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The average American is more likely to own a home than to have saved enough money for retirement[1]. In fact, for many Americans, their house is their retirement plan: They’re counting on the value of that nest egg to fuel their golden years. But while real estate can be a good investment, it isn’t wise to rely on a house to fund your retirement. To explore why, Barron’s spoke with Teresa Ghilarducci, the Irene and Bernard L. Schwartz Chair in economic policy analysis in the Economics Department at the New School, and the author of How to Retire With Enough Money[2].

“You can’t eat your house a sandwich at a time,” she says.

This interview has been edited and condensed for clarity.

BARRON’S: For a lot of Americans, their house is their retirement plan. Is that wise?

GHILARDUCCI: It’s not a great retirement plan at all. For instance, let’s say you own your house, and you have Social Security. You are going to have to live only on Social Security, because you can’t eat your house a sandwich at a time. And also, your house will often be a liability as it needs continual repair. You still need money to pay your taxes. As every homeowner knows, even though you paid it off, it isn’t free.

But is paying off your house a form of saving?

Absolutely. If you don’t manage your debt, it is as bad as not saving. If you pay off your debt, that’s the same thing as saving. If you’ve maxed out on your 401(k)[3] and you want to know...

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