Retirement Why the home could be one’s most valuable asset in retirement: financial planner

Didier Malagies • June 5, 2023


With American seniors finding it more difficult to maintain their quality of life after retirement, many may be overlooking their most valuable financial asset in late life: their home. This is according to Julie Virta, a certified financial planner (CFP) in a new commentary published by Kiplinger.


“According to recent Vanguard research, about 80% of Americans over the age of 60 are homeowners, and housing wealth accounts for nearly half of their median net worth,” Virta wrote. “This could mean that many homeowners nearing retirement are, in fact, sitting on (or, rather, sleeping in) a significant amount of potential retirement income.”


Aging in place is becoming an increasingly popular option among seniors, but Virta also said that downsizing can prove to be a “significant source of funding for retirement.”


“The key to capitalizing on housing wealth is a strong understanding of real estate trends, a strategic tax strategy and a solid retirement plan — a financial adviser can help with all of that,” she wrote.

Keeping a few factors in mind when choosing a potential retirement destination can be critical as well, she said. While some may move from a more valuable housing market to one generally less valuable, the typical results show that going from a hotter to a cooler housing market could make a big difference in terms of tappable equity.


“We’ve found that among people who retire and relocate, about 60% move to a less expensive housing market, allowing them to unlock about $100,000 of home equity from their previous home,” she wrote.

If going through with a relocation strategy, it would benefit retirees to consider where to place any extra cash they obtain, including through additional obligations.


“Remember that home sellers will have to pay capital gains taxes on this gain and therefore should ensure they have enough cash on hand when they file taxes and for any moving expenses or closing costs,” she wrote.


One way that reverse mortgage professionals might be able to become involved in the downsizing or relocation discussion with a client that is not discussed in the commentary is through the Home Equity Conversion Mortgage (HECM) for Purchase (H4P) program, which allows a homeowner to finance the purchase of a new home with a reverse mortgage.



Recently, industry professionals advised RMD that while H4P may be providing them with reliable business in their own markets, it remains a tough sell. Data from the U.S. Department of Housing and Urban Development (HUD) late last year showed that H4P utilization actually fell in 2022, but it nonetheless remains an option if a client is determined to relocate or downsize his or her existing home.



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