Advisers: This Outdated Retirement Rule Actually Un-Diversifies Your Clients
Instead of automatically saving home equity as a "last resort" in retirement planning — that can lead to risky wealth concentration — it makes more sense to treat it as a strategic asset that's incorporated into a client's retirement plan much earlier.
The most common piece of housing advice in retirement planning is also the most rarely examined: Your home should be the last thing you touch.
It sounds prudent. It feels prudent. Homeownership carries an emotional weight that no other line on the balance sheet carries, and "don't touch the house" honors that weight.
But follow the arithmetic of that advice across a retirement, and it does something no adviser would ever recommend on purpose.
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The concentration no one plans
Start where most retiree households actually start: The home is a significant share of total wealth, often the single largest asset on the balance sheet. Now apply the standard sequencing. Spend the portfolio first. Draw down the stocks, the bonds, the cash, every non-housing asset, before the home is considered.
Each year that plan runs, the household's remaining wealth becomes more concentrated in a single asset. Carried to its conclusion, a client who began retirement reasonably diversified ends it with something approaching all of their wealth in one illiquid, undiversified position.
The entire premise of thoughtful financial advice is diversification, not the manufacture of a riskier position over time.
Yet that is precisely what the last-resort rule produces — not by accident of markets, but by design of the sequencing itself.
An asset that ages with its owner
The concentration would be concerning even if the asset were a strong one. The research suggests something more uncomfortable. A January 2026 research brief from Boston College's Center for Retirement Research found that home sellers begin realizing lower sale prices around age 70, with an 80-year-old netting roughly 5% less than a younger seller on a comparable home, and that deferred maintenance and upkeep explain about a quarter of the gap.
Related academic work reaches the same direction: As homeowners age, the capacity to maintain a property declines, and the home's relative performance tends to decline with it.
The last-resort rule therefore concentrates a client's wealth into an asset whose performance is most likely to weaken during exactly the years the concentration peaks.
The literature already moved
This is not a novel objection. Financial planning research has been building the case for more than a decade that housing wealth works harder when it is coordinated with the plan rather than quarantined from it.
Barry Sacks and Stephen Sacks, writing in the Journal of Financial Planning in February 2012, found that coordinated strategies outperformed the conventional last-resort sequencing.
John Salter, Shaun Pfeiffer and Harold Evensky at Texas Tech reached parallel conclusions the same year on housing wealth as a standby buffer that protects portfolios during drawdowns, and Wade Pfau's 2016 work on incorporating home equity into retirement income strategy points the same direction.
Notably, FINRA itself removed the "last resort" description from its investor guidance in early 2014. The research moved. Much of the advice has not.
What 'proactive' looks like
None of this argues that any client should access home equity, and nothing here is a recommendation. The point is that a sequencing question deserves the same scrutiny as every other allocation decision.
Some advisers have begun treating housing wealth that way: Evaluating it early in the plan, in a client's 50s and 60s, while the household still holds a diversified balance sheet and the widest range of options, rather than arriving at it last, by default, when the options have narrowed.
Timing carries a benefit that sharpens the point: Many of the strategies housing wealth can fund — life insurance and long-term care coverage among them — depend on insurability, and insurability narrows with age and health.
Evaluated early, home equity can still fund that kind of long-term planning. Deferred to the last resort, the same equity often arrives after the underwriting window has closed.
The instruments available for that conversation have also broadened.
Alongside traditional financing, newer structures such as home equity investment agreements — CHEIFS® (Cornerstone Home Equity Insurance/Investment Funding Solutions), where I am a co-founder, is one — allow housing wealth to enter the planning conversation without adding new monthly payments or interest, settling instead from the home's value at a future settlement event such as a sale, a permanent move-out or the homeowner's passing.
Which tool fits, if any, is a client-by-client judgment for the adviser and the homeowner's own professionals to make.
The question that is not client-by-client is the one the last-resort rule keeps answering by default. Advisers spend their careers protecting clients from concentration. The sequencing of housing wealth deserves the same protection.
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