Originally featured in the Winter 2017 issue of Westchester Senior Voice magazine.
In my work as a CERTIFIED FINANCIAL PLANNER™ professional, I always discuss housing with clients as they plan for retirement. According to the U.S. Bureau of Labor Statistics, housing is the single largest expense for every age group. Whether you’re 50, 60, 70, or older, it pays to think about what makes sense as you approach or move through your retirement years.
Evaluating housing costs is especially important because we are living longer and may need to support a longer retirement. In Westchester County, we also face higher insurance costs, maintenance costs, and property taxes that come with higher home values. If you are still working, paying off any remaining mortgage should be a priority.
Most people want to stay in their homes throughout retirement but haven’t thought through all the costs involved. We may need to renovate to maintain our home’s value. Household tasks may become harder, requiring outside help. And we may need to modify our homes to keep them safe and suited to our needs as we age.
Reevaluating your priorities can help you create the means for a more fulfilling retirement. If you are concerned about maintaining your lifestyle given the rising cost of staying in your home, the rest of this article is for you.
Lower expenses can be as powerful as higher income
The good news is that there are plenty of options, and lowering your monthly expenses in retirement can be just as effective as increasing your income. One possibility, which can be difficult but necessary to consider, is selling the family home.
For most of us, it isn’t easy to sell the home where we’ve created a lifetime of memories. But if you can get past that, the financial benefits can be considerable. Start with trading in those heating and lawn maintenance bills, not to mention property taxes.
Downsizing may not only lower your expenses but increase your income, since the proceeds from the sale can be invested to provide additional income. And if the home qualifies as your primary residence, up to $250,000 of gain ($500,000 for married couples) is generally excluded from capital gains tax. That exclusion hasn’t been adjusted for inflation, so long-time homeowners in high-cost areas should run the numbers with their tax professional before selling.
Other options to consider
Renting out extra space is another way to help afford your housing costs. Also keep in mind that owning isn’t always the best choice for empty nesters. Other factors matter too, such as a better climate or being closer to adult children and grandchildren. Renting lets you try out a new community before you buy and can save you costly mistakes if the move turns out to be the wrong choice.
Whether you buy or rent your next home, the goal is to make the move on your own terms, before a financial situation forces it. When choosing your next home, think about how you will maintain or build a strong social network and keep doing the things you enjoy. Easy access to health care, dining, and activities all matter. If you rely on a car, what will you do if driving is no longer an option? Ride-hailing services such as Uber and Lyft can make getting around easier, but proximity to what you need matters even more.
Picturing what will be important to you in a retirement home, and understanding what your housing expenses might be, is an important first step in planning for a successful retirement. For the bigger picture, see Retiring? Take Control of Your Assets. Take the initiative and speak with a qualified professional who can help you with your plan.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
