Magazine

UpFront | Published in May 2017

Real Estate As Retirement Asset

By PLANSPONSOR staff | May 2017

Median Home Equity and Financial Wealth
Of Households Ages 65 – 69 in 2012,
By Wealth Quintile

Many workers enter retirement primarily holding two very different types of savings–financial assets and the equity in their home (the value of their home less any outstanding mortgage). For many households, particularly those with less wealth, home equity
is larger than financial assets.

Net financial wealth

Home equity
$0
$0
$5k
$60k
$40k
$150k
$175k
$175k
$1.15mm
$330k
First
(less wealth)
Second
Third
Fourth
Fifth
(high wealth)
Source: Center for Retirement Research at Boston College, author's calculation using the Survey of Consumer Finances (2013)

Annual Real Increase in U.S. Real Residential Property Prices 1996 – 2016

Source: Center for Retirement Research at Boston College, author's calculations using S&P CoreLogic Case-Shiller Home Price Indices (2016)

Living in Retirement

People can get money from their house in two ways: downsize or take a reverse mortgage.

Option 1
  • Downsize
  • ADD to your income.
  • PAY selling and moving costs.
  • GIVE UP your current home, to
    live in a less expensive home.
  • KEEP proceeds from sale and
    equity in new home.
Option 2
  • Get a Reverse Mortgage
  • ADD to your income.
  • PAY loan related fees.
  • GIVE UP equity you can tap as a reserve or leave as a bequest.
  • KEEP living in your current
    home.
Source: Andrew Eschtruth, Alicia Munnell and Steven Sass, Center for Retirement Research at Boston College, “Using Your House for Income in Retirement”

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