According to the Bureau of Labor Statistics (BLS), the average retirement age for Americans varies depending on several factors such as gender, education level, and occupation. However, as of 2021, the average retirement age for all workers in the United States is 62 years old.
It's worth noting that many Americans continue to work past 62, either because they choose to or need to. In fact, the BLS projects that by 2028, nearly a quarter of the workforce will be over the age of 55. Additionally, some Americans choose to retire earlier or later than the average age based on their personal financial circumstances and retirement goals.
For Americans looking to top up their retirement savings, one option is to consider how to use their home as part of their retirement strategy.
While I go into the pros and cons of using your home as a de facto retirement plan in my book, House Poor No More: 9 Steps that Grow the Value of Your Home and Net Worth (USA Version) — winner of the Excellence in Financial Journalism 2022 Book Award— here are five ways your home can be used as part of your retirement plan:
Utilize a Reverse Mortgage
A reverse mortgage is a loan that allows you to convert part of the equity in your home into cash without selling the property or making monthly payments. The loan is repaid when the borrower passes away or sells the property. Reverse mortgages are only available to homeowners who are 62 years of age or older.
Downsize Your Home
Downsizing is a popular option for many retirees. By selling your current home and purchasing a smaller, less expensive property, you can free up equity that can be used to supplement your retirement income.
Rent Out a Room or Space
If you have extra space in your home, you could consider renting out a room or space to generate extra income. This can be done through platforms like Airbnb or by finding a long-term tenant.
Take Out a Home Equity Loan
A home equity loan allows you to borrow against the equity in your home. This can be a good option if you have a significant amount of equity built up, but be aware that it will increase your debt load.
Use Your Home as a Source of Savings
By paying off your mortgage before you retire, you can reduce your living expenses and free up cash flow for other expenses.
Bottom Line
It's important to note that each of these strategies comes with its own risks and benefits, and you should speak with a financial advisor to determine which approach is best for your circumstances. Additionally, you should be aware of any strategy's tax implications.
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