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.
Copyright © 2006 Achievement Catalyst, LLC
No comments:
Post a Comment
Comment guidelines: My Wealth Builder will publish comments that are about the topic and do not contain inappropriate language. My Wealth Builder reserves the right to edit or delete comments for any reason which includes those that have advertising (either for a product, website, or blog), contain inappropriate language or are not about the topic.