Retirement’s New Price Tag: Why Most Homeowners Are Still Falling Short of the Comfort Threshold

Retirement preparedness has taken a hit for many Americans in recent years as stubborn inflation, high prices, and rising health care costs have eroded savings.

In turn, this confluence of factors is reflected in how many perceive the amount of money they will need for their golden years.

To that end, Americans’ so-called “magic number” (the number needed to retire comfortably) rose to $1.46 million in 2026, up from $1.26 million in 2025, a 13.6% jump, according to Northwestern Mutual's 2026 Planning & Progress Study.

What’s more, “46% of Americans say they don't expect to be financially prepared for retirement and nearly half (48%) believe it is somewhat or very likely they will outlive their savings,” according to the study.

What's more, this shifting "comfort threshold" for retirement in 2026 is evident even among those with significant home equity, who are finding themselves underprepared.

The gap between the average retiree's savings and the perceived 'ideal' nest egg

Charlene Quaresma, wealth management adviser with Northwestern Mutual and founder of House of Q Wealth Management, says the new findings are not surprising.

“The 15% increase from last year reflects real and persistent economic factors, including ongoing inflation, rising health care costs, questions about the future of Social Security, and longer life expectancies,” Quaresma says. There are also new concerns about the impact that AI will have on their careers and their ability to save and invest.

“People are realistically adjusting their expectations to account for a more complex retirement landscape," she says. "Plus, with advancements in health care extending lifespans, funding a 30- to 40-year retirement requires significantly more savings than in previous generations.”

The difference between the average retiree savings of $288,700, according to Clever Real Estate, and the ideal nest egg of north of $1 million is staggering.  

In fact, the Northwestern study found that even as the comfort threshold climbs, 23% of those with retirement savings say they have just one year or less of their current annual income set aside for it.

Quaresma says that, generally, an ideal nest egg should replace about 80% of preretirement income over potentially 30-plus years, covering inflation and health-related expenses.

“Bridging this gap requires comprehensive financial planning as early in life as possible,” she explains.

Stephen Kates, CFP, Bankrate financial analyst, agrees, explaining that retirement is primarily a question of cash flow and expenses: If you can align them over a 20- or 30-year period, you will succeed regardless of how much money you have.

“There are plenty of retirees with modest savings and well-controlled expenses. Lifestyle inflation is something people can try to get away with throughout their working lives, but it will catch up with them in retirement,” he says.

Home equity does not do retirees much good if they cannot access the value of that asset, he says. “Which is why it is often better to downsize before retirement or early enough for that equity to go to work supplementing retirement income.”

Equity in people's homes is an asset, but it can’t be the only retirement plan

For Americans who are homeowners but have little saved for retirement, this can mean being house-rich but cash-poor. In other words, having equity and wealth locked in a home, but little left for bills and emergencies.

A recent Realtor.com® report explains that purchasing a home by age 30 is associated with a 22.5% higher net worth (by $119,000) at age 50 than buying in one’s 40s, highlighting how a longer accumulation window compounds financial security.

Yet, retirement requires replacing working income with retirement income. If you cannot monetize the equity in your home, it cannot effectively support you in retirement, Kates says. And if your home is your only asset, you need to either leverage it through a loan or a reverse mortgage, or sell it to support your retirement.

What’s more, home equity can create a misleading sense of financial security, according to Steve Sexton, CEO of Sexton Advisory Group, as people see hundreds of thousands of dollars tied up in their home and feel like they're in good shape.

“But equity in a home isn't the same as money you can live on. It doesn't pay your utility bills. It doesn't cover a medical expense. It doesn't generate monthly income,” Sexton says.

Relying on this false sense of comfort can also have detrimental consequences for older homeowners,

As Cliff Auerswald, president of All Reverse Mortgage, explains, the biggest risk is people waiting until they're in a crisis to figure this out.

"They'll drain their savings first, rack up credit card debt, and then come to me asking about a reverse mortgage or a HELOC as a last resort—when it should've been part of the plan from Day 1," he says.

“If you're 62 or older and most of your net worth is in your house, you need to look at that equity as a tool, not a safety net you hope you never need. A reverse mortgage line of credit, a HELOC, even a planned downsizing—the options are there, but they work a lot better when you're planning instead of reacting,” he says.

Monica J. Washington Rothbaum, chief operating officer and senior attorney at J&Y Law, also notes that accessing that home equity value requires major lifestyle changes, and not everyone is willing to make them. 

“Again, it comes down to what is security and what is comfort,” she says. “We see this play out with clients, too. When someone doesn’t have access to liquid cash, medical bills can start stacking up, and that pressure can push people to settle cases faster or for less than they should, just to get relief in the moment.”

What can homeowners do to be better prepared in retirement and not rely solely on their home equity?

Thankfully, experts say there are several steps homeowners can take to avoid facing this type of situation.

For instance, Northwestern’s Quaresma says homeowners can start by building a comprehensive plan that combines home equity with other retirement income sources, such as investments, annuities, Social Security, savings, and even cash values from whole life insurance. 

And of course, to reduce your reliance on your home equity in retirement, speaking with a financial adviser to discuss goals and create plans is always a great place to start, no matter how far down the road retirement may be, according to Rose Krieger, senior home loan specialist for Churchill Mortgage. 

And not all is doom and gloom. As Sexton says, the good news is that it's not hopeless: Someone at 50 or 55 with modest savings still has meaningful options, such as maximizing contributions, optimizing their Social Security strategy, and reducing unnecessary tax drag on their investments.

“But those decisions require a plan, and they require making that plan sooner rather than later. Waiting costs money in a very real and quantifiable way,” Sexton says.

Robert De Lessio, director of lead advisers at Strategic Wealth Designers, agrees, noting that a strong retirement plan isn’t built on a single asset or assumption. It’s built on balance—liquidity, income, growth, and protection—working together.

“For homeowners especially, the goal shouldn’t be to rely on the house, but to position it as one piece of a broader, more flexible strategy,” he says. “Because in the end, retirement isn’t just about getting there—it’s about staying there, comfortably and confidently, for as long as life lasts.”