For decades, Americans have viewed their homes as solid investment vehicles. They paid in them, watched their value rise, and then cashed them out to fund retirement.
But for many homeowners, the new reality consists of plummeting real estate values and broken nest eggs.
“A lot of people did assume that because they owned their home and their home was going to grow in value they’d be able to rely on that increase as a supplement to supporting themselves in retirement,” said financial adviser Ric Edelman, Chairman and CEO of Edelman Financial Services. “As we’ve discovered over the last ten years, [that’s a] bad idea.”
Virginia homeowner Nolan Heiter said he and his wife have been “diligent” about saving and planning for retirement, and that their home has always factored into their long term investment scenario.
“Our vision was always that you raise your family in a big house and then when you retire you sell the big one and move to the beach and buy something smaller,” he said.
The Heiters have added on to their home over the years, and consistently upgraded its landscaping and aesthetics. However, while recently refinancing the home in order to take advantage of lower interest rates, the Heiters say they discovered the value had dropped significantly. “To see it lose a big chunk of value - and your equity in it – is somewhat devastating.”
Susan Evans worries she’s facing the same news.
Evans has sold many homes, and said she’s always turned a good profit. She had planned to one day do the same with her current home, but doubts she’ll get a return on all she’s invested in it.
“It’s very, very disconcerting to know that my retirement funds may be tied up in here,” Evans said. “I’m just not going to get them out of it.”
Ric Edelman said millions of Americans heading toward retirement are actually taking a one-two punch to their plans. In addition to their homes, their other retirement funds and assets have also taken a hit because of stock market losses.
“I think a lot of people are going to discover that retirement isn’t what they were hoping it was going to be,” Edelman warned.
For those who are specifically worried about their homes, Edelman does offer some encouragement and also urges action. He said those who own their homes outright should not delay trying to make a sale.
“Although you’re selling your house for less than you’d hoped, you’re also buying the next house for less than it used to cost,” Edelman said.
He doesn’t want to see discouraged clients put off retirement indefinitely. Instead, he suggests they move ahead - with an altered view of exactly what their retirement will be.
“Go ahead and enjoy,” Edelman urged.
Nolan Heiter says he and his wife are fortunate to have good jobs and they’re trying to remain optimistic about retiring in their mid-60s.
“It tends to be more of a hope than a reality,” Heiter said. “I have to consider the possibility that 67 or 70 may be more of a reality.”