Retirement Retirement Planning

The Retirement Strategy Millions Are Counting On - And Why Financial Planners Say It Could Fail

Tapping into this asset may not be the best retirement plan.

By Catherine Collins , Edited by Laura Hohenstein

Updated Sept. 1, 2026

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For many retirees, their home is the largest asset that they have. However, it is also an asset that can be challenging to tap into. For that reason, some retirees consider selling their homes and downsizing to access that equity.

However, using your home equity may not be the best retirement plan. Here is why retirees should consider multiple costs before deciding to sell. For example, selling and moving costs may cut into profits, reducing the cash flow retirees can use after they sell.

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Why using home equity as a retirement strategy can be risky

A Federal Reserve Bank of Philadelphia study found that sellers over 80 earn about 5% less on home sales than sellers in their mid-40s. This often occurs because many retirees defer maintenance, and homes that need repairs typically sell for less. Additionally, older sellers are more likely to use pocket listings and sell privately, which reduces competition and, by extension, can undercut returns.

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A majority of older Americans want to age in place

Interestingly, a 2024 AARP study found that 75% of adults aged 50+ want to age in place. While it makes sense that many retirees want to stay in their homes and communities, continuing to live there also means paying maintenance and repair costs.

Additionally, it means that if retirees want to tap into their home equity, they may have to choose options such as home equity loans or even reverse mortgages, which come with fees that can cut into overall profits.

Downsizing doesn't always create a cash flow windfall

Many people also think that downsizing will create a cash flow windfall, but that may not always be the case. A Realtor.com study found that the average cost for a move is $17,000.

Additionally, if retirees downsize to a condo, for example, they may have to pay condo fees and HOA costs. Plus, housing prices are much higher now, and retirees may not get as much home as they think when downsizing.

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Get an assessment of what your home is worth

According to Federal Reserve data, those aged 70 and up currently hold almost $13 trillion in real estate. However, it's still worthwhile to get an estimate of your home's value before you decide to tap into your equity or sell to downsize. This is especially important to do if you are relying on your home equity to fund your lifestyle in retirement.

To get a realistic assessment, contact a local real estate agent who can evaluate your home, research comps, and suggest repairs you can make to increase its value.

Calculate selling costs and moving expenses before listing your home

Once you have an accurate estimate of your home's value, calculate your selling costs and moving expenses before you list it.

You won't get to keep the full amount of what you sell your house for. You'll have to pay agent commissions, closing costs, any home repairs identified during the inspection, and any remaining mortgage balance if you still have one. Additionally, as mentioned, moving expenses can be substantial, especially if you are moving to a different state.

Your next home will also have its own taxes, insurance, maintenance fees, and ongoing upkeep costs. Knowing these numbers ahead of time can help you understand if selling your home is worthwhile and how much equity you can realistically use to help fund your retirement costs.

Estimate your retirement income before selling, especially if you rely on Social Security

Another important step is to outline your retirement budget. Many people retire without a detailed plan or a full understanding of their expenses.

If you rely on Social Security and need to know how much you need in addition to that to fund your retirement, creating a realistic budget can help. Consider your expenses, like housing, food, utilities, and more. Then, compare it against your income. If you need an additional $1,000 a month above Social Security, for example, that can help you determine whether downsizing can create that level of cash flow.

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Working with a financial planner can help you make an educated decision

Making retirement decisions can be stressful. If you're not sure whether or not selling your home and tapping into your equity is the right choice for you, work with a financial planner.

A financial planner can review your retirement income and expenses and take the time to understand your goals for your golden years. They can use that information and compare it against what you can realistically earn by selling your home.

Working with one can help you decide the next steps for your retirement to ensure you have enough income to live on for many years.

Bottom line

Having equity in your home is a big asset. However, it can be hard to access unless you decide to sell your home.

Many retirees in the past have downsized to create more cash flow. However, downsizing may not be as fruitful as it used to be, given the rise in housing prices and overall living costs.

Working with a financial planner can help you decide on the next steps for you and avoid financial mistakes that could hinder your retirement goals.

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