Do I Have Enough to Retire? Count the House.

When people tell me they do not have enough to retire, I ask one question. Did you count the house?

Almost nobody has. The spreadsheet has the 401K, the IRA, Social Security, maybe a pension, maybe a rental. It does not have the paid-down home that is often the largest single asset in the plan. It is the row everyone forgets.

I am a mortgage broker in Oregon City, and this post is about putting that row back in.

Why the house gets left out

Houses do not send statements. Your 401K reminds you every quarter what it is worth. Your home just sits there, so it feels like a place rather than a number.

There is also a feeling that using home equity means losing the home. That was true in the old days of reverse mortgages, and it is not true now. You can use some of the equity and keep living there with the title in your name.

And there is the plan to leave it to the kids. That is a real goal and I respect it. It is also worth asking the kids. Most of the adult children I talk to would rather their parents be comfortable than inherit a house.

The three ways a home can fund retirement

Sell and downsize. You sell, buy something smaller or cheaper, and pocket the difference. Clean and simple. The catch is that in a lot of Oregon the smaller house is not that much cheaper, and moving at this stage is a big lift.

Borrow against it with a payment. A home equity line of credit or a cash out refinance. These work if you have the income to carry the payment. For someone who is retiring, adding a payment is usually the opposite of what they need.

Borrow against it without a payment. This is the reverse mortgage. You use some of the equity, there is no monthly principal and interest payment, and you keep living in the home. You still pay property taxes, homeowners insurance and upkeep, and you live there as your primary residence.

What it looks like in a real plan

Here is the shape of the conversation I have with clients and their planners. I keep it general here because every plan is different and I do not quote numbers on a blog.

Start with monthly income after retirement. Social Security, pension, planned withdrawals from retirement accounts.

Subtract monthly expenses, including the mortgage payment if there still is one.

If the result is negative or too thin, there are only so many levers. Work longer. Spend less. Withdraw more from the accounts, which drains them faster. Or remove the mortgage payment and, if needed, add a cushion from the home.

That last lever is the one most plans never pull because the house was never in the spreadsheet.

The standby line of credit

If you have retirement accounts, the version planners like is a reverse mortgage set up as a line of credit. You do not have to draw on it. The unused portion grows over time. When the market drops, you draw from the line for living expenses instead of selling investments at a loss, then let the accounts recover.

It is a planning move, not a last resort. I send the planner a one page summary of what it looks like before and after, and I stay out of the investment advice. That is their job.

Questions to bring to your planner

• What does my plan look like with the mortgage payment removed?
• If the market dropped in my first two years of retirement, what would I sell?
• Is there a reason to keep the home free and clear that outweighs my monthly comfort?
• What would a standby line of credit do to my withdrawal rate?

If your planner has not seen a reverse mortgage line of credit used this way, that is fine. I am glad to get on a call with both of you.

Who should not count on the house

If you plan to sell within a few years, upfront costs matter more than the monthly relief. If you cannot keep up with property taxes and insurance, borrowing against the home does not fix that. And if the home is already heavily mortgaged, there may not be enough equity to make a difference. I will tell you that on the first call.

Start with twenty minutes

I serve Oregon City, Clackamas County, Multnomah County, Washington County and the rest of Oregon. Bring your planner, I will bring the numbers. If retirement feels out of reach and you own your home, message me and let me do the homework for you.

Becky Chambers, Mortgage Broker, NMLS #2814018. Freestone Mortgage, NMLS #2613454. Licensed in Oregon. Equal Housing Opportunity. This material is not from HUD or FHA and was not approved by HUD or any government agency. For informational purposes only. This is not a commitment to lend. Verify any tax questions with a licensed tax advisor.