If you were counting on tapping the equity in your home to help finance your retirement, you may have reason to worry. A recent issue of SmartMoney points out, “With home prices falling for nearly five years, many American must consider what to do with their homes should prices continue to collapse and the equity in their homes, if they are still lucky enough to have any, disappears completely.”
If you are a Baby Boomer with an eye toward retirement, your plans may be taking quite a beating right now. Warnings about shortfalls in social security and Medicare, rising health care costs, and the prospect of higher taxes now combine with disappearing home equity. No wonder so many Boomers say they plan to work through their “retirement.”
So, what do the experts say you should do with your home? Should you stay put and wait it out, hoping that home prices will eventually recover? Or should you bail out now, before you lose even more, and downsize?
“The answer is that it depends on the individual situation,” says Nicholas Paleveda, an adjunct professor at the graduate tax program at Northeastern University. “If you have plenty of assets for retirement, there may be no reason to downsize. If you do not have sufficient assets for retirement, then selling your home to live in a smaller home may be appropriate.”
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