Are You Really Ready for Retirement? Experts Warn Homeowners Still Paying Mortgages May Be Overconfident
When it comes to retirement planning, homeowners often feel a sense of security knowing they have equity in their homes. However, experts caution that this confidence may be misplaced.
According to the Your Money Retirement Survey conducted by SurveyMonkey and CNBC.com, 37% of workers believe they are “ahead of schedule” (7%) or “on schedule” (30%) with their retirement savings. Among those who feel on track, factors such as starting retirement savings early, having little to no debt, and home equity or ownership play a significant role in their preparedness.
However, Angie Chen, a senior research economist, warns that homeowners’ confidence in their home’s value as a source of retirement wealth may be misguided. The Center for Retirement Research’s National Retirement Risk Index indicates that 28% of people who own houses but still owe a lot on their homes are more likely to be overconfident.
To accurately assess retirement readiness, it’s crucial to consider not just the current value of your home but also the amount you still owe. For example, if you bought a $500,000 home but still owe $400,000, your actual equity is $100,000. While homeownership offers financial benefits, including building equity and fixed housing costs, it’s important to be mindful of the risks of borrowing against your home.
Winnie Sun, co-founder of Sun Group Wealth Partners, emphasizes the importance of viewing home equity as an emergency fund for retirees. While a house may not be a liquid asset, accessing your equity can provide a safety net in times of need.
In conclusion, while homeownership can offer financial stability in retirement, it’s essential to be realistic about the true value of your home as a retirement asset. By understanding the risks and benefits of leveraging your home equity, you can make informed decisions to ensure a comfortable retirement.
Stay informed about retirement planning and financial strategies by visiting Extreme Investor Network. Our experts provide unique insights and valuable tips to help you achieve your financial goals. Make sure to check out our latest blog posts for more exclusive content.