Don’t Count on Your Home for Retirement

by Marc Bastow | April 8, 2013 11:07 am

Back in the early aughts, I heard a demographics and financial expert suggest a future notion that didn’t seem possible: Baby boomers would not find their homes to be the financial panacea that prior generations counted on, and planning on such for retirement would lead to anguish.

Today, though, I hear a lot of people who made it through the housing crises talking about how thrilled they are that, because their house value has stopped falling, retirement is looking a whole lot better. In fact, from my experience and speaking with any number of financial advisers and friends, many people believe that because their house is paid in full, they are doing well and in decent shape for retirement — even though they have very little in the way of savings in retirement plans.

And therein lies a big problem for retirement planning: becoming financially dependent on your home.

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If we’ve learned anything from the past five to seven years, it’s that home values are susceptible to massive price swings. Just take a look at the accompanying CalculatedRisk[1] graphic of Case-Shiller price information. While the markets are slowly coming back, being in the the wrong place (a depressed market) at the wrong time (retirement) can lead to some difficult planning decisions.

More importantly, if you’re like me, you don’t want to be in a position where the only way to fund your retirement is to hock your beloved home — seller’s market or not.

So how can we if not avoid, at least mitigate, the risk of home dependency? Keep contributing to your IRA and 401k plans. Here’s why:

Our home is still our castle, and we want to keep it that way — not have it become something we need to pawn just to afford life after work.

Marc Bastow is an Assistant Editor at

  1. CalculatedRisk:
  2. reverse mortgage:
  3. Avoiding debt:

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