Your home is no doubt your biggest asset, and since the price you paid for it most likely has appreciated, it is certainly a key part of your retirement planning. But looking at your home as an investment, consider why today may be the best time to move from a home — even one with with no mortgage — to renting at The Manor.

Typical buy vs. rent arguments cloud the more important point: A house is an inefficient way of building wealth.

A house costs far more to buy and operate than you think. (See the back page.) Homeowners can easily end up paying more to live in their houses even during the “mortgage-free” years than any added "profit" they gain when they sell. A common mistake made by most homeowners is how they figure their returns. Often by subtracting the price they paid from the price they received, they assume they made a huge "profit." Their return often overlooks the costs of owning a home — buying it with a long-term mortgage and then paying taxes on it, insuring it, repairing it, renovating it — and how these costs sap most of what most homeowners think they make in price appreciation.

So how much does a house really cost?

David Crook of The Wall Street Journal Online says, “You can easily end up spending three times the purchase price of a house.” In his example, today's buyer of a typical $300,000 single-family home who takes out a 30-year loan will end up paying the price of the house again just in interest. Add 30 years of property taxes, homeowner's insurance, regular maintenance and a couple of big-ticket repairs or improvements, and the total cost of buying the home could easily top out at well over $1 million. He remarks that, “Even cash buyers might be surprised to see that they can't be assured of making a profit.”

Living in a home with a mortgage is just another form of renting.

If you choose to purchase a new house or continue to live in a home with a mortgage because you believe it is better to pay “deductible” interest than rent, consider the fact that mortgage interest is simply another form of rent you pay your lender for the use of its money. You may receive a deduction from the government, but most of your monthly payment neither builds equity nor is deductible. And keep in mind that it takes 20 years before a typical borrower pays more principal each month than interest.

How can even staying in a mortgage- free home be a risky investment?

It's risky and bad planning to have too much of your net worth in your principal residence. No prudent stock-market player would put 60% or 70% of a portfolio in just one stock, but millions will hold that much or more of their total net worth in just one house. How much wiser is it to invest some of your cash where it may earn a greater return and leave some where it is more accessible for travel and enjoyment, or heaven forbid, an unexpected emergency.

Housing values appreciated in the past, how about in the near future?

 According to a June, 2009 article in “Smart Money” magazine, for housing returns of the next 20 years to match the last 20, the government will have to relax borrowing standards even further. (Which given recent foreclosures, seems unlikely.) That analyst (Jack Hough) “suspects real returns will turn negative over most of the next two decades, but that house prices won't necessarily dip.” He goes on to say, “If house prices remain flat, they produce negative real returns due to the creep of inflation.” This means that even in a home that is paid for, you may not build any new equity.

Retirement is supposed to be carefree and enjoyable. Examine your situation and only undertake the costs and risks that will allow you to sleep well at night.

Whether you buy a new home, remain in one that is mortgage free, or rent, the fact of the matter is that housing is an unavoidable cost of living. From a conservative point of view your home should be best considered a cost of living as opposed to an investment asset. This is because investment assets shouldn't depend on finding another place to live as a means of providing access to needed cash. Renting is like buying an insurance policy against home maintenance. What this means is that renters have no liability for regular maintenance costs, equipment failures, or catastrophic occurrences such as a tree falling on your home or being hit by a storm. The beauty of renting is that the landlord has to worry about the unexpected financial costs of ownership.