The single worst thing the real estate boom did to average Americans was creating a fantasy that you could count on your home equity as part of your retirement plan.

But national average home prices have fallen almost 40% since 2008—putting a huge dent in many people’s nest eggs (to say the least).

Yet from what I see as a financial planner, the Home Equity = Nest Egg formula won’t go away.

But it must. No matter how much equity you have now, or how much you think your home could be worth when the market rebounds (whether in five, 10 or 20 years), it’s too risky to include your home as part of your financial plan.

• If you’ve refinanced multiple times over the years, you may not have much equity to tap by age 65.
• Even if you’re prudent and pay off your mortgage by retirement age, you may not be able to sell your house.
• You may be able to sell your house, but the cash will likely get eaten up by medical bills and long-term care expenses.

Most of my clients still have a mortgage, at ALL ages. Few and far between are mortgage free—including those in their 60s.

I had a finance professor who once said that buying a home and art were similar. Never look at them as investments; buy what you can afford and what you love. You’ll likely be stuck with both for a long time.

Raise the roof. Were you hoping a real estate rebound might rescue your retirement?

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