The real way Americans get rich

Happy weekend. A quiet moment is a good time for a big-picture question: what do you want the years ahead to look like, and is your money set up to pay for them? The stories below start there.

On the money today:

Let's get into it.

Homeowners 62 and older now hold a record $15.34 trillion in home equity, about twice the $7.54 trillion they held in early 2020. For many of them, the house is the biggest asset they own, and our Must Read covers the guardrails for anyone thinking about borrowing against it.

What’s the smartest or most costly decision you’ve made about your home, whether buying, borrowing against it, paying it off or selling? Hit reply and tell us what you learned. Your story may be featured in a future issue.

Living on a fixed income makes every big purchase feel like a risk. Still, a short list of big-ticket buys keeps showing up as ones retirees rarely regret, and at least one is easier to enjoy the sooner you make it. See how many of the five you’ve already checked off.

Why it matters: The average American can expect about 78.5 years of life but only about 64 of them in good health, a gap of roughly 14 years. For purchases that depend on your health, the window to enjoy them is shorter than retirement itself.

The last five years before retirement are when a plan either holds together or starts to show its cracks. Saving more is only part of the job. A rough first year in the market can shrink a portfolio that looked solid on paper, and some savers look for a buffer outside stocks and bonds. Gold is one option, since it can’t be printed the way currency can, and a gold IRA through Goldco lets you hold it with the tax advantages of an IRA. It’s one of several choices to weigh, along with a few moves that go beyond picking investments.

Why it matters: If the market falls 10% in your first year of retirement and you withdraw the common 4%, your portfolio ends that year about 14% smaller before it has a chance to recover. The five years before you retire are the window to build the buffer that keeps one bad year from dictating the rest of your retirement.

Dave Ramsey and Suze Orman have spent decades teaching Americans to be wary of borrowing, and for plenty of people that advice is exactly right. Some of the richest people in the country take a different approach, borrowing against assets they already own. For most homeowners, the biggest asset is the house, which makes the guardrails around any move like this worth knowing before you try it.

Why it matters: Homeowners 62 and older hold a record $15.34 trillion in home equity, according to the National Reverse Mortgage Lenders Association. For many readers, the biggest asset they own isn’t in a 401(k), and knowing how to use it, and when not to, is part of the plan.

Last week, we asked our readers what they’ve changed in their routine because of rising fuel prices, inspired by our story on the US fuel crisis. One reader wrote in with a reply we wanted to share. One reader told us what they’ve cut back on, from takeout to Halloween, and what that could mean for the wider economy.

From our reader, V.R.

Answering the query about personal routine change due to rising fuel prices, I don’t buy things I don’t need. That stretches from takeout from restaurants to Halloween. This year was about handmade decorations and handmade costumes which took more time and effort. While this is how I offset the sky high fuel prices at the pump, there is a nagging awareness of the cumulative effects on the consumer economy. There is still spending, but that spending has been shifted from finished goods to components and hurts some industries while strengthening others.

The correct answer is D) About 57%. The S&P 500 closed at 1,565.15 on Oct. 9, 2007, and bottomed at 676.53 on March 9, 2009. On price alone, it didn’t close at a new high again until March 28, 2013, more than five years later. Anyone who retired at the peak and kept withdrawing through that slump had far less invested when the rebound came, which is why the years before retirement are the time to build a buffer.