Sellers : YOUR HOME AND RETIREMENT: Strongsville Real Estate

By:
CJ Harrington
Keller Williams Realty
www.cjharrington.com
cjharrington.crs@gmail.com
440.336.0612

Date:
10-22-08

Many retirees are planning to access home equity, hoping it may make the difference between a comfortable retirement and just getting by. This article considers some of the strategies for tapping home equity, such as moving to a more affordable residence or obtaining a reverse mortgage.
So, what should you do before you start? Firstly, talk with your spouse or partner about using your home to help finance retirement. Next, consider whether your plans are realistic. For example, ask yourself whether you could really downsize to a smaller home. Also, begin looking into the cost-of-living implications that would be associated with moving to a different part of the country. Finally, check your most recent retirement account statement to determine whether you're already contributing the maximum amount.
Now, onto your home and retirement, unlike earlier generations of retirees, who paid off first mortgages and retired at the family homestead, today's Baby Boomers are looking to capitalize on home equity to enhance their retirement savings. Popular strategies for tapping home equity include downsizing to a smaller house or condominium, relocating to an area where the cost of living is more affordable, and taking out a reverse mortgage.

Regardless of which strategy you choose, it's important to be realistic about what your house may be worth when you retire. Although housing prices have escalated considerably during the past few years, a variety of factors may cause them to level off or decline at some point in the future. Home equity may add value to a diversified portfolio, but relying too much on your house to fund your retirement could work against you if the real estate market in your area cools considerably. Just like the current Ohio market.
Another option is to move. Selling your existing home and relocating to a more affordable house or condominium may be a reasonable option if you have considerable home equity and the shift won't negatively affect your lifestyle. As part of your research, remember to investigate the overall housing costs in your desired area. For example, real estate values and property taxes typically vary considerably by locale, sometimes even within the same state. Additionally, before relocating to a new area, you might want to spend significant time there to make sure it is compatible with your lifestyle and interests.

Furthermore, when calculating your home's sale price as part of the retirement income equation, be sure to use realistic assumptions. Real estate prices have risen at above-average rates in recent years, and there is always the potential that they may level off or even decline in the future. When planning your retirement income, remember the importance of diversification, owning a portfolio of stocks, bonds, and cash investments in addition to home equity can help guard against market swings in any one area, including real estate. Of course, there are no guarantees that a diversified portfolio will protect against overall financial losses, but a diversified portfolio can position you to potentially take advantage of gains in several financial sectors.

In closing, consider the recent boom in the national housing market may have lulled many Baby Boomers into believing their home equity will be enough to see them through a comfortable retirement. If you're among those who intend to rely on a home's value -- either through downsizing, relocating, or obtaining a reverse mortgage -- make sure that your plans include realistic projections. And remember that maintaining a diversified portfolio of other types of investments can potentially help balance out your overall pool of financial assets. Aside from all this, if you plan right that dream house on the beach under the sun may still be yours.

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