First Person: Our Home Is Not Our Nest Egg

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A recent US New & World Report article posted on MSN Money noted that, "An Ameriprise Financial survey released earlier this year found that people may have unrealistic expectations about how much they can rely on home equity in retirement. And the U.S. Department of Housing and Urban Development recently formalized curbs that will reduce the amount of funds people will be able to get from reverse mortgages."

We hope not to have to use our home as part of our retirement nest egg. We'd prefer to go into our golden years with our home paid off and rely upon other assets to foot the bill for our retirement needs.

Not letting a mortgage drag us down

We've worked hard to pay off our mortgage. We put a sizeable downpayment (about 40 percent) on our first home, and made extra payments ourselves as well as by way of a bi-weekly mortgage plan to cut time and money off our mortgage payoff. Through these efforts, we managed to pull enough equity out of our home when we sold (during the housing market collapse no less) to allow us to downsize to a smaller and cheaper property, buying it outright in the process.

Cutting costs in retirement

As the MSN Money article notes, "In terms of their homes, nearly half of those polled said they expected to use home equity to help fund their retirement. Ameriprise termed that response "a surprising statistic considering that housing values remain well below pre-recession levels in many parts of the country. Doing so may be even more difficult for the 37% of homeowners who say they've not yet or are not on track to pay off their mortgage before they retire.""

We hope to sustain our mortgage-free lifestyle as we move toward and into retirement. The mortgage for our previous home was $1,350 a month, and not carrying that amount into retirement would be huge. This could likely cut the biggest expense we would have in retirement from our budget.

A great financial reserve

While we don't want to dip into our home's equity to fund our retirement nest egg, it's hard to deny that having a paid off home could act as a great financial reserve fund in our golden years. Even though we'd prefer not to use a reverse mortgage or home equity line of credit, having that bulk equity reserve could allow us to sell our home and utilize the proceeds to pay for moving into an apartment, retirement home or assisted living community if necessary. And if nothing else, it could act as a wonderful legacy to one day leave to our children.

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The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.


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