Your home may or may not be an important part of your retirement plan. In this step, you must decide whether your home will be an expense or an asset during retirement. If your home is not paid off when you retire, you will still need funds to pay the mortgage, and you will need an increased amount of income to pay off your loan. If your home is paid off, and it is larger than your needs require when your kids are gone, you may want to sell your home and downsize when you retire.

There are two ways you can sell your home. You can simply sell your home for cash (usually to another family), or you can sell your home through a reversemortgage. With a reverse mortgage, the buyer (usually a bank or investor) pays for the home, and you, the owner, can stay in the home until you die.

If you want your home to be a part of your retirement plan, begin by determining the current value of the home. Current appraisals are good starting points. Next, estimate how much your home’s value will increase by the time you retire. Again, be conservative in making your forecast. Finally, determine how much you will owe on the home when you retire. Many people have a goal to have their mortgages paid off before retirement. However, if you expect to still have a mortgage when you retire, allow for mortgage payments when calculating your retirement expenses. Some people plan to buy another home after they retire; this is an additional expense to consider.

To calculate how much money your home will contribute to your retirement plan, subtract the amount you still owe on your mortgage as well as the cost of a new home from the estimated value of your home at retirement.