Retirement is the final step of the American Dream for many of us. At this stage in our lives we've accomplished much of which we've set out to do in our lives, we've built families, careers, and businesses. We've had opportunities to develop and have worked our way through all of the challenges and travails life has thrown at us. After all, how bad can any individual day be, if you're reading this, you've survived it!
Retirement isn't all coffee and roses, unfortunately. With retirement comes a litany of challenges and concerns and decisions that can feel irrevocable. Choosing where we live can end up being one of the most daunting decisions we make as we approach or when we're in retirement. Maybe you've been through this exercise already or are starting to look towards this with some hesitancy. Either way, I hope this helps provide some clarity and ideas on how to help make the right decision!
This is a personal topic for me as I have aging parents that are asking themselves these very questions right now. Mom and dad are working through these exercises to figure out if their home is a realistic option for their retirement, not just early on, but hopefully, for many years to come! I'd love to hear your personal stories on how you or your parents are working through this too.
So what are the top 3 choices you should be thinking about as you choose to settle into your final retirement home?
1. Does my home support my health? For many of us, over 50% actually, will not move again once we retire. So this is a choice and something essential to think about early. This exercise comes with a big 'what if?' since our health today is not our health in the future. How many of you have had a short period of time go by where you've seen a large shift in your health? All it takes is 1 doctors visit, 1 missed turn signal, 1 trip and fall, to completely change our outlook on our health. Your health is an incredibly important piece, maybe the most important, when it comes to choosing our final home. For this exercise, take a close look around your home. Do you have a lot of stairs? How would you feel about climbing those stairs at your most tired, right now? Your most tired right now might be your everyday feeling in 10-15 years! Do you have a lot of property to maintain? How do you feel about spending cold, wet miserable days maintaining your property. Or sweltering hot days with no shade or oppressive humidity? Or, will you be comfortable spending a portion of your fixed income to have someone take care of your property on your behalf. Is it property that you will really be able to enjoy in the next 2 decades? Also consider proximity to family. Are you close to loved ones? Do you have a community that will remain in place or family to help support you as you age? Tip, using the equity in your home to create a line of credit can provide you with the flexibility to increase spending down the road!
2. Can I afford to stay here? There's a saying - we spend our whole lives building our wealth and sacrificing our health. Then we spend the end of our lives spending our wealth to try and keep our health. There is so much truth to this, as retirement, in a sense, is like being out of work for 30 years! Housing costs in retirement are almost equally as important as our health when it comes to choosing if we should stay or we should go. Take a close look at your budget today, how much room does it have for an increase in costs? Housing costs may rise more quickly than traditional inflation. The cost of oil, gas and electricity can increase quickly and greatly impact your budget down the road. For my parents, as an example, the cost of oil in the winter to heat their home is 'northeast' of $1,500 per month! Also take a close look at how capable you are of handling any large financial shocks in your budget. On fixed income, large shocks can be more than just a headache, it can completely change your retirement picture. A lot of these shocks can come from the home. Need to replace a water heater? Might run you $8,000. Roof repair or replacement can cost tens of thousands. Simply painting a home might run over $10,000 depending on size and where you live. Home maintenance can come with some hefty one time costs. Make sure you're realistic about how much updating your home will need over the next 2-3 decades. Did you know that the largest expense most people have in retirement is their home? 44% of Americans carry a mortgage into retirement and it ends up being their largest monthly expense. If this is you, the HECM reverse mortgage can eliminate your existing mortgage principal and interest payments to free up your money for other needs!
3. Are you in a place that supports the lifestyle you want? What kind of home do you live in today? Do you have a large property and privacy? Part of a gated community with close knit neighbors? Perhaps you're looking at a retirement community or a mountain retreat for your retirement. One of the items that is rarely discussed in retirement and aging is mental health. Depression can be very common as we age. Not only is retirement itself a huge shift in our identity, we now find ourselves with more time on our hands and the unfortunate truth that many of our closest friends are aging alongside us and in many instances passing before us. Finding yourself the right type of community and property is essential to help protect your mental health as you age. One of the most common mistakes I find people making is staying in a home that doesn't provide them the lifestyle they really want, or moving to a new home which doesn't offer the true lifestyle they want in retirement. Be very aware of what's most important to you in retirement. Do you want a very active community, or would you prefer someplace quieter. For this exercise, look back over your life. Where have you been most satisfied? What kind of personality are you? How important is your social life vs your privacy? Taking a careful look at what provides you the most peace and satisfaction will go a long way to ensuring you don't wind up in a position where you're unhappy during these years of your lives! One of the tools you can use in retirement is the H4P or HECM for purchase. This is the idea of buying a home in retirement with about 50% down and having no monthly payments of principal and interest. Imagine being able to move to a home and lifestyle you want to be in, this might be how you can do it! Or, if you're stuck in a place you don't want to be, this very well may be your ticket to a lifestyle you can actually appreciate!
After working through these 3 exercise you may have a much better sense of should you stay or should you go! Ultimately, all of these choices either directly or indirectly relate to whether you can financially afford to stay in your current home or move into a new one. Did you know that for the majority of Americans, their largest asset is their home? If you haven't considered the use of housing wealth in retirement please reach out to your financial advisor or to me and I'd be happy to speak with you about how we can serve you better in your retirement years!
