Retirement: Part Four
We’ve been talking a lot about retirement planning. Most of it won’t be just numbers, it will be lifestyle. Many of those lifestyle choices will affect those numbers. One of these, and our planning topic for this article, is housing.
A lot of people count their houses as assets when adding up the money they can depend upon in retirement. The main problem with this is that you’ve got to live somewhere. So, while you may have a very valuable house you can sell, if you do so you’ll need to buy another one or pay rent.
If you buy a new place, it ties up some or all of the proceeds you got from the sale. If you rent, you have an ongoing expense. And either way the cost will continue to go up (think taxes, insurance, and inflation).
Staying where you are gives you a different problem. You have a large home in a nice neighborhood with beautiful landscaping. Now fast forward. You’re 80 years old. It’s only the two of you now, you’ve got arthritis, and your spouse has asthma. The house is now 40 years old and needs repairs, painting, mowing, trimming, and weeding. Oh, and the A/C is starting to make strange noises.
Right now you have a good home brimming with life and vitality, taken care of by people who are fit and energetic. But it will get old and you will get old. Planning on staying there the rest of your life may not be the best idea. Or it may. The key is that you need to have plans on what to do if it becomes a burden instead of a blessing. You also need to know how you’d recognize the difference.
But maybe you don’t have an upkeep or financial problem with retirement housing. Your cash flow will allow you to buy that house on the lake you’ve always wanted. Great, but before you move in, I have some questions.
Have you ever lived there? I don’t mean have you ever visited your planned retirement locality. What seems like the ideal life two weeks out of the year may not turn out that way if you are there 365 days a year, year after year. Your favorite vacation locale may not make a good home.
Visit your retirement dream home during all seasons. Do a test move by taking trips there that last months rather than days before you commit to your move. Then look at the true costs of living there. How much is food? How much are electricity and gas? What are the insurance rates and taxes? Move if you want, but be realistic and be prepared.
Almost one-third of pre-retirees expect to relocate or downsize their homes in retirement. But according to a consumer wealth research report by Tiburon Advisors, fewer than one in ten actually do so. Have your dreams, but plan for your reality.
That’s enough retirement for now. But you should have gotten the picture. Planning for it is not a one-hour exercise on the back of a napkin. In the next article we’ll start on college. So get ready to go back to school.
Gary Silverman, CFP® is the owner of Personal Money Planning, a financial planning and investment management firm located in Wichita Falls. You may e-mail him at Gary@PersonalMoneyPlanning.com