Subscribe to the BlogOnce upon a time, your home was considered a nest egg for life’s changes. But despite the gains in home prices over the last twenty years and a burgeoning selling market, it still might be hard to withdraw money from your home equity or much less get the best return on your investment. So, if you are counting on your home to double as a nest egg for retirement, it may not be the best option for many reasons outside of your control.
Withdraw
If your home truly is your nest egg for retirement, be smart using its equity. If you draw from your home equity, you will have less to liquidate in retirement. Once used only for emergencies or once in a lifetime events, now folks use their home’s equity to finance new debts. Be smart about using home equity to pay off credit card balances or you may find yourself in deeper debt after charging your cards up again.
Selling
The best use for home equity money is to add value to your home. Remodeling your home, such as adding a room, improving the kitchen or bathrooms will add more money to your nest egg once you sell. However, if you sell your primary residence to fund your retirement, where will you live? You will still have to find another home to purchase or rent. And to combat capital gains taxes, you will need to invest in another property at some point.
Emotional Ties
If you view your home as your retirement nest egg, you will need to be prepared to sell it and move on quickly. So, after 40 years spent in a home with children raised and memories made, you will have to relinquish ownership to pay for your retirement? It may not be as easy to follow through. You won’t be able to pass on the family home to your heirs and when it comes time to sell, the housing market may not be in a good place.
This was a guest post by GoBankingRates.com, a site that provides daily updates on the latest CD rates, finance information and more.