Relying on Home Equity for Retirement? You Could Be Facing a Shortfall

Homeowners 62 and older are sitting on more housing wealth than ever. Senior home equity climbed to a record $14.66 trillion in the third quarter of 2025, up almost 2% from the previous quarter, according to the NRMLA/RiskSpan Reverse Mortgage Market Index. Median home equity for homeowners 65 and older was $250,000 in 2022, up 47% from $170,000 just three years earlier, according to Harvard's Joint Center for Housing Studies.

Many retirees see their homes as a safety net, the asset that will eventually cover a move, a health scare, or a stretch where Social Security and savings come up short. But this can be a significant financial mistake, as that safety net may be much smaller than it looks. 

Older homeowners tend to sell for less than younger ones selling a similar home. Therefore, the equity they think they have, often based on a standard market valuation, may actually be thousands of dollars less than they were anticipating.

Why homeowners over 70 often sell for less than expected

A seller in their 80s typically gets about 5% less than someone in their 40s or 50s for a comparable home, according to a January 2026 research brief from the Center for Retirement Research at Boston College. On a $429,300 home, the current median sale price nationally, according to the National Association of Realtors, that's a loss of about $21,465.

The researchers found that older sellers' homes tend to have more deferred maintenance, things like an aging roof, an outdated kitchen, or decades-old wiring and plumbing that a younger seller might have already replaced.

Buyers price all of that into their offer before they even make one. Plus, older sellers are more likely to sell off-market, often directly to an investor, instead of listing publicly where competing buyers can push the price up. A private sale to a single buyer means no competing bids and no upward pressure on price.

Lower-than-expected home equity can be problematic for downsizing and care plans

A lower sale price is particularly difficult for retirees who are counting on that money to fund a specific next step, such as a smaller home, an assisted living move, or long-term care. If we take our example above, where the shortfall is over $21,000, that's a big chunk missing from the equity you were expecting.

Assisted living now costs a median of $6,200 a month nationally, or about $74,400 a year, according to CareScout's 2025 Cost of Care Survey. A retiree who comes up short on the home sale may end up having to choose a smaller apartment, a second- or third-choice assisted living facility, a less convenient location, or ask family to help cover the gap in the first year or two.

Housing costs don't disappear just because you've retired

Selling for less is only part of the picture. Many retirees are still paying for their homes well into retirement. The share of homeowners ages 65 to 79 carrying a mortgage rose from 24% in 1989 to 41% in 2022, and median mortgage debt over that period jumped from $21,000 to $110,000, according to Harvard's Joint Center for Housing Studies.

For these retirees, a chunk of any sale proceeds goes straight toward paying off what's owed before it can fund anything else, so getting less than you expected on the sale of your home can have an even bigger impact.

Even with home equity, many retirees still face a gap

Home equity alone doesn't close the broader retirement savings gap either. The typical baby boomer faces an annual spending shortfall of about $9,000, or roughly 24% of what they'll need, even after their other assets are factored in, according to Vanguard's 2025 Retirement Outlook. Tapping home equity can help close that gap.

Vanguard's researchers estimate that if boomers sold their homes outright and invested the proceeds, the share who are financially on track for retirement would rise from 40% to 60%. For most retirees, selling outright and becoming a renter isn't realistic, though. Therefore, they downsize or move to assisted living, all of which reduces how much actual liquid equity they receive from the sale of their property, so it may not fully close the $9,000 per year gap.

How to protect more of your home's value before you sell

A few practical steps can help retirees hold onto more of their home's value when the time comes to sell. Tackling small repairs before listing, fresh paint, a working appliance or two, and basic curb appeal improvements can offset some of the deferred-maintenance discount and reduce lowball offers.

Listing on the open market rather than accepting the first private offer also matters, even when the public listing process feels slower than a quick investor sale. A HELOC or reverse mortgage could provide a way to access equity gradually rather than relying entirely on a future sale. And any cash offer, especially from an investor, is worth a second opinion before accepting it for speed alone.

Bottom line

Only 9% of baby boomer homeowners say they plan to use home equity or a reverse mortgage to fund retirement, according to Freddie Mac's 2024 Baby Boomer Consumer Research survey. Most are counting on savings, Social Security, and pensions instead.

Home equity is real wealth, and for most retirees, it's one of the largest assets they have. But it's also illiquid and tied to market conditions, and the amount a retiree actually clears from a sale can come in lower than planned. The smart move for seniors is to treat home equity as a cushion, not a paycheck.

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Author Details

Chris Lewis, CEPF

Chris Lewis has spent his career turning data into answers. As Director of Digital PR at FinanceBuzz and a Certified Educator in Personal Finance, he oversees the data journalism and media relations teams, digging into the personal finance topics that shape Americans' lives at every stage, from Social Security and retirement income to 401(k) strategies, jobs, and real estate.