A retiree may appear financially ready to stop working, but much of their wealth could be tied up in assets that are harder to access than cash or investments in a brokerage account.
Suze Orman, host of the “Women & Money” podcast, warned in a 2023 episode that including all home equity in net worth can make a household’s financial position look stronger than it really is.
Although a primary residence counts as an asset, accessing its equity typically requires selling the property, borrowing against it, or taking out a reverse mortgage.
Retirees who base spending decisions on total net worth rather than accessible resources risk withdrawing too much or retiring before their finances can support it.
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Suze Orman’s net worth warning targets a flaw most retirees overlook
Many retirement planning tools total assets without clearly distinguishing between funds retirees can readily withdraw and equity tied up in a primary residence.
Orman warned that this single-number approach can create a false sense of financial security, 24/7 Wall St noted, particularly as rising property values inflate net worth without generating spendable income.
Nadia Evangelou, director of real estate research at the National Association of Realtors (NAR), shared that homeowners in their 60s have typically accumulated roughly $200,000 or more in housing wealth from appreciation alone, five times the median retirement savings.
<strong>While retirement assets are more concentrated among higher-income households, for many middle-class homeowners, their home is their single largest asset as they transition into retirement</strong>.
For retirees whose wealth is concentrated in their homes, that distinction can be decisive: Their reported net worth may look substantial, even when their accessible financial cushion is limited.
Home equity and retirement accounts dominate the typical family balance sheet
The median family with a working head between ages 25 and 64 holds 78.2% of its total wealth in just two categories, individual retirement accounts and home equity, according to the Employee Benefit Research Institute (EBRI).
That ratio rises sharply with age, climbing from 55% for families with heads of household aged 25 to 34 to 87.4% for those aged 55 to 64.
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Geoffrey Sanzenbacher, research fellow at the Center for Retirement Research (CRR), calculated that Americans aged 65 and older hold approximately $12 trillion in home equity that remains unspent and locked inside primary residences.
Sanzenbacher’s research showed that housing wealth accounts for the majority of total wealth in the second and third quintiles of the wealth distribution among older households.
Only the top 20% hold enough financial assets that home equity represents a small fraction of their overall resources.
Home equity and retirement accounts make up 78.2% of typical family wealth, leaving older households heavily reliant on housing for financial security.whyframestudio / Getty Images
Turning home equity into spending money costs more than retirees expect
Accessing home equity can involve transaction costs, borrowing expenses, relocation, or restrictions on how much cash a homeowner can obtain. The trade-offs depend on whether the retiree sells, downsizes, or borrows against the property.
Selling captures equity but may involve agent commissions, closing costs, moving expenses, and the emotional difficulty of leaving a longtime home.
Sanzenbacher has also highlighted the sentimental attachment that can discourage older homeowners from downsizing, even when doing so could improve their financial flexibility.
Reverse mortgages offer another route, letting eligible homeowners borrow against their equity without required monthly payments. However, interest and fees can increase the outstanding balance over time, reducing the equity remaining for the borrower or their heirs.
A 2017 Journal of Finance study, “Reverse Mortgage Loans: A Quantitative Analysis,” found that only 1.9% of eligible homeowners held reverse mortgage loans in 2013.
The timeline for converting home equity imposes a cost no liquid asset has, because selling a home requires months of listing, negotiation, and closing.
Housing market conditions can shift during that window, potentially reducing the price a seller receives before the transaction completes.
A retiree needing emergency cash cannot speed a closing or draw partial equity the way a brokerage withdrawal permits. Orman drew a harder line on her podcast, noting that stocks remain liquid even in a crisis, while a single event can destroy a home’s value.
How to pressure-test your retirement plan
Orman advised retirees to calculate two net worth figures, one with the house and one without, and build their withdrawal plan around the lower figure, treating any future proceeds from downsizing or a reverse mortgage as supplemental.
A plan calibrated to the smaller number holds up whether property values climb, stall, or drop during the opening years of retirement.
Vanguard’s 2025 Retirement Outlook found that workers who save through a defined contribution plan are nearly twice as likely to be retirement-ready as those without one, making accessible accounts the first line of defense once paychecks stop.
Timing matters, too. A 2026 brief from the Center for Retirement Research found that sellers in their 80s receive roughly 5% less than sellers in their 40s for comparable properties.
If retirees plan to downsize, they should consider how delaying a sale could affect the proceeds available to fund later expenses.
Vanguard’s Principles for Retirement Income recommends maintaining a contingency fund and spending reserve to reduce the risk of having to sell investments during a market downturn.
Ultimately, a retirement plan should remain viable without relying on rising home values, a future home sale, or a reverse mortgage to cover essential expenses.
By stress-testing withdrawals against lower asset values, preparing for unexpected costs, and keeping accessible reserves, retirees can reduce their dependence on uncertain sources of equity and build a more resilient income strategy.
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