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7 Ways Home Equity Can Shape Retirement Planning

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Many Americans expect to rely on a blend of workplace retirement accounts, private savings and Social Security benefits to fund their retirement lifestyle, but their planning often overlooks another potentially significant source of retirement income.

The sale of a home or the use of tools such as home equity conversion mortgages — often called reverse mortgages — can help turn a difficult planning projection into a much sounder strategy.

There are potential pitfalls to consider when tapping into home equity, of course, and use of these tools isn’t appropriate for all savers. There’s also a lot of education to do and misinformation to dispel.

These dynamics are explored in a recent episode of Morningstar’s The Long View podcast, featuring guests Don Graves, president and founder of the Housing Wealth Institute, and Wade Pfau, a retirement income planning professor and co-founder of the Retirement Income Style Awareness program.

They told podcast hosts Amy Arnott and Christine Benz that more Americans could benefit from factoring home equity into their planning considerations. People might not end up “selling” all or even a portion of their home equity, they explain, but it’s good to know the option is there — and not just as a last resort to avoid late-in-life bankruptcy.

See the accompanying gallery for seven ways that home equity can shape retirement planning.