Quote:
Originally Posted by noppenbd
I do think it is relevant. Having a large portion of your net worth represented by the equity in your house is not diversified IMO. Look at boomers who planned to use the equity in their house to retire on. Say you only had $250K in retirement savings with $750K in home equity, planning to downsize or borrow against that equity to finance a large portion of your retirement. If you lost 20% of that equity in the housing bubble you are going to be cash strapped in retirement.
Would I use 20% as a planning target? Not really, because I think it will be the natural result of good savings habits and not saddling yourself with a large house payment.
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This is how I would answer the question. Regardless of house value, a person needs good savings habits to retire with proper risk assessment.
A person's net worth does not determine if they can retire.
A person's financial independance does. In the 250k/750k case, I would argue the person is not financially independant and could not retire.