As retirement costs surge, more homeowners turn to their equity

Americans may need roughly $2.57 million to retire comfortably by 2043, up sharply from the $1.75 million projected for 2033, according to a 2025 Goldman Sachs retirement survey.

The increase reflects years of inflation that have driven up the costs of housing, health care and daily expenses. Households headed by someone 65 or older now spend about $122,000 annually, compared with roughly $60,000 in 2000, the survey explained.

Financial experts told Realtor.com that home equity can help supplement retirement income through tools such as reverse mortgages and home equity investments, but they caution against relying on it as a primary strategy.

“The $2.57 million number from Goldman Sachs isn’t meant to be paralyzing,” said Alex Langan, chief investment officer of Langan Financial Group. “It’s meant to be a wake-up call. The gap between what most people are saving and what retirement actually costs is real and it’s widening. Your home is a meaningful part of the answer for a lot of people. It just can’t be the only answer.”

Why home equity alone may not be enough

Many retirees are “house rich, cash poor,” meaning that they own homes with significant value while lacking dependable income or liquid savings, Realtor.com explained.

“Unfortunately, this is common among people over 65. On paper, they have significant equity in their homes, but not enough liquid savings or dependable income to comfortably support their retirement,” said Pam Krueger, founder and CEO of Wealthramp in San Francisco.

Experts say rising property taxes, insurance premiums and maintenance costs can strain retirees, even if their homes are fully paid off.

Langan said many clients incorrectly assume their homes alone can fund retirement.

“You can’t pay your property tax bill with home equity,” he said. “You can’t cover a medical expense with it. You can’t use it to get through a rough patch without doing something specific to access it. And every way to access it has strings attached.”

Downsizing may not always solve the problem either because housing costs and transaction expenses can reduce expected savings, experts added.

Reverse mortgages and other equity options

Reverse mortgages are attracting renewed interest from older homeowners seeking additional income without monthly loan payments, according to the report.

Some retirees are also exploring home equity investments, which provide cash in exchange for a share of a home’s future value.

“Closing costs [for reverse mortgages] can be higher than those with traditional mortgages, and there are origination fees, loan servicing fees, interest, monthly mortgage insurance premiums and an upfront mortgage insurance premium,” Michael Micheletti, chief communications officer at Unlock Technologies, told Realtor.com.

“It’s gaining interest among retirees because of the different qualification criteria and the fact that there are no monthly payments,” Micheletti said.

Financial planners say home equity should support, but not replace, broader retirement planning strategies that include timely Social Security distributions, investment diversification and liquid savings.

This article was written by Jonathan Delozier and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication. The system helps convert company announcements and industry data into HousingWire-style news coverage.