Using Your House as Retirement Savings

For the past 6 years, I have not been counting my house equity as part of my savings for retirement for a couple reasons:

I believe income generating savings are what's needed for a comfortable retirement. The equity in my home doesn't generate any liquid income until I sell it. And I don't plan to sell my home at retirement.

Since I have a mortage, my home is causing me to spend my monthly income. Even if I didn't have a mortgage, I would still need to pay for taxes, utilities and maintenance, which I estimate at 5% the cost of my house.

An August 25, 2006 article in The Wall Street Journal explains why using your house as a savings vehicle may not be a great idea. Forget the Mansion: Why Buying Bigger Doesn't Guarantee a Rich Retirement

However, it is a very common practice include home equity as part of one's retirement savings. I know many of my colleagues are doing so. My thinking is that this strategy works if one plan's to sell and move to a smaller home at retirement. Otherwise, I think I would be overstating my retirement savings.

This is not financial or retirement advice. Please consult a professional advisor.

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