Your home is your retirement because it does several things for you all of which are good. I’m going to show you just how important a home is to your retirement.
Slow and Steady Wins the Race
Remember learning about Aesop’s fables when you were young? Every fable was a lesson in life. One of the most well known is a race between a tortoise and a hare. The proverb of slow and steady wins the race comes from this fable. The moral of the story is that inconsistent behavior never wins against purposeful, steady action.
A house represents slow and steady and a race well won. This is because after 30 years of paying your mortgage every month, you own your house free and clear. Almost all of us will never be able to save as much as a house is worth any other way. Because we see the value in owning our own home, we pay our mortgage and win the race by the time we retire. As a result, this is one of the ways your home is your retirement.
Homes Grow In Value
Homes do grow in value over the years. While I realize not every house has fully recovered from the Great Recession, that was just over 10 years ago. Real estate is a cyclical industry that moves with the economy. It’s never up or down all the time. As we cycle through the years, the long term pattern is positive.
According to the US Bureau of Labor Statistics, a home bought in 2000 costs 59.49% more today. If you paid $250,000 for a house in 2000, it would be worth $398,717.63 in 2020. Think about that for a moment. Have you saved up $149,717.63 in your piggy bank since 2000? Hmmm…..I didn’t think so because I sure haven’t.
Additionally, your home give you this gain without sacrificing your lifestyle. It just happens while you’re living in it. This is another way your home is your retirement. In the example above, anyone who bought an average family home in 2000 would have a nearly $150,000 gain by just living in the house.
Enforced Savings and Appreciation
Because buying a home is a long term proposition, you get the benefit of enforced savings and appreciation. Paying off your mortgage bit by bit every month is like putting money into a savings account. You are literally paying yourself. This is because once the mortgage is paid off, you have a large sum of money you would never have any other way for your retirement.
Additionally home values rise. As we saw with the $250,000 house bought in 2000, there was a nearly 60% gain by 2020. While there may be better investments, for almost all of us we’d never win this big any other way. While you build equity by paying off the mortgage you’re also gaining appreciation. This is why for almost all of us, your home is your retirement.