Some baby boomers may not be able to retire as soon as planned due to limited savings and large home equity line withdrawals.

CNN Money reports:

“The housing bubble had another perverse effect on our planning: It led us to save less. “Many people thought, ‘I’m wealthier, I already have a big chunk of my nest egg thanks to my house, so I don’t have to save as much,’ ” says Moody’s Economy.com chief economist Mark Zandi.

Using asset gains as an excuse to cut back on saving can be dangerous, especially when those gains come during a period of unprecedented returns. Bloated asset values can be illusory - and temporary. So even if your retirement accounts balloon during your career, keep making contributions. If nothing else, you’ll give yourself a wider safety margin to deal with setbacks.”

In some urban areas, people now owe more on their homes than they are worth. The situation is complicated by the fact that many homeowners withdrew the equity that would remain for extravagant home upgrades, shopping sprees, and other unnecessary expenses.

Hopefully, homeowners will learn to be more cautious with home equity lines and more generous with savings in the future. Retirement takes careful planning, especially in times of unexpected price increases.

See Also:

5 Financially Sound Ways to Use Your HELOC

No Retirement HELOCs for Baby Boomers?

Tags | Heloc, home equity line of credit, mortgage crisis, retirement