Homeownership accounts for around 48% of the median wealth of Americans aged 60 and older, and about 80% of all Americans are homeowners in this age range.
When more retirees start to live close to big cities with robust housing markets, they understand they can access this money by selling their homes and moving to a less expensive location.
The median amount that homeowners were able to unlock from their homes in 2019 was $99,019, while for the top 10% of homeowners who moved to less costly housing markets, the amount increased to $347,000 from their homes.
Once they stop working, retirees no longer need to live close to major cities like New York, Boston, or Los Angeles. Instead, they are thinking about relocating to states like Florida or Wyoming which are cheaper and have a stronger focus on retirement.
This not only provides them with a neighborhood of retirees to mingle with but also allows them to sell their houses and access a sizeable portion of their fortune. Vanguard recently studied this group to find out how much money retirees are freeing up through selling and moving.
The average homeowner who employed this method in 2019 and was over 60 was able to access almost $99,000 of home equity. A median of $337,000 was freed for the top 10%.
Over $223,000 in retirement savings are held in the financial accounts of the typical homeowner who is at least 60 years old. Many people are beginning to prepare to use their home equity as part of their retirement plan because they believe that amount alone is insufficient to support them in retirement.
For those with family ties keeping them in their current place, this may not be an option. But, for many people, this is increasingly turning into a chance to more than quadruple their retirement savings. Each approach offers a different set of benefits to the homeowner while also creating unique opportunities.
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1. Lottery Winners
Those who relocated from a housing market that boomed at the ideal time for them are the lottery winners. While they owned their property, they had access to long-term, significant growth in local home values.
They were able to build up a significant amount of home equity just by being in the right place at the right time by timing the market perfectly. The majority of homeowners simply happened to get lucky with the property boom in their location, which is why the phrase has lottery connotations.
Some homeowners may have expected housing surges like this. This group often moves to pretty much any market that hasn’t experienced comparable growth trends and ends up freeing a sizeable sum of money for retirement due to their significant home equity growth.
2. Bargain Hunters
Many individuals fall into the second category, referred to as “deal hunters,” which necessitates a little bit more effort to release their equity. Instead of experiencing rapid increases over a short period of time, this group often experiences constant development in the value of their house over the course of ownership. Because of this, they will need to be more inventive to extract some wealth from their house.
The plan is to locate a great deal on the housing market someplace in the nation so that they may buy a new house for a lot less money than they can get for it when they sell their old one. Even if it might not lead to the same retirement destinations as they had hoped for, this can still be a practical strategy to significantly boost the amount of money they have saved for retirement.