How Home Buying Fits Into My Retirement Plans

As I get closer to closer to buying my first home, I’m getting pretty excited. It’s not just the extra freedom and satisfaction that I’m excited about though. I’m also excited about how this plays into eventual retirement plans.

Many people just think of stocks, bonds and mutual fund investments when saving for retirement is mentioned. Really there is so much more than just market related investments. Physical assets such as your home should definitely be considered.

For people like me who live in an expensive city this is especially true. The home we are buying now will go a long way to fulfilling our retirement savings needs. Eventually we can sell off this condo, downgrade to something cheaper and use the cash for day to day needs. With any luck, the housing market keeps growing here and we even net a nice profit from that sale.

There is the possibility that the housing market collapses in the meantime though. So we cannot count on definitely getting the full amount back down the road. With that in mind we’ll still need to save as much money as possible on top of the value of our home. Most likely the condo will keep its value, but it’s best to play it safe.

The route we will likely take is to one day upgrade to a bigger home. At that time we can sell our current condo and have a major chunk of the next home paid off. Either way we’d be building up equity that can later be liquidated.

Some of you are probably wondering why we don’t just plan to rent the condo out. Unfortunately this condo does have rental restrictions which drastically limits how many units in the building can be rentals. So that’s not really something we can rely upon. If not it would be great to be able to rent out our home to add some nearly passive income.

Part of our plan is to gradually do some renovations to our condo. Not only will this make it a nicer place to live, but it will raise the value of our home and make it easier to sell when the time is right. Who wouldn’t want to make an investment that will also make you more proud of your home and ultimately happier? And yes I know that some renovations don’t add a comparative value back to the home. We’ll just have to keep that in mind when deciding on renovations to tackle.

The great part of including your home value in your retirement planning is that it can lead to extra motivation to put aside more money. While putting money into stocks and other investments, it can be tough to be satisfied with progress towards a large end goal. As a result you might not save as much money. When paying off a mortgage, reducing that total is a much more attainable goal that can be achieved a lot quicker than your final retirement goal. For psychological reasons it is just easier to get motivated to pay off debt than it is to save for a long term goal.

What about you? Is your home a major part of your retirement plan? Or do some of you choose to exclude it as somewhere that you will still live when you are older?

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