Housing Bust Forces Americans to Alter Retirement Plans

"Some people considered their house's equity like an ATM that could be used to help pay for children's education costs, as well as other expenses," says Jim Holtzman, an adviser with Legend Financial Advisors Inc. of Pittsburgh, which manages about $300 million in assets. "It doesn't make any sense to base retirement on real estate."

A few years ago, Randy Klein, 63, thought he'd retire in "a couple of years," he says. But the value of his home in Cleveland has dropped about $40,000 since then, forcing him to drop plans to sell his three bedroom house and downsize, because the savings won't be substantial enough. He has also seen his 401(k) lose value.

Now Klein, a hardware store owner, says he will likely work into his early 70s to compensate. "I wouldn't have considered even thinking about this a year ago," he says.

Working Longer

Working longer is a growing trend.

The AARP reported in April that almost one in four people from age 45 to 54 planned to delay retirement, with one in five people ages 55 to 64 thinking the same.

Staying on the job has benefits besides a paycheck. Employment is often a requisite in qualifying for mortgage refinancing, a good option for those with equity and good credit because rates have fallen to historic lows.

By working later in life, pre-retirees also can consider putting off collecting Social Security, a strategy that could lead to higher monthly payouts once they start collecting.

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