Skip to content

#8 Overlaying Debt and Equity in Portfolio and Housing Wealth


Now ten years into partial retirement from careers in counseling, you’ve both decided to take full retirement as of year-end 2021. You want to pay more attention to managing your financial assets along with expanding your involvement in photography (you) and art collecting (she), firmly resolved to spend the rest of your lives in your present home.

In the course of analyzing your separate and jointly owned portfolio assets, you realize you have become almost “top heavy” in your equity investing with very little in fixed income, although you do keep cash reserves for emergencies and for moderate investing in the art collection. You’re somewhat concerned about inevitable downturns in the stock market, but with interest rates so low, are not ready to make major portfolio shifts to bonds. In terms of your overall financial picture, debt relative to equity is almost insignificant, with no home mortgage or credit card debt.

You’ve obviously devoted serious thought to the future and to re-assessing your portfolio allocation decisions. Going forward, you might consider “re-balancing” your overall asset allocation using your housing wealth. The term “overlay” comes to mind, because portfolio managers of pension funds, faced with the same concerns about the bond and stock markets, use overlays of derivatives and options to offset their exposure to different segments of the market.

Three years have passed. You’re older. The value of your home has probably increased significantly. Interest rates are lower. All these points indicate in favor of refinancing.