June 2, 2008
Get a grip!
Ouch:
I don’t have a proper pension and was counting on using my home to raise money for my retirement. Many of my friends are doing the same. Are we in trouble?
Yes, you are in trouble and not because of the housing market. You are in trouble because you haven’t thought properly about the risks and rewards of long-term savings. Because you haven’t put money in a private pension, you have lost out on very generous tax relief. Moreover, you have missed the most basic rule of risk mitigation in investment: diversification. Betting your entire future on the performance of a single home sounds like a particularly poor approach to long-term investment.
That was Norma Cohen in a Q&A in Friday’s FT. I know who to draft in to write Dear Economist if I ever go on sabbatical.
