Rethinking the Role of Housing in Retirement Planning

Many people think of their home as their biggest asset. It’s where a lot of their money has gone over the years, and in many cases, it’s appreciated in value. But it’s also different from other assets because you live in it. It’s one of the few things you can own that carries financial, emotional, and practical weight all at once.

You don’t use your investment account every day. You don’t make memories inside your IRA. A home is tangible, personal, and sometimes deeply sentimental, which makes it harder to treat like a typical financial tool.

When it comes to retirement planning, financial planners take varied stances on how to handle the primary residence. Some include it in net worth projections. Others leave it out entirely. There are different schools of thought.

For the purpose of this discussion, we’re taking the position that your home should not be treated as a core retirement asset. Here’s why:

• You still need a place to live.
• The value of your home when you retire may not match what it’s worth today.
• Even if you do sell, you’ll likely need some – or all – of that money to secure another place to live.

Which means the equity in your home may not be available to cover anything else. It may not reduce your retirement drawdown needs. It may not produce income. And it may not be there to bail you out if something in your plan goes sideways.

This article is about building a retirement strategy that works without depending on your home to rescue it. If it ends up helping later, great. But if it doesn’t, your plan should still hold.

Don’t Make the House the Plan

A home can be part of your broader financial picture, but it shouldn’t carry the weight of your entire retirement strategy. If your plan hinges on selling at a certain time, for a certain price, and freeing up a certain amount of money, you’ve introduced more risk than you probably intended.

The housing market may not cooperate. Interest rates, property taxes, inventory, and local demand all shift. Even if your home has appreciated, that doesn’t mean it will be easy – or profitable – to convert that value into something you can actually use.

If the only way your retirement plan works is if the house performs perfectly, that’s not a plan. That’s a hope. Build a plan that still functions if the house can’t contribute at all.

Equity Is Not the Same as Liquidity

It’s easy to overestimate the financial role your home can play just by looking at the equity. But unless you’re prepared to sell or borrow against it, that equity isn’t usable. It’s locked up in the walls – unavailable unless you’re willing to give something else up.

Even if you’re comfortable with the idea of using a HELOC or reverse mortgage, those options come with terms you don’t fully control. Rates shift. Lending standards change. And the decision to borrow against your home in retirement can have lasting consequences if not handled carefully.

You need real liquidity in retirement. That means assets that can produce income and be accessed without disrupting your life. The home doesn’t meet that standard.

Don’t Count on Downsizing to Create a Windfall

This one trips people up.

The narrative is familiar: sell the big house, buy something smaller, and use the leftover cash to fund retirement. But that doesn’t always work out the way people expect. In many markets, smaller doesn’t mean cheaper. The new house may be newer, but not meaningfully less expensive. Property taxes, insurance, HOA fees, and transaction costs can eat into whatever margin you hoped to capture.

Some people even find they’re paying more per square foot when they downsize.

If you plan to move for lifestyle reasons, great. But don’t rely on that move to fund your next chapter. It may not free up as much as you think.

Focus on Cash Flow, Not Just Net Worth

Your home might show up on a net worth statement, but net worth doesn’t fund retirement. Income does. Liquidity does. The ability to manage costs does.

If you’re in the planning stage, build toward a model that creates stable income from predictable sources. Pensions, Social Security, investment withdrawals, part-time work, rental income – whatever the mix is, it needs to function without requiring you to touch the house.

If you do end up selling or using equity later, it should feel like an option, not a necessity.

Don’t Assume Staying Is Free

A paid-off mortgage doesn’t mean you’ve removed the cost of housing. Staying in your home still comes with:

• Property taxes (often rising)
• Homeowners insurance (in some areas, rising fast or disappearing)
• Maintenance and repairs (often rising with the age of the home)
• Accessibility modifications if you plan to age in place

Retirees often underestimate the ongoing costs of staying put—especially when the home requires increasing upkeep. And once physical limitations or care needs enter the picture, staying may not even be possible without significant investment.

Plan for these costs now, not later.

Start Early So You Don’t Get Boxed In Later

You don’t need to have all the answers right now, but you do need to ask the right questions while you still have options:

• Could I afford to keep this home if taxes or insurance doubled?
• If I needed to move quickly, how liquid would this asset really be?
• What will I need from my next home that this one doesn’t provide?

Those aren’t fun questions. But asking them early is what gives you leverage later.

Bottom Line: If the House Helps, Great. But Don’t Rely On It.

A home is a real asset. But it’s also a complex one. It’s emotional. It’s illiquid. And it doesn’t always function the way people think it will when they need it to.

There’s nothing wrong with hoping to sell someday, or with planning to age in place. But a strong retirement plan doesn’t depend on any one thing working perfectly – especially not something that’s shaped by market timing, physical condition, and emotional attachment.

If the house ends up helping, that’s a bonus. Your plan should work even if it doesn’t.