(Maybe, but probably not)
Surveys
indicate that most people consider their house to be their biggest investment
and an important part of their retirement planning. Are they thinking
correctly? Is a house an investment that can be used to fund retirement? The
answer is yes ONLY if you plan to sell upon retirement and then buy a cheaper
one (with only the difference between the two available to live on.) Otherwise, your
residence is what we call a personal use asset (like your car). This
is because your house cannot pay for your food, clothing, and health care if
you are still living in it.
Investments
pay interest, dividends, or rent – or can be liquidated to help pay bills. The
house you live in does none of the above and if you liquidate, you have to move
out. So don't make the mistake in thinking that the money you are paying on your mortgage
is somehow doubling as retirement savings. The only way you can get money out
of your house is to 1) borrow against it (a home equity loan or second
mortgage) or 2) sell it. Keep in mind if you borrow against it, that money must
be repaid and if you are no longer working, where will the money come from?
Of course,
you could sell the home using a reverse mortgage (where you are essentially annuitizing the equity in your home). This allows you to receive
payments from the buyer while you continue to live there but this means that
your house leaves your estate upon your death and thus cannot be passed along
to your heirs. Typically, reverse mortgages are very expensive and should be
arranged only as a last resort, not as part of a financial plan.
