Wednesday, October 21, 2009

The Housing Crisis and Your Retirement

One of the most difficult things about the meltdown in the housing market is the effect it will have on so many people's retirement plans. One recent study showed that home equity represents 21 percent of the typical pre-retiree's net worth, second only to their investment in Social Security. For most people, even the affluent, their home represents a huge portion of their retirement plan.

But the housing crisis has meant that that leg of the retirement strategy has suffered as much as our 401(k)s. That's a double whammy that's going to be tough to get out of. According to a survey conducted earlier this year by the Employee Benefits Research Institute, only 13 percent of all workers feel very confident about having enough money for a comfortable retirement. This is the lowest figure in the survey’s history and represents a 50 percent drop just since 2007.

How can you avoid losing your confidence in your ability to retire? It's important to keep in mind that your home is a big part of your portfolio, and should be managed as such. That doesn't mean that you should buy and sell houses like you do a basket of stocks, but your real estate holdings should be, for example, accounted for in your asset allocation. And you should always keep your long-term housing decisions in mind when plotting out your long-term financial strategies.

To talk more about how your housing situation fits into your financial goals, feel free to give me a call.

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