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Two-thirds (73%) of people would consider using their home to help finance retirement, according to the Equity Release Council.

But is this such a wise idea? What are the risks?

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Home as a piggy bank

The council says that by 2017, more than a quarter of a million retirees will consider downsizing and almost 60,000 will look into equity release.


And the likelihood of your property making up a substantial part of your retirement planning increases among younger age groups (who are less likely to have made alternative plans). So, for example, 93% of those between 18 and 24 expect to dip into the value of their home, and 73% of them listed it as one of the top three sources of income.

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However, even among older age groups, the home is a vital part of their planning. Some 55% of those aged 55-64 plan to dip into it. For them the vast majority expect to downsize - at 39%, while 9% will opt for equity release.

The fact that younger people are more likely to dip into the value of their home - and more likely to consider equity release - means that an estimated 98,400 people will use this approach in 2056.

Nigel Waterson, Chairman of The Equity Release Council, said: "This research clearly shows that more and more people are considering using their property as part of their retirement finances. This might mean choosing to downsize, rent a room out or use equity release - or any combination of the above."


Risks

Clearly, as the home remains by far the biggest asset we have, there will be those who have seriously unbalanced savings and assets, and it makes perfect sense to find a way to turn some of those assets into income in retirement.

However, there are some serious downsides. If you choose to downsize then you run a number of risks.

Clearly you are entirely dependent on property being priced high enough when you come to sell. A house price crash at the wrong time could mean you don't get the cash you were expecting.

Likewise, you may be over-estimating the gap in value between the property you own and the smaller property you have your eye on - particularly in areas where small properties are in big demand.

Finally, you won't have a chance to choose when you move and downsize, and your property decisions will be driven by something other than the right thing for you.

Equity release

Meanwhile, if you release equity you are eating into the value of your estate over time, which needs to be made clear to your family in order to avoid nasty surprises. You may also end up getting a relatively small return in exchange for the value of your property once you have paid the interest on the equity you are releasing.

It is therefore worth seeing an adviser long before you plan to retire, so you can weigh up all your potential sources of income, understand the implications of your choices, and stand a better chance of having the retirement and the income you want.

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