Q. Our townhome will be paid for in 2 years. My husband and I will both be 61. If we sold at that time, we would probably walk away with $400,000 to $450,000. The townhome will be about 15 years old. I am sure there will need to be some repair--- new roof, siding, etc.--- due to the age of the building.
Why would it not be better to invest the money in a CD at 5 percent interest? That would yield about $20,000 a year without ever touching the principal. Then we could rent rather than own. I realize home ownership may eventually gain income, but homes also take a lot of money to maintain.

The $20,000 a year would more than cover the rental, and our money would be safely invested. Even if we had to pay taxes on the interest income, we would still be in a fairly low tax bracket. Your comments?
---D. S., by email  
A. Very good idea. And ahead of the crowd. You are likely to find that the rent and utilities will be less than the operating cost of your house. And since you’ll no longer have equity tied up in a house, you can put it to work to pay your rental expenses.

I believe many middle-income Americans will discover that the equity in their home is the biggest single lever on their retirement standard of living. They will learn that they can either have a lot of shelter, or they can choose to have less shelter and more disposable income.

The one revision I would make to your plan is to invest the money in a conservative portfolio that includes equities. If the money is all in CDs or other fixed income investments, your interest income will remain constant--- but your rent will rise with inflation. Eventually, there will be a significant gap. This is a virtual certainty.

Invested conservatively, you could draw from your shelter nest egg at 4 to 5 percent. You would have a high probability of keeping up with inflation. Another benefit is that your dividend and capital gains income would be taxable at 15 percent.

I wish more people had your foresight. The most common problem older people have is being incapable of moving even when the house no longer suits their needs, is increasingly expensive, hard to maintain, and too large.

Many people who do move from a house to an apartment discover that they can live just as well in far less space. Many people who live in houses ranging from 2,000 to 3,000 square feet, for instance, will have all the space they need in 1,100 to 1,300 square feet.

Q. My wife and I will soon turn 60. We have about $750,000 that we would like to put in a safe place. I know we would lose the rate of return we now are enjoying from stocks and bonds (allocated 60 percent/40 percent). But,I am growing increasingly uncomfortable with the market and the U.S. economy in general. What are safe havens for personal savings?
---D.D., by email

A. The only reasonable thing to do is to diversify further. It won't cure your worry, but it should reduce it. And it will be better than the dream of Promised Land Investing.

All-or-none cures are usually a good way to shoot yourself in the foot. You will probably preserve more purchasing power by being diversified than by timing yourself into the purported safety of gold and other havens for the worried.