{"id":7603,"date":"2014-04-21T13:02:12","date_gmt":"2014-04-21T20:02:12","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=7603"},"modified":"2016-12-21T07:28:05","modified_gmt":"2016-12-21T15:28:05","slug":"home-retirement-piggy-bank","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/home-retirement-piggy-bank\/","title":{"rendered":"Your Home Is Not A Retirement Piggy Bank"},"content":{"rendered":"<p>The investment bank\u00a0J.P. Morgan\u00a0recently released an interesting, very lengthy report on the state of the markets. Compelling reading, but the really arresting chart was all the way out on slide No. 65.<\/p>\n<p>On that page, you learn the long-term performance statistics of a number of different asset classes. Here&#8217;s a simple list version of the chart:<\/p>\n<ul style=\"color: #333333;\">\n<li><a title=\"Real Estate Investment With Less Risk\" href=\"https:\/\/www.marketriders.com\/investing\/real-estate-investment-with-less-risk\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">Real estate (REITs)<\/a>: 11.2%<\/li>\n<li>Gold: 8.4%<\/li>\n<li>S&amp;P 500: 8.2%<\/li>\n<li>Foreign stocks (EAFE): 6.5%<\/li>\n<li>Bonds: 6.3%<\/li>\n<li>Homes: 2.7%<\/li>\n<li>Inflation: 2.5%<\/li>\n<li>Average investor: 2.3%<\/li>\n<\/ul>\n<p>That&#8217;s what happened from 1993 through 2012, according to data gathered by market research firm Dalbar and cited by\u00a0J.P. Morgan\u00a0in its report. People tend to focus on the last item, the\u00a0<a title=\"Fund Fees: Slash Them Early\" href=\"https:\/\/www.marketriders.com\/investing\/fund-fees-slash-them-early\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">relative performance of the average mutual fund investor<\/a>.<\/p>\n<p>That&#8217;s a terrible result, I know, but I want to point out instead the two entries just above, inflation and home prices.<\/p>\n<p><a href=\"d MediaTextVisual\"><img loading=\"lazy\" class=\"alignnone wp-image-7605 size-full\" src=\"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/04\/Highland_Heights-Stevens_Subdivision_Highland_Park_4.jpg\" alt=\"retirement\" width=\"512\" height=\"329\" srcset=\"https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/04\/Highland_Heights-Stevens_Subdivision_Highland_Park_4.jpg 512w, https:\/\/www.marketriders.com\/investing\/wp-content\/uploads\/2014\/04\/Highland_Heights-Stevens_Subdivision_Highland_Park_4-300x192.jpg 300w\" sizes=\"(max-width: 512px) 100vw, 512px\" \/><\/a><\/p>\n<p>All investing at its root has the same goal, to beat inflation by a wide enough margin to allow your savings to grow by compounding in a reasonable period of time. Given that most people save for 20 to 30 years in order to retire, that is what we have to consider &#8220;reasonable.&#8221;<\/p>\n<p>So,\u00a0<a title=\"Key to Retirement Success Is Compounding\" href=\"https:\/\/www.marketriders.com\/investing\/key-to-retirement-success-is-compounding\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">your target is double, double again and maybe double one more time<\/a>. One becomes two, two becomes four, then becomes eight.<\/p>\n<p>What many people do instead is focus on the single biggest asset in their lives, their home. That&#8217;s not a bad thing. Owning a home can be a great deal, since you get to live in it while you pay it off and the taxes and interest are deductible.<\/p>\n<p>But you shouldn&#8217;t confuse owning a home with real\u00a0retirement\u00a0savings. Even if you plan to downsize, the amount cash you might realize in a sale and repurchase will not be significant.<\/p>\n<p>Meanwhile, your home &#8220;investment&#8221; is only growing at\u00a0<a title=\"Inflation Risk: 87 Is the New 65\" href=\"https:\/\/www.marketriders.com\/investing\/inflation-risk-87-is-the-new-65\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">about the rate of inflation<\/a>, which is to say, by nearly zero.<\/p>\n<p>Your return\u00a0goal should be to safely double your savings every decade. That would require you to earn at least 7.2%. Add in normal inflation, and your goal becomes something closer to 10%.<\/p>\n<p>Can you do that these days? The short answer is yes. An all-stock portfolio in the years from 1950 through 2013, a period which included every major market crash and hiccup in modern times, nevertheless gained 11% annualized.<\/p>\n<p>A bond portfolio did 6.1%, and a 50-50 stock and bond mix returned 9%, according to\u00a0J.P. Morgan&#8217;s\u00a0analysis.<\/p>\n<h2><strong>Lower costs are\u00a0key<\/strong><\/h2>\n<p>The real trick is owning enough stocks early, when those market declines are opportunities to buy rather than a headache to endure, then\u00a0<a title=\"Get Your Retirement Stocks Bonds Mix Right\" href=\"https:\/\/www.marketriders.com\/investing\/get-your-retirement-stocks-bonds-mix-right\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">slowly move over to a less-volatile mix<\/a>\u00a0of income investments as you age.<\/p>\n<p>That type of portfolio management is getting easier and easier to do at greatly reduced cost,\u00a0<a title=\"What Is An ETF? Three Simple Answers\" href=\"https:\/\/www.marketriders.com\/investing\/what-is-an-etf-three-simple-answers\/?utm_source=marketriders&amp;utm_term=2014-04-21-your-home-is-not-a-retirement-piggy-bank\/\">thanks to\u00a0ETFs<\/a>\u00a0and simple online software. So, yes, buy a home and keep it repaired and enjoy those tax breaks year after year.<\/p>\n<p>Just don&#8217;t bet your\u00a0retirement\u00a0on it.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The investment bank\u00a0J.P. Morgan\u00a0recently released an interesting, very lengthy report on the state of the markets. Compelling reading, but the really arresting chart was all the way out on slide &hellip; <a href=\"https:\/\/www.marketriders.com\/investing\/home-retirement-piggy-bank\/\">Read more <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":7605,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[62,42,43,37],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Your Home Is Not A Retirement Piggy Bank | MarketRiders<\/title>\n<meta name=\"description\" content=\"You shouldn&#039;t confuse owning a home with real retirement savings. 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