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Making Our Homes a ‘Nest Egg’ Again

Research shows most people do not have enough money saved to retire comfortably or safely. In fact, the reality is Americans don’t save enough for retirement. To get a better picture of what we’re dealing with, let’s look at some numbers:

  • 40% of Americans age 55-64 have no money set aside for retirement
  • Of those in that age that do have retirement accounts – the median balance is $120K according to the Federal Reserve

Overall, the median retirement account balance for all working-age households in the U.S. is $3,000 and $12,000 for near-retirement households, according to the National Institute on Retirement Security.

Making Our Homes a ‘Nest Egg’ Again

However, you wouldn’t know how ill prepared most of us are to watch our friends, neighbors, and family living so well.  It seems most people have nice homes, filled with nice stuff, driving nice cars, and taking nice trips. Could we be living too well today and doing far too little to prepare for retirement?

How about you? Where do you stand?

Further, we have moved from an employer-managed retirement environment to an employee-managed environment.  Aside from an overstressed social security system, we are largely on our own for retirement planning. You have to be prepared to take care of yourself.

Now let’s look at how our housing choices directly affect our saving for retirement. The norm has become that we spend the maximum amount a bank will lend us because we are focused on luxury and believe those depreciating finishes are actually an investment. America’s current views on home ownership is the product of super low interest rates and mass delirium about the importance and value of houses. Unfortunately, this drastically undermines one’s home as a tool for building long-term value and savings for our future.

Too often we use our home’s equity for better living ‘today’ and thereby abandon the ‘nest egg’ savings potential. Now I will give you an important piece of information – Pulling the money (equity) out of your home for upgrades is a bad idea. You are only withdrawing from your retirement savings to purchase and install depreciating amenities for your house.

In today’s society, nobody pays off their house anymore, on the contrary, we refinance for better rates (and a little extra cash for fun). It didn’t used to be this way and this shift in thinking regarding home ownership is part of the reason our retirement savings are so inadequate.

Your home is a simple investment, a long-term inflation adjusted and leveraged savings account. It can and should be an important part of your retirement plan. Let’s work towards restoring the original ‘nest egg’ mentality to our homes. Here is my simple three step system for your incorporating your home into your retirement nest egg…

  • Settle in:  Don’t move so much – get comfortable. “What are 4 walls anyway… they are what they contain” – Under the Tuscan Sun
  • Settle down: Stop spending money on frivolous luxury items. Think a little more modestly about spending money on your home.
  • Settle up: Pay extra, pay it off. “There are two ways to conquer and enslave a nation.  One is by the sword…  The other is by debt.”  – John Adams, 1826

It is time again to treat our homes as our nest egg for long-term financial prosperity.  Stay longer, spend wiser, live a bit more modestly… prudent home choices will once again be the cornerstone of your financial future.

12 Comments to “Making Our Homes a ‘Nest Egg’ Again”

  1. property taxes will eat all your savings , and will eat into your nest egg too . property taxes always not mentioned when you buy a home , not mentioned when you sell a home and not mentioned when you are unemployed and can’t afford them , yet they keep going up every year regardless if the value of the house goes up or down .

  2. My wife and I bought a very small and rundown bungalow on a quiet street in the Don Mills area in Toronto three years ago. The area suffers from chronic flooding of the basements. I have been a custom home builder for the last thirty years. I could see the neighborhood of Don Mills transforming. We fixed all the water-related problems, open up the main floor and made the basement fully usable. The house is totally dry now and very livable.
    We intend to retire here. We are both 67 years old. The equity in the house is all we have.
    The house has doubled its value in three years.
    Po Ku recently posted…10 Tips for buying new dream house – stickyMy Profile

  3. Reading your article has enlightened me a lot. I was pondering the issue of buying a house if I could afford it versus financing the house. In my opinion, I end up paying at least 3 times the price of the house if I pay mortgage each month with bank financing. I wonder why people who can afford it still choose this route. I will need your opinion on this matter. Thanks in advance.

  4. Managing our finances with our future in mind is something many of us don’t think about until it’s almost too late. We need to think about future every pay check we get. Putting money away even small amounts will add up in the end. Sometimes we buy things we really didn’t need to buy. This money could have been set aside for our retirement.
    Purchasing a home is a good investment for your future. Paying for a home will result in financial stability and peace of mind that you will have a home to live in when you are older. Whether you live in a luxury home or a small condo, it’s important to work towards paying off your home.
    Laura Willis recently posted…Why List with Summit Sotheby’s International Realty? Compliments of Laura WillisMy Profile

  5. The american dream is dead, long live the american dream.

  6. If I need something I will go to the thrift shop. It is refreshing to know that there are others out there living frugally.

  7. It blows my mind how much home people are buying these days. I saw a statistic showing the average size of new homes steadily increasing over the last three decades. We install seamless @gutters for some new home builders in the @Madison, WI area. The lower-end home builders are still in the $280K-$350K range, and the homes are HUGE!

    My wife and I are downsizing from a large rancher to something more fitting for our small family, and we look forward to not having a mortgage. Thanks for the post!
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  8. Staggering numbers. Great information you have here.
    Ron recently posted…MUST SEE! This House Is Pretty Amazing, Look At The Awesome View Surrounding It!My Profile

  9. Hi,
    Great content and well written too.I am always happy to visit your blog and learn new things tips and tricks.I really found this article interesting to read.It is helpful and informative post .Keep posting:)
    Carol Martin recently posted…Oh Yes, we have Water on GabriolaMy Profile

  10. Well, on the brighter side that first statistic about Americans having nothing saved for retirement makes me feel better about my student loan debt. I personally have refrained from buying new clothes, if I need something I will go to the thrift shop. It is refreshing to know that there are others out there living frugally.

    Thanks for the great post!
    Aaron recently posted…Get Your Ann Arbor Home Ready for Spring WeatherMy Profile

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  12. The only thing I wonder when I see statistics like that is whether or not they include multiple accounts that people may own.

    I know I, for one, don’t bother to roll all of my 401ks into the new employer’s plan every time I change job. And, since loyalty to employees and thus employers is declining, people change jobs a lot more than they used to.
    Jody recently posted…Sengled Debuts a Combo Light with a Camera at CESMy Profile

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