Who factors house equity into their 'retirement income'?

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BBQ-Nut

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Does anyone here use/factor/depend on the equity of their home as part of needed income later in retirement?

Does your long term plan envision not being able to live 'alone' (even with a spouse), and so selling the house and cashing out the equity can be used for moving into a retirement community or even assisted living?

Also - has anyone considered or is using a 'reverse mortgage'?

At some point the family or the law is going to take my keys away, and my spouse, and we may need add'l assistance for everyday living - which makes living in our house unrealistic.

For me, I have *not* included our house equity in our retirement savings calculations - so it's nice to know it is a 'buffer' in case we need it.
 
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Well, I guess it is part of your portfolio but generally cannot generate income like other assets. Selling and moving to a smaller dwelling would gain you some money however.
 
dtbach said:
Well, I guess it is part of your portfolio but generally cannot generate income like other assets. Selling and moving to a smaller dwelling would gain you some money however.
Click to expand...

Well, that is what I meant - if not worded clearly. My bad.:facepalm:

So yes - are you depending on 'cashing out' the equity by selling your home to pay for your retirement, or do people not include it?
 
We don't count it. However, if only one of us is alive, and near the end, and we're running low on money, it's our end of life "emergency fund". Either reverse mortgage (and get in home care), or sell and go into facility. Hopefully, our funds don't run that low, but we do consider it a buffer for at the end.
 
Our home equity is not part of our Plan A retirement assets, but if things go pear-shaped, it's part of either Plan B (if the need arises late in life) or Plan C (if the need arises sooner getting a j*b becomes Plan B and downsizing is Plan C).
 
I consider all assets in our portfolio, including real assets. Plans for utilization vary by asset class.
 
I do, it is a significant number. And I also including my business inventory, although it is even less liquid.
 
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For retirement income, no our home is not included. Only include it in net worth estimates.
 
No. I would only do that if downsizing an expensive house was part of my financial independence plan.
 
I use my own spreadsheets with liquid net worth and total net worth. I assume the house will appreciate with inflation.

The house factors into the plan either because we have a mortgage + gain house appreciation, pay rent but have the house value in liquid assets to invest, or pay off the mortgage but then have less to invest and just have house appreciation. I plan it all different ways.

When we talked to a financial adviser years ago, he said they don't factor home value into the retirement plan, which especially in California seemed a bit bizarre. Person A could have zero savings and a paid off house worth $500K and person B could rent and have $500K in savings, so by their logic person B could be prepared for retirement and person A would have to work until he drops. That makes no sense, to me to not include the house, as A and B would have more or less the same net worth.
 
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We do not. Our only consideration for it is downsizing to something smaller, and the amount of equity we get out of it would dictate the choice of a new place. Other than that, as was mentioned above, it is more an end of life "Emergency Fund", if needed.
 
BBQ-Nut said:
Does anyone here use/factor/depend on the equity of their home as part of needed income later in retirement?

Does your long term plan envision not being able to live 'alone' (even with a spouse), and so selling the house and cashing out the equity can be used for moving into a retirement community or even assisted living?
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I do.... Explained here in some detail as phase II (post #115)
http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251-2.html#post1355291

I did not understand your post as a question about using house equity as part of an investment portfolio.
 
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When I was a homeowner, I did not include home equity in my retirement plan. We lived in a cheap house and including home equity would have made little difference. Now, if I were to spend a sizable amount of money for a house in a prime real estate market, I might look at how home equity could play a role as a backup.

My MIL is using a reverse mortgage on her house. She was facing a retirement budget deficit even after annuitizing her meager savings, so she had no choice but to "pawn the house".
 
I don't, but have had family members who would move into an unfinished house, finish it (painting, carpeting, drapes, landscaping ...) while living there, sell it and repeat the process. If you don't buy too high, it is like any investment.
 
since i can't sell off my living room it plays no part in my retirement income.

only what is not being consumed by me counts.

actually owning a home mostly serves to reduce housing costs. it adds zero to the income side . it improves cash flow.

unless you sell and rent or sell and down size study after study shows home ownership allows someone to retire because it cuts housing costs and allowed them to retire on less income.

whether a home is worth 100k or 1 million if you are consuming it to live in then its value is a moot point. all it represents is an expense, some higher ,some lower but it represents your housing costs.

that isn't to say it isn't part of your net worth like your car, your jewelry ,your furniture if you are inclined to throw it in , it just matters for what purpose are you counting it.
 
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We don't factor any equity from our primary residence or consider it part of the portfolio. Even downsizing is costly, real estate transaction fees and moving costs consumer much of the potential cash benefit. Reverse mortgages are no great deal either.
 
Well, maybe, sort of.

While it's not liquid the house is an asset that does have marketable value and can be sold. The way we're leaning now is when we do move it will be to a CCRC and the house equity more or less covers the entrance fee that in turn gets monthly housing expenses down to about what they are now. With the benefit that all maintenance issues go away.

That reminds me, Monday is April 1st and we were going to call and do "The Tour" of one and get a package with all the fine print.
 
We view our home as a necessary expense since we have to live some place. If we choose to sell at some point the money will just be used to buy/rent another place. I guess it's part of our net worth, but not a part of our investable assets, so we only consider it as an expense.
 
BBQ-Nut said:
Does anyone here use/factor/depend on the equity of their home as part of needed income later in retirement?

Does your long term plan envision not being able to live 'alone' (even with a spouse), and so selling the house and cashing out the equity can be used for moving into a retirement community or even assisted living?

Also - has anyone considered or is using a 'reverse mortgage'?

At some point the family or the law is going to take my keys away, and my spouse, and we may need add'l assistance for everyday living - which makes living in our house unrealistic.

For me, I have *not* included our house equity in our retirement savings calculations - so it's nice to know it is a 'buffer' in case we need it.
Click to expand...

No, I do not and will not use home equity to plan for retirement. If we downsize or move, that'll be gravy.
 
I do not count it in my portfolio. House is all I'm planning to pass to my kids when/before I depart - hopefully a nice chunk of down payment for their own house. I'll then rent/buy a small condo.
 
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We plan to move and downsize at retirement. I count the equity in excess of what we believe will be the cost of the retirement home as part of the portfolio starting then. Probably right at $100K will go into the portfolio assuming no real estate crash.

The equity in the new home isn't accounted for anywhere except in net worth. It's a cushion via reverse mortgage if ever needed
 
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