Be careful using your house to fund your retirement

The biggest asset many people have upon retirement is their home. To many retirees who own their homes free and clear, it only makes sense to use the value of this asset to fund their retirements. However tempting this may be, there are a few things to consider.

First, home values fluctuate, so don't count on selling your house at a high point of the real estate market. Second, selling a home could dramatically increase your income taxes for the year in which you make the sale. Third, you'll still need a place to live, so if you sell a paid-off house, you'll probably have an additional housing expense.

Finally, if you decide to take out a reverse mortgage (essentially a loan against the value of your home that you don't have to pay back for as long as you live there), remember that such loans may be more costly in the early years of the loan and may have steep entry costs.

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