People frequently relocate from expensive to less expensive places when they retire. This releases home equity that is comparable to or even greater than retirement money stored in 401(k) plans and similar vehicles.

Why it matters: Individuals rarely use reverse mortgages to obtain cash from their homes and yet require a place to live in retirement. Yet, moving to a less expensive location is considerably more typical.

Be wise: The younger generations are buying in pricey states and cities because they want to reside close to high-paying employers or reputable educational institutions. Older Adults are using the money they are borrowing from the mortgage market to fund their retirement.

By the numbers: About 80% of Americans over the age of 60 are homeowners, per a new Vanguard report entitled “Home is where retirement funding is.”

By relocating, the median American over 60 can unlock about $100,000 of home equity — and even more if they downsize at the same time. That’s a meaningful sum given that the same median American retiree has about $223,000 in financial retirement accounts.

Where it stands: About 25% of U.S. retirees sell their homes and relocate to somewhere cheaper over any given 10-year period, per Vanguard’s Kevin Khang, one of the authors of the report.

That doesn’t just free up cash; it also reduces their day-to-day living expenses.

How it works: Let’s say a homeowner sells her house in Denver for $600,000, and moves to a similarly-sized house in Florida costing $400,000. That means she’s cashing out to the tune of $200,000 — 50% of the value of the new home.

In fact, in 2019, that ratio averaged 73% in Colorado, up from just 12% in 2007.

“Given what happened to housing values in Colorado during the pandemic, it’s very likely that this number is even higher now,” says Khang.

Other states with lots of cashing-out potential include California (77%) and Hawaii (116%). Importantly, the cashing-out figures include moves within the state, not just moves to a different state entirely.

The bottom line: High housing prices are not the reason why younger Americans move to expensive cities and suburbs. But “when you’re retiring, you’re hyper sensitive to retirement resources,” says Khang.

For older folks who moved to expensive neighborhoods when they were younger, those resources often include their home — which can prove to be a source of substantial liquidity.