Unlocking Home Equity in Retirement: Pros and Cons of Relocating for Retirement Income
Retiring and Unlocking Home Equity: Pros and Cons of Counting on Relocation for Retirement Income
March 6, 2023, 8:06 AM PST
Revised: 8:06 AM PST March 6
Retirement planning is a key component of financial planning and it is important to consider all of the options available to retirees. One strategy that has gained traction among retirees is to relocate and unlock home equity in order to shore up retirement funds. According to a recent Vanguard report, roughly 60% of movers age 60 and above go to a cheaper housing market and this translates to 25% of all retirees having the potential to unlock such wealth.
For homeowners over the age of 60, housing wealth accounts for almost 48% of the cohort’s median net worth. The average homeowner of this age group has $223,000 of retirement savings in financial accounts. By utilizing a retire-and-relocate strategy, homeowners unlocked a median figure of $99,019 from their homes in 2019. Those in the top 10% achieved a median income of $337,000.
The Vanguard study finds that retirees in the best position to take advantage of this strategy are those who own homes in regions where home values have appreciated rapidly over the past few decades, such as the West Coast, Northeast and select states like Arizona, Colorado, Florida, Nevada and Utah. Conversely, homeowners in Midwestern and Southeastern states like Alabama, Mississippi, Nebraska and South Dakota may end up losing money on the transaction.
It is important to take into account other costs such as property taxes and homeowner’s insurance when considering a move. It is also wise to consult with a financial advisor to help with your retirement needs. A financial advisor can help you make a retirement plan and create income streams for your golden years.
Ultimately, it is important to understand both the pros and cons of relying on this strategy for retirement. While it works for many, it doesn’t work for everyone and the amount of money one might get from selling their home depends on numerous factors. It is best to do your research and to know how much money you need to retire comfortably. SmartAsset's free retirement calculator can help you answer this question and consider the best options for your retirement.
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