The Value of your Real Estate in Retirement Planning--Still the largest part of your Net Worth
Working with clients in the Bay Area, it is not unusual to see the value of a client's primary residence as the largest part of their net worth. Sometimes, the analysis of retirement planning results in the question of what to do with all that equity in your house. Should it be a source for retirement planning?
The issues/questions to consider when it comes to the use of housing wealth are:
• Paying off the mortgage to reduce overall expenses
• Sell and downsize to a smaller home, freeing up funds for investment
• Sell your home, invest the proceeds and then rent
• Secure a home equity loan or secondary mortgage on the house
• Get a reverse mortgage
• Rent out extra rooms
• Rent out your primary residence and live elsewhere at a lower cost
• Keep the house mortgage-free, and let its value serve as an emergency fund if needed
Because of the emotion that is usually wrapped up in the primary residence, the ultimate question of what to do with housing wealth often becomes difficult. The best recipe for success with investment and retirement planning is to plan with unemotional assets.