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You can't take home value with you

Retirees on average are living on very low incomes -- a median of $24,400 -- but have significantly more money tied up in their homes than other low-income Americans.

For example, 75.8 percent of families headed by a retiree own their home, but only 24.6 percent have any debt on that home.

Those numbers tell some financial advisers one thing: The average retired person should look for ways to convert that equity in his home into cash that might improve his standard of living.

"It seems like people are reducing their lifestyle in order to have more assets left on their death," said Bard Malovany, of Sagemark Consulting in Annandale , Va. "It doesn't make a lot of sense."

They might instead consider a reverse mortgage, through which they could remain in their home while receiving funds, which would then be repaid when the home is eventually sold. He cautioned that a person pursuing that approach should get professional advice and analyze the details carefully.

Another option might be for the retiree to sell the home and rent an apartment, said Charles Berk, a Washington-based first vice president of UBS Financial Services Inc., thus turning the home into cash and avoiding the hassle and expense of maintaining a house. "That way, the maintenance is taken care of and they have the capital to supplement their lifestyle," he said.

Many retirees appear particularly vulnerable to one potential investment mistake, judging from the Fed data, said the financial planners. About 19 percent own stocks directly, and the median value of those portfolios is $45,000. For most people, it makes far more sense to invest in low-fee, diversified mutual funds that own hundreds of stocks than to pick a few and own them directly, advisers said. Yet only 16 percent of retirees owned stock in mutual funds and similar investment pools.

"I'm always baffled that the average person thinks they can pick stocks better than a qualified mutual fund manager," said Peter Speros, an adviser with Sullivan, Bruyette, Speros & Blayney Inc. in McLean , Va. Moreover, an individual investor with a relatively small portfolio of individual stocks tends to deplete his savings through brokerage fees, he said.