Real Estate and Retirement

Before you start counting your real estate profits from selling your home and downsizing, think about how much you'll pay for the house you'll live in next.  Unless you're willing to move far away, the cost of your empty-nest dream cottage has probably also shot up too.

Consider the recent explosion in prices an anomaly.

Many boomers face another challenge.  You won't be able to tap all your home's equity if you've already borrowed heavily against it.

As with stocks, demographics could also dampen home prices as boomers first downsize and then, move on.  Some economists think real estate is even more vulnerable to those trends.

Though this may lower returns, it doesn't necessarily portend a crash.  Housing economist Karl Case of Wellesley College notes that boomers span a wide age range. "I'm 60, and if I'm going to be in my house another 20 years, the baby boom still stretches out another 20 years behind me," says Case. "The pattern isn't as cliffy as you might expect."

Even if the value of your house slides, Case adds, you have built-in insurance: The cost of the house you're buying will have gone down too.

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