Nikki Foley:
If your housing strategy isn’t part of your retirement plan, you may be missing one of the biggest levers you have.

Welcome to Paladin Financial Talk. I’m your host Nikki Foley, and I’m joined by featured advisor and founder of Paladin Financial, Jeff Foley. Together today, we are going to answer what today’s housing market means for your finances.

Jeff Foley:
Thank you. Thank you for having me here.

Nikki Foley:
A little bit about Jeff Foley — Jeff founded Paladin Financial in 2017. We’re located here in the Twin Cities of Minnesota. You’re a Certified Financial Planner™, recently received the Certified Tax Specialist designation, and you have just shy of 30 years in the business. Congratulations on that one.

Jeff Foley:
I know. I look much younger.

Nikki Foley:
Of course. Jeff, you’ve recently been on KARE 11’s Minnesota & Company show, and you also had an article recently in Fortune Magazine. Tell me a little bit more about this. Why is it important to speak to our community about retirement income planning, tax strategies, and so forth?

Jeff Foley:
We are very big on educating the community because there’s so much going on. There’s a lot to consume. We talk about the four pillars of a financial plan — financial planning, healthcare planning, tax planning, and estate planning. There’s always something changing, and we want to keep that top of mind and make people aware of their options and the importance of having a plan.

Some interesting statistics: about 30% of people worry about retirement, 30% are pessimistic about retirement, and 50% of people in America don’t think it’s realistic for the average American to retire comfortably. Financial education is not taught in school for the most part, and I think it’s important to keep these conversations in front of people.

Nikki Foley:
When most people think about retirement planning, they think about investments, 401(k)s, and Social Security. That’s usually where people start. But one of the biggest and often overlooked pieces of the puzzle is housing.

Jeff Foley:
Today’s environment is tough. Younger people trying to buy their first home are dealing with high inflation, high interest rates, and high housing costs. It’s hard to know what the right move is and how long to delay taking that next step in life. That’s exactly why we’re doing this series — to help people think through some of these decisions, the pros and cons, and their options.

Nikki Foley:
Over the next several episodes, we’re bringing on knowledge leaders from different areas — financial planning, lending, real estate, and reverse mortgages — to help listeners understand how housing fits into the bigger financial picture.

Jeff Foley:
For people getting close to retirement, retirement planning includes the years leading up to retirement, the transition into retirement, and ongoing maintenance because things are always changing.

Retirement planning can be complicated because of the number of financial choices people have to make. Some of those decisions are irreversible. Then you add uncertain lifespan, healthcare costs, long-term care concerns, and market changes. Housing becomes one of many major financial choices that people need to think through carefully.

Nikki Foley:
One thing I recently learned through retirement income planning coursework was this image of a retirement planning table. During your accumulation years, maybe there are three big financial decisions you’re making. But as you move toward retirement, suddenly there are eight or ten major categories to manage.

You have financial advisors, tax professionals, attorneys, insurance professionals, housing experts, healthcare professionals, retirement coaches, and potentially senior care professionals all involved. Housing and relocation become a seat at the retirement planning table.

Jeff Foley:
Exactly. Housing is a major decision no matter where you are in life. Whether you’re buying your first home, upsizing, downsizing, or considering how home equity fits into your retirement income strategy, it’s one of the largest assets and expenses most people have.

At Paladin, we help model these decisions out. We look at mortgages, property taxes, maintenance, future repairs, HOA costs, and overall cash flow. People often assume their expenses will drop significantly in retirement, but today’s retirees still want to travel, spend time with family, and enjoy life.

Nikki Foley:
How might home equity factor into retirement income?

Jeff Foley:
Home equity can be a significant resource. We think about retirement planning as puzzle pieces. You may have Social Security, pensions, investments, part-time work, rental income, and then your home equity.

If someone needs to replace windows, renovate a home, help support family, or supplement retirement income, we look at all available options to determine the best path forward. Sometimes a reverse mortgage or downsizing strategy makes sense.

Nikki Foley:
You mentioned reverse mortgages. We’ll actually have guests later in this series to discuss that topic in more depth.

Jeff Foley:
Reverse mortgages are much more consumer-friendly today than they used to be because of regulation and industry changes, but they’re still complex decisions. Having the right professionals around you matters.

Nikki Foley:
One thing that stands out to me is how many retirement decisions are both emotional and financial at the same time.

Jeff Foley:
Absolutely. Most decisions we help clients make are both a math question and an emotional or family decision.

Nikki Foley:
How does today’s geopolitical environment impact interest rates and housing?

Jeff Foley:
Interest rates are a major factor in housing affordability. There’s a lot happening globally and politically that impacts rates. Nobody knows exactly what will happen next, but eventually interest rates will likely come down over time.

Nikki Foley:
Bring this full circle for us. What does today’s housing market mean for finances?

Jeff Foley:
Housing is a significant expense, so you don’t want to overextend yourself. But you also need to recognize that over time you’ll likely build equity and increase income throughout your career.

You want to make housing decisions based on your life goals, not fear. Don’t overdo it financially, but also don’t put your life completely on hold trying to perfectly time the market.

Nikki Foley:
One phrase I recently heard was “date the rate, marry the home.” Interest rates will change over time, but the home itself and how it fits your life matters most.

Another rule of thumb — housing expenses generally shouldn’t exceed about 28% of your monthly income.

One other question we hear frequently from prospective clients is how to balance paying down your mortgage versus investing.

Jeff Foley:
That’s another example of math versus emotion. If your mortgage rate is 7% and you’re only expecting to earn 5% conservatively investing, paying down the mortgage faster may make sense mathematically.

But there are many moving pieces:

• emergency savings
• future expenses
• job stability
• taxes
• investment goals
• risk tolerance

Some people simply want the peace of mind of entering retirement debt-free, and that’s okay too. The important thing is understanding the trade-offs.

Nikki Foley:
Jeff, any final thoughts as we wrap up?

Jeff Foley:
Your home impacts your tax plan, your retirement plan, your financial plan, and your overall lifestyle. These are major decisions, especially in today’s market, so thoughtful planning matters.

If this conversation sounds familiar and you have questions, we offer a complimentary 15-minute phone call to help people start the conversation and feel more confident about their decisions.

Nikki Foley:
You can visit Paladin Financial and use the booking link in the top right corner to schedule a complimentary phone call or first appointment.

You can also follow us on YouTube, Facebook, Instagram, LinkedIn, and more for additional financial education and resources.

Thanks for listening, and we’ll see you on the next episode of Paladin Financial Talk.