How Your Home Can Benefit You in Retirement, Ep #179

Your home provides shelter, right? Homeowners' houses are also investments—just like stocks and bonds. Unlike living in an apartment, you can bequeath your home to someone after you pass away. Houses—like any product or service—provide benefits. What are they? And can your home be a source of income in retirement? Listen to this episode of Best in Wealth to learn what your options are![bctt tweet="How can owning a home benefit you in retirement? Learn more in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]Outline of This Episode[1:10] My parents built their house and made it home[3:13] The three benefits of homeownership[11:51] Spending source and spending use pyramids[17:55] Four different ways to use your home for retirement[20:41] Don’t let anyone talk you into a decision you don’t wantThe three benefits of homeownershipThere are three types of benefits you receive when you own a home—and each one is important:Utilitarian benefits: What does something do for me and my finances? All houses provide shelter and protection. Your home value can fluctuate and be worth a different amount at a different time.Expressive benefits: What does something say about me to others and myself? Expressive benefits convey tastes and social status (i.e. having the money to buy a house in the first place).Emotional benefits: How does something make me feel? You may have peace of mind and security or experience the pride of ownership.As a financial advisor, my job is to help clients understand these benefits from an investment standpoint. I’m often asked if someone should buy or rent a home, pay off their mortgage, or sell their homes and buy something smaller. The benefits you receive from your home influences these decisions.Should you pay off your mortgage before retirement?I usually coach my clients to pay off their homes if they can—but not always. I love the emotional and expressive benefits that come with homeownership. But interest rates are at 2–3%. It can make more sense to invest that money instead of putting it into paying off your mortgage. It feels right in my head—but not in my heart. Many of my clients need to pay their mortgage off to lower their monthly expenses and alleviate stress. It also adds stability to your life when the stock market is volatile.Some people have zero emotional ties to their house and holding a mortgage isn’t a big deal to them. Others want to say “This is mine. No one can take it away from me.” Some advisors simply run the numbers, which will always tell you that you’re better off keeping a mortgage. But it sets aside the emotional and expressive benefits of homeownership. Weighing all three leads you to the right decision for you. Everyone’s financial plans are different. Houses don’t just play a role in our portfolios, but also in our lives.[bctt tweet="Should you pay off your mortgage before retirement? I share a few thoughts—and other options—in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]Spending source and spending use pyramidsThere are three layers in spending source pyramids.Consistent income: Part-time job, social security benefits, pension, or annuity.IRA or 401k: retirement accounts where you access them as a source of monthly income to bridge the gap between expenses.The things that you’re going to give away someday. The top of this layer is typically your home. It can be a strategy for retirement income.The spending use pyramid also consists of three...