Suze Orman Warns Retirees Against Counting All Home Equity in Net Worth
Suze Orman cautions that including the full value of home equity in net worth can overstate a retiree's financial cushion because that wealth is not liquid. She recommends calculating net worth both with and without home equity and using the lower figure when planning retirement withdrawals. Standard homeowners insurance typically excludes floods and earthquakes, so a disaster could leave that equity trapped in a damaged property.
Suze Orman, host of the Women & Money podcast, revisits net worth calculation in a Suze School lesson. She argues that retirees often treat home equity as fully available, even though it cannot be spent without selling, borrowing, or using a reverse mortgage. HUD counseling materials caution reverse mortgage borrowers about growing debt and shrinking equity.
Standard homeowners insurance generally does not cover flood or earthquake damage. If such a disaster strikes, a retiree may face repair costs while the property's equity remains locked in a damaged home, leaving less liquid savings to rely on.
Retirees and near-retirees who hold most of their wealth in housing could be most affected by this warning. Recalculating net worth without home equity may lead to more conservative withdrawal plans and greater attention to liquid savings. In disaster-prone areas, households with limited cash reserves may face harder recovery choices if insurance does not cover flood or earthquake damage. Financial advisers may also need to discuss housing wealth more carefully.