Many people, especially those who are living in cities where homes are expensive such as Vancouver, see their homes as an important asset. Owning a home is one of the most important purchases we make, but you don’t want to make the mistake of thinking of the place where you live in the same way as you would an investment property. Ideally, you wouldn’t want to have to tap into your home equity as a source of income in retirement right away; it would be kept as part of a backup plan in case something unexpected occurred.
Why You Should Not Count on Your Home Equity to Fund Your Retirement
Here are some reasons your home should stay your castle, and not be relegated to something you would draw on to fund your retirement:
- You may not make a lot of money if you tried to sell it when you retire.
If you live in a city where housing costs are high and want to buy another home in the same area, you will be paying a lot of money for your new home as well. The only way you will end up with a lot of cash in your pocket to fund your lifestyle in retirement is if you were planning to move to a smaller city or town where life is slower and more relaxed. This is not the right choice for everyone, and you would have to think about whether it fits your goals and lifestyle, as well as your financial plans, before taking this step.
- You may not find a buyer for your home.
Depending on market conditions and how quickly you need to sell, it may take some time before you are able to sell your home. Assuming there are other retirees in your area who are also downsizing, you may have a lot of competition when trying to sell your home. There are only so many potential buyers for larger homes.
If you are trying to sell your home, don’t buy a new one until you sell your existing home. The last thing you want is to be stuck owning two houses.
Plan for Retirement With Your House as an Asset
While you don’t want to ignore your house as an asset, don’t make it the prime focus of your retirement plan. Most people would prefer to remain in their homes in retirement, if possible. Sit down with a financial advisor and start talking about what retirement means to you.
- Where would you like to live? Would you like to stay in the same area?
- How do you feel about downsizing to a smaller home?
- Do you have children and grandchildren? Do you want to live in a particular area so you can be near them?
- What other assets will you have to draw on in retirement?
Start thinking about and working toward your goals now so that you can have the kind of lifestyle you want when you are ready to retire. As an experienced financial advisor, I can help you put the pieces together to get you there. Please contact me for your no-obligation consultation.