How do you view your home?

[LivingAlmostLarge]

Today while doing a coffee run with my neighbor it came up that he views his house as part of his retirement plan. He has another 15 years until his youngest is done with high school (he's 4)! So he feels he'll get $2M out of the sale of his home at that time. That money will go to their retirement accounts and make them true up. They just bought some cheap land and are planning on building a house to "retire" in 15 years.

I told him I came to realization I have 10 more years until my DK2 graduates high school so 2030. But my DH has already said he's working until 2034 (hoping DK2 is done in 4 years !) Anyway at that time he'll be 55. I want to sell our home and start traveling and maybe move somewhere warmer for 6 months. I think our number of $5M will be feasible if not ridiculously too much. But that being said in 15 years our house is on a 30 year note and won't be paid off mostly because I wasn't planning on staying on it.

But at the same time he asked my why wasn't i considering cashing in on the house and using it for retirement $$. I don't know. I guess I never viewed my house as savings. It's just a place to live. I do view any investment properties as investments. But our house? That's the problem with living HCOLA. The home takes up such a large part of your net worth usually. It also is expensive and lots of times it turns into a little bank.

What do people do when they retire? Cash in the house? Have you viewed it as extra money? Is it extra money because you do need a place to live, but perhaps not so big. Not so much property taxes, maintenance, etc. I hadn't considered this in detail yet. My $5M number was solely based on our investments. But I am starting to wonder should I count home equity? Should I instead say our number is hit sooner if we can cash out?

[corn18]

You can do whatever works for you. My house is not part of my retirement number other than an expense. But if I lived in a $2M paid off home and planned to downsize to a $500k home, I would factor that into my required number for sure. But be careful about predicting the future. As you get closer to retirement, you can update your plans with any changes in the housing market or your housing plans in retirement.

[Jluke]

Using round numbers.

where I live, say I bought a house for 200k 20 years ago.

now if I want to sell that house and downsize I might be able to sell it for 275k but then when I go to downsize I might have to spend 200k and even then I might not get what I really need. Or I could move to a new 55 and older community where the houses cost 325k.

I don’t know what the future looks like for me and my current home. MCOLA.

in a HCOLA I can see using the home as part of your retirement fund BUT then you will need to sell and leave that area to downsize and reap the benefits of extracting cash from your home. Don’t forget to pay taxes on any gains in home equity (if exceed the allowable limit).

[disneysteve]

I guess I never viewed my house as savings. It's just a place to live.

I'm with you, and we've had this conversation here before. Your primary home isn't an investment. It's your home. If you sell it, you need to replace it and there's a good chance the replacement will cost even more.

We bought our home in 1994 for $142,000. Today, if we're really lucky, we might get $250,000 almost 26 years later. Not a very good investment at all, which is fine because we didn't buy it as an investment.

What happens in retirement. That's still a little fuzzy but we'd like to get a place in Florida. That will cost us a lot more than 250K (and I don't think we'll actually get that much for the house) so any proceeds will just get rolled into the new place. That doesn't change our retirement planning at all. Retirement is based on our investment portfolio that can actually generate income for us to live on. The house is not part of that equation.

[cypher1]

For me, rent is only temporary (hoping to keep doing for another 12 months), I consider my house my base to fall back to eventually. Right now I am considering the house more of an investment, while I continue to save more money as my renter pays my mortgage each month. When my renter wants out, I'll simply move back in and keep finding projects for it until I get sick of it, or if a different life change comes up.

I will say, with renting a room for the last 18 months, its been a great feeling for downsizing and less stress. An even greater reason to declutter, and determine what items are truly important or useful. True, there's still a concern of repairs and upkeep at my house, but very minimal with my renter.

[kork13]

I sort of view it both ways. I do consider my home an asset that builds our NW & eventual readiness to retire, but a home is also an expense to plan for. Especially in HCOLA where homes are regularly $500k-$1M+, it only makes sense to plan for some of that equity to boost your accounts upon sale (assuming you want to move away at some point).

Bottom line, it comes down to your plans. If you plan to make a side step in housing, home equity is neutral for you. If you plan to move down, then it may be something from which to adjust your "number".

[rennigade]

You can do whatever works for you. My house is not part of my retirement number other than an expense. But if I lived in a $2M paid off home and planned to downsize to a $500k home, I would factor that into my required number for sure. But be careful about predicting the future. As you get closer to retirement, you can update your plans with any changes in the housing market or your housing plans in retirement.

This would probably be the only way I would ever include a house in our grand plan...and it wouldnt be until later in life. If you knew you were going to downsize/move to a LCOL and pocket a million+ after taxes...then yes, I would consider it. But like you said, life gets in the way. Plans change.

We dont include our house in any numbers game, but If we did, it would be a money pit. If we did ever sell it, we would take a major loss, hundreds of thousands over a few decades. Every year, between property tax/insurance, thats $7k that we will never get back. Include home improvements/maintenance. Im not sure people ever factor that in?

[LivingAlmostLarge]

I was contemplating are we going to sell and move to something cheaper? I think so mostly because I can't necessarily see us living in a home and paying for upkeep. The question is what we would move into. The other issue is that we are in an excellent school district and once the kids are gone we can move into a bad school district that is much cheaper home prices even in the local area.

[Fishindude77]

On my personal financial statement when calculating my net worth I absolutely include the value of our home in that figure. It is most certainly an asset that could be liquidated.
Never considered it for retirement income as I like living here, but if push ever comes to shove, we could always sell the home to help pay for end of life expenses; medical, nursing home, etc.

[Drake3287]

I'm another that doesn't consider my home into retirement plans even though I agree it can be for many people. Like the OP plans on, I retired at 55 but with our house paid off along with a similar 5 million savings/investment amount if I include my pension based on living 30 years after retirement. Although it sounds like a lot of money it really isn't unless you're living in middle America. I think your retirement plans hinge on where you plan to live, life style and future travel or other related plans. Medical costs of course also play into the mix.

[ua_guy]

We've only ever factored our home into retirement planning as a paid-off place to live until we die and/or need care. Not having a mortgage in the later years really helps reduce the total nest egg needed. It could be a source of some emergency funds (reverse mortgage), or a cash-out sale in the event of needing to move into assisted care. That's what happened to my DH's grandmother recently. We cleaned out her place and sold it to cover the next stage of her care in assisted living.

[kork13]

We've only ever factored our home into retirement planning as a paid-off place to live until we die and/or need care. Not having a mortgage in the later years really helps reduce the total nest egg needed.

This seems like the most pragmatic way to look at it. It basically just means more flexibility & lower income requirements. Very neatly distilled.

[corn18]

I have run the math and if you have a $500k mortgage going into retirement and $500k more retirement savings, it matter not one bit vs. having $1M and a paid off mortgage. At least as far as ending balance is concerned. Inflation is your friend when it comes to a mortgage.

[scfr]

Our house is part of our net worth.
Our house is not part of our retirement "number."
I have a target as far as maximum percentage of net worth that is in non-financial assets (house and car/s).
We care about maintaining our home to maintain its value.
I absolutely consider the investment (appreciation) potential when purchasing a home. That definitely goes on the list of factors to weigh when choosing which house to buy. It's one of may things to look at, but it is a thing. It's hard for me to wrap my head around the fact that people would buy a house and not think about that. It's a big purchase!

We are in the process of buying a house right now, and one thing that has changed for us now that we've hit our retirement number and are getting a bit older and know this will be our last house purchase … we're adding a couple creature comforts that we don't expect to be able to recoup when we sell, and we're paying a bit upfront to make a some changes that will make the house lower-maintenance and hopefully easier to stay in longer. Those things may or may not be appreciated by whoever buys our home some day. In other words, while we still care about the "investment" potential of the house, we probably care a bit less than we have on prior home purchases.

[disneysteve]

I absolutely consider the investment (appreciation) potential when purchasing a home. That definitely goes on the list of factors to weigh when choosing which house to buy. It's one of may things to look at, but it is a thing. It's hard for me to wrap my head around the fact that people would buy a house and not think about that.

We didn't buy our home as an investment, so the investment potential simply wasn't a factor. It's no different than buying a car or a frying pan. We bought it to have a place to live for as long as we wanted to live there. When we're done with it, we'll sell it for whatever we can get for it and move on. If we make a "profit" meaning we sell it for more than we paid for it, that's nice. But we will also have spent tens of thousands of dollars on taxes, insurance, maintenance, and renovations during the time that we owned it so will there really be a profit? Probably not.