Unlock Home Equity in Retirement by Relocating to Cheaper Housing Market
By Retiring and relocating to a cheaper housing market could be a great way to cash out on home equity and enjoy more financial stability. This is according to a recent report by Vanguard, which found that the typical older homeowner could extract up to $100,000 of home equity by migrating to an area with lower housing prices.[0]
The report also notes that this approach is much more popular than the use of reverse mortgages, a product specifically designed to help retirees access their home equity. That’s the kind of gain some retirees have enjoyed by selling homes they bought when they were younger and then relocating to an area with lower home prices.
About 80% of Americans aged 60 or older are homeowners, and housing wealth accounts for almost 48% of the cohort’s median net worth.[1] The average homeowner in the group has $223,000 of retirement savings in financial accounts, and this sum is usually not enough to fund a retirement that could last three or more decades.[2]
However, by selling their home in a strong housing market and relocating to a weaker one, homeowners that retire can net the difference and add it to their retirement funds. Conversely, if you own a home in Midwestern or Southeastern states like Alabama, Mississippi, Nebraska and South Dakota, you might end up losing money on the transaction.[3] In many of these states, home values have not experienced the same levels of growth as other parts of the nation.[3]
Creating a plan that factors in both wealth and health is of the utmost importance for pre-retirees and retirees.[4] Working with a financial advisor to develop a retirement plan and create income streams for your golden years is a great way to maximize your retirement savings.[4]
Additionally, investing in a financial planning service offered by your employer could help you reduce your financial stress, and increase your chances of staying with your employer.
In some cases, the payoff of relocating in retirement is even bigger. Vanguard provides an example of a woman who bought a home near Boston in the 1990s for a price of $170,000.[3] The current estimated value of that home would be approximately $500,000.[5] By selling her house, relocating, and purchasing a smaller home in her new location, she was able to gain approximately $200,000 in capital gains.[5]
0. “How Relocating in Retirement Could Make You $100,000 Richer” msnNOW, 11 Mar. 2023, https://www.msn.com/en-us/money/retirement/how-relocating-in-retirement-could-make-you-dollar100000-richer/ar-AA18uqPC
1. “Retire-and-Relocate Strategy Can Pay Off for Some Retiree Homeowners | PLANSPONSOR” PLANSPONSOR, 7 Mar. 2023, https://www.plansponsor.com/retire-and-relocate-strategy-can-pay-off-for-some-retiree-homeowners
2. “Why moving in retirement can earn you an extra $100,000 — or more” CNBC, 7 Mar. 2023, https://www.cnbc.com/2023/03/07/why-moving-in-retirement-can-earn-you-an-extra-100000-or-more.html
3. “It’s Possible To Make $100K or More in Retirement — How Social Security Factors In” AOL, 8 Mar. 2023, https://www.aol.com/finance/study-shows-possible-100k-more-125235625.html
4. “52% of retirees expect to pick up a part-time job to make ends meet” Financial Planning, 6 Mar. 2023, https://www.financial-planning.com/advisers/news/retirees-expect-to-pick-up-a-part-time-job-to-make-ends-meet
5. “Vanguard Says Retirees Can Add At Least $100K To Retirement …” MENAFN.COM, 11 Mar. 2023, https://menafn.com/1105752910/Vanguard-Says-Retirees-Can-Add-At-Least-100K-To-Retirement-Savings-By-Doing-This
