Home Equity: A Potential Lifeline for Retirement, says Financial Planner


Many American seniors find it challenging to maintain their quality of life after retirement. However, their most valuable financial asset might be right under their roofs. According to Julie Virta, a Certified Financial Planner (CFP), the family home could be a significant source of potential retirement income. This view was shared in a new commentary published by Kiplinger.

Housing Wealth: A Goldmine for Seniors

“About 80% of Americans over 60 are homeowners, and housing wealth accounts for nearly half of their median net worth,” Virta wrote, citing recent Vanguard research1. This indicates that homeowners nearing retirement could potentially tap into a significant retirement income.

The aging-in-place approach is gaining popularity among seniors. Nonetheless, Virta suggests downsizing could be a “significant source of funding for retirement.” She stressed that capitalizing on housing wealth requires a deep understanding of real estate trends, a strategic tax strategy, and a solid retirement plan, aspects a financial advisor could assist with.

Choosing a Retirement Destination Wisely

When selecting a retirement destination, several factors should be considered. Moving from a valuable housing market to a less valuable one can make a notable difference in tappable equity.

“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,” Virta noted.

She also emphasized the importance of considering where to invest extra cash obtained through the relocation strategy. Home sellers should be prepared to pay capital gains taxes on this gain and have enough money for tax filing, moving expenses, and closing costs.

Overlooking the Potential of H4P

The commentary didn’t mention the Home Equity Conversion Mortgage (HECM) for Purchase (H4P) program, an opportunity for reverse mortgage professionals to join the downsizing or relocation discussion. H4P allows a homeowner to finance the purchase of a new home with a reverse mortgage.

However, while H4P may provide some industry professionals with steady business, it remains a challenging sell. Last year, data from the U.S. Department of Housing and Urban Development (HUD)2 showed that H4P utilization fell in 2022. Despite this, it remains a viable option for clients who relocate or downsize their existing homes.

  1. Sadowski, J. (2023). Your most valuable retirement asset could be your home. Kiplinger. Retrieved from https://www.kiplinger.com/retirement/your-most-valuable-retirement-asset-could-be-your-home

U.S. Department of Housing and Urban Development. (2023). HUD’s Public Data Sets. Retrieved from https://data.hud.gov/data_sets.html