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Friday, May 13, 2011

Real-Estate Nightmare Looms for Retirees

Unless you were the retiree that was smart enough to pay off the before retirement.
Five short years ago, many learned men and women warned Americans against thinking that rising home prices would eliminate or lessen the need for them to save for retirement. Institutions and advisers alike warned people against relying on the equity in their homes to finance part if not all of their consumption needs in retirement.
Today, that's no longer the case. In fact, today, we have almost the opposite situation. With home prices falling for nearly five years, many Americans now must consider what to do with their homes should prices continue to collapse and the equity in their homes -- if they are still lucky enough to have any equity -- disappears completely.
Should they stay in place and wait it out? Or should they bail out now and downsize? If they stay in place, should they pay down their mortgage, if they have one? And if they have a home equity loan, should they refinance that or, if possible, accelerate the payments on that debt?
"As always, the answer to such questions is determined by the age, desires, financial situation and other characteristics of the owners," said Barney Walsh, CEBS, a pension and retirement planning consultant with Morgan & Walsh
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