This week's Family Caregiver Question Of The Day involves planning for retirement. In today's economy is it better to build equity in your home or build your stock portfolio.
Before you answer the question here's a quick look back at Catherine Rampell's February 2013 article "In Hard Economy for All Ages, Older Isn't Better … It's Brutal". She wrote:
"Young graduates are in debt, out of work and on their parents’ couches. People in their 30s and 40s can’t afford to buy homes or have children. Retirees are earning near-zero interest on their savings.
In the current listless economy, every generation has a claim to having been most injured. But the Labor Department’s latest jobs snapshot and other recent data reports present a strong case for crowning baby boomers as the greatest victims of the recession and its grim aftermath.
These Americans in their 50s and early 60s — those near retirement age who do not yet have access to Medicare and Social Security — have lost the most earnings power of any age group, with their household incomes 10 percent below what they made when the recovery began three years ago, according to Sentier Research, a data analysis company.
Their retirement savings and home values fell sharply at the worst possible time: just before they needed to cash out. They are supporting both aged parents and unemployed young-adult children, earning them the inauspicious nickname 'Generation Squeeze.'"
Thankfully the economy has bounced back since the recession and housing market slump of 2007-2008. However the savings, pensions and home equity lost by millions during that time period will never be recovered unless they invest rapid growth but risky stocks or take on the housing market. So what would you do?
"Even as the stock market soars to record highs, federal regulators are announcing new, cheaper ways for cash-strapped borrowers to buy a home. With the catastrophic housing crash of the last decade still glaring through the rear view mirror, the government is again pushing home ownership as the best way to build wealth, but is it?"
'It would perhaps be smarter, if wealth accumulation is your goal, to rent and put money in the stock market, which has historically shown much higher returns than the housing market,' said Nobel Prize-winning economist Robert Shiller at a Standard and Poor's conference last week." -- "Where to put your cash? A house or a stock" by Diana Olick