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Subject:  Re: Interaction of asset allocation and home Date:  9/15/1998  4:42 PM
Author:  TMFCheeze Number:  5439 of 106013

Rayvt posted:
<<How should one modify their retirement asset allocation when they buy a home? How do they interact?>>

Not at all. A home is a place to live, not an investment. If it increases in value over the years, well and good; but consider it frosting on the cake.


That's an interesting and perhaps helpful way to look at it, Ray, and overall it's probably not a bad idea to ignore a large chunk of one's net worth when planning for retirement, and rely on other savings to do the trick. The home, then, would be pure gravy, or as you put it, frosting on the cake, when the time for retirement comes. (Why am I getting hungry all of a sudden?)

The question, though, is more complex, and the answer depends on many, many factors, including the age of the home owner, the assets he or she has already accumulated, and the plans that person has for the future. Many people live in large homes during their working life when they have families to raise and a need for more space, then sell those homes and move into more modest digs when it comes time to retire. In that case, the equity in the home can be an important consideration in a retirement plan. Then there are the reverse mortgages which some people use -- it's another way to take advantage of that equity they have built up in their homes.

I'm not going to pretend I have the answers here, and I'll leave the final word to those with larger brains than mine (Pixy? This is your cue to step in...)

Cheeze :-)
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