This Is How You Can Turn Your Home Equity Into a Retirement Buffer

If you're one of the many homeowners who has the bulk of your net worth tied up in your home equity, you might consider using that equity as a strategic planning tool to improve your liquidity, diversification and retirement resilience without having to sell.

By Dan Anderson

published 8 January 2026

in Features

An older woman smiles as she talks on the phone while her husband works on his laptop at the kitchen table next to her.

For many households, the single biggest number on the balance sheet isn't a stock portfolio. It's the home they live in.

Over the past decade, that's been a gift. Rising property values gave families a sense of security and, for many, meaningful paper wealth. But when so much of a family's net worth is tied up in one place, it can also mean more risk than most people realize.

A home is an illiquid asset. You can't sell off the bathroom to fund a tax bill or an unexpected expense. Liquidity tends to show up only at the time of sale, which often isn't when families want to make major financial moves.

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And unlike a diversified portfolio, your house ties your financial fate to a single street, a single school district and a single local economy.

Many hold 40%, 60% or more of their net worth in their primary residence. For some, it exceeds 75%. That creates concentration risk — when a single asset dominates your financial picture and limits flexibility, diversification and liquidity later in life.

Retirees in particular often face the issues of having strong home equity, limited liquid funds and reluctance to add monthly obligations in retirement.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

A new way to think about home equity

More families and their advisers are starting to view home equity as a strategic planning tool rather than an untouchable asset. Instead of treating it as something that matters only at sale or at death, they're looking at ways to unlock just enough value to give their retirement plan more flexibility and resilience.

There are a number of ways to thoughtfully use home value without selling or disrupting a retirement plan. Some homeowners access a portion of equity to create liquidity for long-term care, income strategies or investment opportunities.

Others use a small slice of equity to handle discrete planning needs — such as Roth conversion taxes or portfolio rebalancing — without having to tap retirement accounts prematurely.

For those who want to remain committed to housing as a long-term asset — meaning they still believe in homeownership and housing appreciation — reallocating a modest portion of a primary residence into other diversified real estate exposures can help reduce the concentration risk of having too much wealth tied to a single property.

From last resort to planning tool

Financial advisers increasingly view home equity as part of a client's overall strategy rather than a fallback plan.

By modeling side-by-side scenarios — keeping equity locked up vs reallocating a portion of it — they can help families see the potential impact on income, liquidity, net worth and legacy.

The goal isn't to take on more risk, but to make the wealth tied up in a home work more effectively for the household.

This approach can be particularly valuable for retirees or mass affluent households with strong portfolios but limited liquidity. It can help widows or single homeowners who want to remain in their homes but need more flexibility.

It can also give advisers a way to solve funding challenges without shrinking assets under management (AUM) or layering on new monthly obligations.

What can homeowners do?

Here are the main ways homeowners can responsibly tap equity to diversify and strengthen their retirement plan — without selling their home outright.

Home equity line of credit (HELOC). Good for tactical liquidity or emergency reserves. You pay interest only on what you use. Best for homeowners with stable cash flow who want flexible funding options.

What to consider:

Monthly payments are required
Interest rates could adjust and rise over time

Reverse mortgage (for ages 62-plus). Good for retirement income, long-term care funding and aging in place. No monthly mortgage payments, and it's a regulated product with consumer protections.

Considerations:

Reduces future inheritance
There are costs and counseling requirements

Move/downsize/sell or rent. Good for those who are ready for a lifestyle shift and want full access to their equity.

Considerations:

Major life disruption
Housing costs may not fall depending on the market

Shared equity/home equity investments (HEIs). Good for homeowners who want liquidity without borrowing. There are monthly payments, and they retain ownership and occupancy.

Considerations:

Homeowners share future appreciation in the home value upon selling or refinancing
Requires a clear understanding of the terms

CHEIFS® (Cornerstone Home Equity Insurance/Investment Funding Solutions), where I am a co-founder, is one example of this emerging model.

How to choose the right path

Ask yourself:

How long do I plan to stay in this home?
Do I need steady income, a liquidity buffer or funding for a specific financial move?
Is avoiding new debt or monthly payments important?
Am I trying to reduce concentration risk or simply access cash?

This is where a financial adviser can help model scenarios — especially when planning tax moves like Roth conversions, funding long-term care or preserving invested assets.

The bottom line

When too much net worth sits in a single address, families carry more exposure than they might realize. Rebalancing even a modest slice of home value can strengthen income, improve diversification and keep more assets working — without forcing a move.

In a world of rising costs and longer lives, that's not a radical idea. It's a practical one.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Dan co-founded Cornerstone Financing LLC with the initial vision of helping trusted wealth and insurance advisers utilize their client's greatest dormant asset — home equity — to more efficiently fund insurance premiums. This vision has ultimately broadened out to what Cornerstone is today. Dan is a seasoned veteran of the insurance industry, with two successful entrepreneurial ventures, both with highly successful exits. Dan's visionary approach to creating seamless, personalized wholesale insurance execution has led to the 2006 launch of Madison Brokerage, later sold to Acrisure, the world's sixth-largest insurance broker, where up until September 2024, Dan led the company's wholesale life insurance platform.