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July 29, 2009 at 08:00 PM
Income planners might not be in the real estate business, but they still need to think about becoming become conversant with the ins and outs of homeownership from a retirement income perspective.
Two recently published studies shed light on this.
A study by Phoenix Companies Inc., Hartford, Conn., found that about 14% of U.S. residents with at least $1 million in net worth see the equity in their primary residence as a major part of their retirement savings. That is up from 10% in 2008 and 12% in 2007, researchers say. (See our report on this here)
That trend line says a lot about how home real estate is being reinvented–not just as something to sell or an asset to pass down but as a retirement income piggy bank.
In today’s economy, one might expect to see this shift in thinking among people of more modest means, but not among people with $1+ million in net worth.
An equally telling finding from the Phoenix study is that 41% of the survey group already have a home equity loan or line of credit, up from 34% in 2008, and 21% have home equity credit lines that have not yet been used, up from 8% last year.
Then, there is a report about homeownership among older people, age 62 and up, from MetLife Mature Market Institute, Westport, Conn., and the National Council on Aging, Washington. This study found that a “small but growing” number of older people are using their housing wealth earlier in retirement to maintain financial independence, rather than saving this asset as a last resort.
The MetLife/NationalCouncil study also found that some older homeowners are already beginning to tap their home equity “to ensure that they will have enough income to meet basic expenses.” (See our report on this here)
Findings like the ones above should be a signal to financial advisors–that they may need to start reevaluating the traditional notion that the client should never tap equity in the home unless there is a dire emergency.
