Having a plan to meet housing needs is an important part of your retirement income strategy. A home provides you with an anchor, a place of shelter, memories, and nearness to friends and community. Homes are also a major source of wealth for retirees and near retirees. Home equity typically provides between 45 and 75% of median household net worth when approaching retirement.
For a typical retiree, home equity is larger than the value of the accompanying investment portfolio. Expenses related to the home; property taxes, utility bills, home maintenance and upkeep, can add up to a significant portion of your monthly budget.
As we get older, our bodies slow down, and health issues and other aspects of aging make us less mobile. Contingencies we need to plan for are whether we can continue to live in and properly maintain the same home, whether we have access to a community that lets us continue to enjoy basic conveniences, even if we stop driving our own cars, and what will happen to our social lives and our opportunities to remain active as old friends also become less mobile or move away. One of the greatest dangers to quality of life in retirement is the risk of becoming increasingly isolated.
Due to the important connection to the emotional and financial aspects of retirement, it is worthwhile to spend time thinking about housing options and potential uses for home equity. As time moves forward, it is important to live somewhere with social connections, transportation options, and quality health care and long-term care services. You need to think about where to live, how long to stay there, and whether to move later in retirement (if this is the case, what is the plan for that).
One of the first things to do is consider reasons for moving. These relate primarily to the changing emphasis of life priorities and life needs. For instance, empty nesters may no longer require a larger home when there are no children living there. Large homes require more cleaning, maneuvering, heating and cooling, and possibly larger properties requiring lawn care. As well, children may have moved to other parts of the country, and new retirees may wish to be closer to their grandchildren.
When you have no children in the household moving to a state with lower taxes for retirees can also be source of savings. Retirees, obviously, are no longer constrained to live close to their employers. The reduction of need to remain settled in one location for children and employment may create freedom to move elsewhere.
In addition, with more time to focus on hobbies and interests, moving may provide an opportunity to live closer to the types of places which can better fulfill these interests (golfing, being closer to the beach, etc.) Finally, the aging process will slowly reduce mobility, and moving can be one way to set a long-term housing plan in motion that will better support the opportunity to subsequently age in place (one floor living is a big thing to think about here) and having quick access to important medical care.
We know that retirees have developed family and community ties and friendships they do not wish to leave behind. Many also have significant memories and good feelings about their homes and wish to maintain the stability and familiarity those represent. Their home can be an important part their memories and leaving that anchor behind really is not a viable option. If the home is paid off, owners tend to take pride in ownership and might feel trepidation about going through the whole process again. New technologies and the possibility of renovating the home can also make aging in place an easier endeavor than in the past.
Whatever your circumstances and feelings are, the biggest thing is to have a plan, if you are unsure of what to do or how to plan, work with a Retirement Strategist. They only have your best interest in mind and will help you make those decisions and the plan to financial freedom no matter what your choice is.
