Making Unwise Decisions With The Equity In Your Home

What has happened to the equity in your home? Will it have any bearing on your lifestyle when you retire?

When you retire, your home becomes a more valuable asset to you than ever, not because of the equity in it, but because it affords you a place to live out the rest of your life in quiet enjoyment. Your home is supposed to be your place of comfort as you grow older but, as we all known, it may not be that way for millions of Americans who are already retired or getting ready to retire.

In the not so distant past, paying off a home was considered more important than any other investment opportunity for people nearing retirement age. It was the correct, and smart, thing to do and aging homeowners looked forward to the day when they didn't have a house payment anymore.

But over the past few years, greed and fast money has taken the place of common sense in the world of high finance, overindulgence, and excessive lifestyles. People started spending for today instead of saving for tomorrow. Home equity became the way of paying for our extravagances and now, with the economy in a serious recession, those days of fast living have abruptly come to a painful end.

More and more retirees are finding themselves in foreclosure and many are losing their homes at an alarming rate. The system of checks and balances, in our government and at home, were thrown out the window. We were sold a dream and we bought into the hype. We were convinced that the good times would never come to an end, and with 20/20 hindsight, many of us have been left wondering what the hell were we thinking.

As the baby boomer generation is heading into retirement age, many are not nearly as confident in their future as they once were. Their homes are mortgaged to the hilt, many companies are either closing or laying off employees, the stock market is tumbling in a downward spiral, and 401(k) plans have taken a big hit, and combined, this has left many retirees and those who are near retirement in a bad financial predicament.

We were all lulled into the belief that we could enrich ourselves more by taking the equity from their homes and investing the money in the stock market. This has left many retirees in dire financial straits. With the sudden drop in home prices and the rise in mortgage payments, (many of us took out adjustable rate mortgages), we are struggling to keep a roof over our heads.

This problem is more widespread than we care to admit and it is getting worse by the day. The money that we borrowed is gone, we can't sell our homes because more is owed on them than what they are worth, and our retirement pension and social security is not enough to keep up with rising mortgage payments.

As they get older, many retirees may find themselves in the precarious position of having to depend on their children for assistance and/or living arrangements, or they may have to look at entering assistant living facilities earlier in their lives than they would like.

This may become an even bigger problem for seniors because everybody is facing the same economic hardships today, and the near future doesn't appear to offer much better economic hope. The problems of today will also become a heavier burden on tax payers and county, state, and federal government agencies tomorrow. There will become a greater need to fund more housing and care assistance programs for the elderly.

Finance Topic of the Month: Why Is It So Hard To Get Out Of Debt?