Your home provides shelter, right? Homeowners' houses are also investments—just like stocks and bonds. Unlike living in an apartment, you can bequeath your home to someone after you pass away. Houses—like any product or service—provide benefits. What are they? And can your home be a source of income in retirement? Listen to this episode of Best in Wealth to learn what your options are!
[bctt tweet="How can owning a home benefit you in retirement? Learn more in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]
There are three types of benefits you receive when you own a home—and each one is important:
As a financial advisor, my job is to help clients understand these benefits from an investment standpoint. I’m often asked if someone should buy or rent a home, pay off their mortgage, or sell their homes and buy something smaller. The benefits you receive from your home influences these decisions.
I usually coach my clients to pay off their homes if they can—but not always. I love the emotional and expressive benefits that come with homeownership. But interest rates are at 2–3%. It can make more sense to invest that money instead of putting it into paying off your mortgage. It feels right in my head—but not in my heart. Many of my clients need to pay their mortgage off to lower their monthly expenses and alleviate stress. It also adds stability to your life when the stock market is volatile.
Some people have zero emotional ties to their house and holding a mortgage isn’t a big deal to them. Others want to say “This is mine. No one can take it away from me.” Some advisors simply run the numbers, which will always tell you that you’re better off keeping a mortgage. But it sets aside the emotional and expressive benefits of homeownership. Weighing all three leads you to the right decision for you. Everyone’s financial plans are different. Houses don’t just play a role in our portfolios, but also in our lives.
[bctt tweet="Should you pay off your mortgage before retirement? I share a few thoughts—and other options—in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]
There are three layers in spending source pyramids.
The spending use pyramid also consists of three layers:
When you look at both, your house is at the top. Behavioral life cycle theory predicts that investors are reluctant to dip into things in that top layer. Your home equity makes up a large portion of your wealth. Most people don’t sell their houses to support non-housing consumption.
Only 2% of Americans who are eligible homeowners choose to do a reverse mortgage on a paid-off house. It can add income for retirees for many years, yet most people don’t do it because they’re emotionally attached to their homes. But there are some cases where I can look at prospective clients and say they can retire early—if they’re willing to do a reverse mortgage or downsize.
From a utilitarian perspective, there are four different ways you can use your home in retirement:
Above all, don’t let anyone talk you into a decision you don’t want before you work through all of the emotional and expressive benefits. The emotional benefits can be completely priceless. I cover each of these options in-depth in this episode. Listen to get the whole story!
[bctt tweet="There are 4 different ways to use your home for retirement. What are they? Listen to this episode of Best in Wealth to find out! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]
Audio Production and Show notes by
PODCAST FAST TRACK
The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.