Be careful using your house to fund your retirement

The biggest asset many people have upon retirement is their home, with many retirees owning their homes free-and-clear. As such, many retirees believe it only makes sense to use the value of this asset to fund their retirements. However tempting this might be, there are a few things to consider before making any decisions.

First, home values fluctuate, so don't count on selling your house at a high point of the real estate market — you may be disappointed. Second, if you sell a home, you may face tax implications that could dramatically increase your income taxes for the year in which you make the sale. Third, if you sell your home, you are still going to need a place to live and, if your house was paid off, you will now 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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