For millions of Americans approaching retirement, a big part of their fortune is tied up in something they might never want to sell: their homes.
Even with the recent drop in home prices, the real value of a single-family house in the U.S. has more than doubled in 10 years, according to the Standard & Poor's Case-Shiller index, and home values in some markets have tripled.
Many who bought midpriced houses in the mid-1990s now find themselves living in homes worth a small fortune. They could retire comfortably if they could somehow tap into that. But it's easier said than done.
Ya Gotta Live Somewhere
Unlike stocks and bonds, a home can't be sold quickly for a profit. The costs to sell a home and move are high, and the declining real estate market makes it doubly difficult these days. And even if you can find a buyer, many longtime homeowners simply don't want to sell. Too many memories and hard work are tied up in their houses. And after a sale, they know they'll still need a place to live.
We asked financial advisers for some tips on how to handle real estate as you approach retirement. Their advice is aimed at those age 55 to 65, but it can be used by anyone investing in real estate.
1. Figure out how much your home is worth—to you.
For most people, a home "becomes an integral part of their identity, of who they are," says Avani Ramnani, of New Jersey-based Athena Wealth Advisors. Their status in the community is linked to their home, which also holds memories of raising children and the "sweat and hard work" that went into improving it.
All this can make it difficult to sell, even if it's financially smart. Some people will pay almost any price to stay in their homes for as long as possible.
If you know you need to sell, Ramnani advises first going out and finding a new place where you'd love to live. That may make it easier to load up the moving trucks. While lamenting the home you're losing, you can also get excited about the one you'll be gaining.
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