The Vanguard Group, Inc., an American registered investment advisor based in Malvern, Pennsylvania, has suggested a novel strategy capable of adding at least $100,000 or more to your retirement savings. This smart strategy centers on using the hidden value in your home, catching the eye of retirees looking to make the most of their post-work years.
The cornerstone of this strategy is based on a remarkable statistic: approximately 80% of Americans aged 60 and older are homeowners, with their housing wealth accounting for a significant 48% of average wealth within this group. Vanguard, a behemoth with approximately $7.7 trillion in global assets under management, highlights the idea that homes in bustling urban areas can be a valuable source of wealth for retirees, an undiscovered resource with significant potential.
As retirees inch closer to their final years, they are realizing that their need for geographic proximity to major cities like New York, Boston, or Los Angeles has dwindled. Instead, they are increasingly considering a relocation to more retirement-friendly havens like Florida or Wyoming. This twofold decision not only grants them access to a vibrant retiree community but also unleashes the pent-up wealth within their homes when they opt to sell and move.
According to their research, as of 2019, the average homeowner aged 60 or above who employed this strategy could access around $99,000 in home equity. Surprisingly, for the top 10% of homeowners opting for more economical housing markets, this figure skyrocketed to an average of $337,000.
The investment and management company has provided an example of a woman who purchased a home near Boston in the 1990s for $170,000. Today, that same house would be worth around $500,000. By selling her original home, moving, and purchasing a smaller one in her new area, she managed to access approximately $200,000 from the profits earned by selling her house.
Interestingly, Vanguard classifies retirees who employ this strategy into two categories: “lottery winners” and “bargain hunters.” The former profited from living in booming housing markets and witnessing substantial equity growth, while the latter saw steady but modest appreciation in home values. Both groups have found their way to greater financial stability in retirement.
However, it’s crucial to weigh the pros and cons of relying on this strategy for retirement. On the plus side, it can significantly boost retirement funds, potentially facilitating relocation to idyllic destinations. Conversely, the housing market’s unpredictability, illiquidity, and the requirement for relocation present formidable challenges that must be factored into any retirement plan.