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Buying a House Can Weigh on Your Retirement Planning

Buying a House Can Weigh on Your Retirement Planning

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Tuesday, 27 March 2018 01:23 PM Current | Bio | Archive

Many Americans dream of owning their own homes. Whether it’s a townhouse in the city, a small house in the suburbs with a white picket fence, or a farmhouse on ten acres of land, home ownership has given generations of Americans a sense of freedom and independence that is unique to this country. But for an increasing number of Americans, the reality of owning a house is that it can be like an albatross around their necks or, even worse, like the sword of Damocles.

Housing Prices Continue to Rise

It’s well known that housing prices in many areas of the country have outstripped the overall rise of inflation over the past several decades. That’s especially so in many large metropolitan areas like New York, Los Angeles, and Washington, DC, which is why you hear so many financial pundits in the media talking about home ownership as an investment. But in order to reap the rewards of that investment, you have to own it outright first.

Because house prices are so high, the 30-year mortgage has become the most popular means of getting the money to buy a house. But while that puts you into a house, you’ll be spending the next three decades paying off that loan. Whereas previous generations may have been able to afford the payments on a 15-year mortgage, over 85 percent of mortgages today are 30-year mortgages. And since many homeowners buy their homes when they’re in their 30s and 40s, once they’ve had a number of children, they may end up paying those mortgages into retirement.

More Retirees Holding Mortgages

A recent survey of 60- to 70-year-old homeowners discovered that 44% of soon-to-be retirees expect to continue paying off their mortgages into retirement. At least 32% of them expect to take more than eight years to pay off their mortgages, while 17% believe they may never be able to pay off their mortgages. That’s a scary thought.

With those kinds of numbers, home ownership really shouldn’t be looked at as an investment. Yes, it provides you with a roof over your head, a warm place to sleep, and space to enjoy time with your family. But when you calculate all the upkeep, the interest payments on the mortgage, the utilities, and the property taxes, the odds of you making a profit on your house are incredibly slim.

Pay Off as Much Debt as Possible Before Retirement

Treat a house for what it is, but don’t get sucked into the hype of a home as an investment. And certainly don’t become one of the nearly half of all retirees who still have mortgage payments to make in retirement. When your salary has been cut to zero and your only source of income is what you have been able to save throughout your career, you can’t afford to siphon off thousands of dollars every month to pay down your debts.

Your goal should be to pay down as much debt as possible before you retire. Otherwise, if your investments don’t perform as well in retirement as you had hoped, that debt could end up eating up significant amounts of your retirement principal and leaving you with insufficient funds to fully enjoy your retirement. In the worst case, you may not be able to make those debt payments, and you may find yourself losing your home.

Not Running Out of Money in Retirement

Of course, all of that is easier said than done. Sometimes you just aren’t able to do everything that you want to do. You make your best effort to pay down debts, but some you just can’t swing. If that’s the case, then you need to make sure your retirement savings last through your retirement. Since you know you have fixed costs – debt – you can plan everything else around that.

Probably the most important way to keep from running out of money is by ensuring that your retirement accounts continue to work for you in retirement. Yes, you’ll eventually have to take mandatory distributions, but even after that point the remaining balance of your accounts can continue to grow.

An ideal asset both for both protecting you retirement assets and ensuring that they’ll continue to work for you through retirement is gold. For centuries, gold has been trusted by investors around the world for its ability to protect hard-earned savings from the ravages of inflation. And when stock markets crash, investors flock to gold.

Gold’s slow and steady nature allows savers and investors to maintain their purchasing power over time, without having to wonder whether their assets will lose value. Since 1971, gold has even outperformed stock markets, which makes it ideal for those looking at maintaining their assets’ performance in retirement.

With a gold IRA, you benefit from the same tax treatment as traditional IRA investments, all while enjoying gold’s protective status. You can even roll over existing retirement funds into a gold IRA. So if you’re looking to protect your hard-earned retirement savings and ensure that your investments continue working for you, you owe it to yourself to think about investing in gold.

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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TrevorGerszt
Many Americans dream of owning their own homes. Whether it's a townhouse in the city, a small house in the suburbs with a white picket fence, or a farmhouse on ten acres of land, home ownership has given generations of Americans a sense of freedom and independence that is...
retirement, ira, gold
881
2018-23-27
Tuesday, 27 March 2018 01:23 PM
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