Retirement is a good time to
reassess your real estate requirements. You may no longer need a large house
with several bedrooms, and downsizing
can add cash to your nest egg. But you also need to think carefully
about the new needs that will arise as you age. Here are seven issues to
consider as you contemplate where you will live in retirement.
Are you going to relocate? If you envision retiring
in a warm sunny area, you need to do a lot more than just dream about it.
Do your research on towns and neighborhoods, including crime rates, access to
public transportation and the taxes, insurance and other expenses of carrying
your new home. Be especially aware of health care options and do research medical
facilities in the areas as well.
Do you plan to downsize? You may be tired
of the maintenance that goes with owning a suburban home and want to downsize
to make things more manageable. But do more homework than just counting up the
square footage. And don’t forget to look closely at your expenses. Just because
a place is smaller doesn't necessarily mean it's less expensive to maintain.
Will you fritter
away your profit? If
you downsize and walk away with a windfall, remember you've cashed out for a
reason. So be careful not to let the money slip through your fingers. Maybe you
want to use part of it to take a long-desired
vacation. That's fine. But the rest of the funds should probably go into
your savings or investment accounts to help pay for future living expenses.
Is now the time to renovate your home? The kids are
gone, and many people take the opportunity to put in long-desired upgrades and
special features. If you have the extra time and money, go ahead. But be
careful about finishing the basement or installing a new pool to lure your
grandchildren to visit. A better use of funds might be to get rid of all your
throw rugs and either install wall-to-wall carpeting or refinish the wood
floors, and then install
grab bars in the bathrooms. These improvements may ultimately prove more
useful in retirement.
Have you paid off your mortgage? A lot of people
forget that once you retire you no longer receive bonuses, raises or
promotions. So now is not the time to take on new debt, even if mortgage rates
are low. Living in a mortgage-free home relieves you of a big chunk of your
housing costs. If you want to stay in your current home for the rest of your
life, a reverse mortgage can allow you to use some of your home’s equity for
living expenses.
Do you really want to own two homes? Some people dream
of owning a vacation home where they may someday retire. Others like the idea
of owning a place in the north and a winter retreat in the sunbelt. It's a
tempting dream, but as many people found out during the great recession, you do
not always save money by “getting in at today's prices," especially since
resort prices are more volatile than those in well-established towns. And if
you do ever need to sell out, you'll discover that retirement real estate is
not very liquid. So be honest: How much time are you really going to spend at
your place in the sun, especially if it's so far away you need to fly there?
Do you want a real estate investment? Almost
10 percent of retirees make extra income from rental real estate. The
investment can pay off handsomely, but it's fraught with plenty of pitfalls. Do
you really want the responsibility of dealing with tenants, maintaining a
second property and figuring out the financials? Do you have the discipline to
purchase an investment that will pay off, rather than one you fall in love
with?
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News & World Report.