What will your life look like once you retire? Do you plan to travel? Visit grandchildren more often? Maybe retirement is something you do more on paper because you still plan to work. Whatever your particular retirement looks like, you have to think about your home. Some people elect to downsize from a house that was once full of kids. Others would stay forever, if possible.
Your decision will depend partly on your financial situation. It's a time-honored retirement tradition: Sell the house, which has soared in value over the years, move somewhere cheaper and live off the home sale proceeds.
For recent generations of retirees, tapping equity in this way could in many instances more than make up for a lack of other retirement savings, or could amply supplement a traditional pension and Social Security benefits.
But financial planners today warn against counting on your house to bail you out in your retirement years. Uncertain home price appreciation, the rise of home equity mortgages and the logistics of relocating are likely to limit the number of future retirees who will be able to take advantage of this option.
If you're like many Americans, you purchased your house because it met your lifestyle needs. Your house is the place you now call home. But at some point after you retire, you'll face a decision: Should you hold on to your house, or would renting or living in a retirement community make more sense for you?
Selling the home could be the perfect way to cut costs – but that’s not always the case.
The cost of selling.
Selling your home for retirement comes with some pretty high costs. You’ll likely have to do some facelift/style updates to get the best price, you could have 6% or more in realtor commissions. If you make enough money in the sale, capital gains taxes could take a big bite out of your earnings.
The cost of moving.
Then, you have to purchase or rent somewhere new to live during retirement. If the new place is much smaller, you might end up needing to buy smaller furniture instead of just using what you have. Then, there are all the costs that come with moving: closing costs, actual movers (and this time, you may need help with packing to spare your back), and many other incidentals that you won’t know about until you do it.
Maybe moving to a sunny climate for retirement seems like a dream come true, but you’re leaving lifelong friends, family, community and doctors with whom you’ve built relationships over time. The beach is nice, but having friends and family to spend time with is better – providing (of course!) that you actually like your friends and family. By the way, you probably think your house is worth more than it actually is, so make check out the likely selling price with a few real estate agents, and maybe pay for a property appraisal, before committing to the change.
All of this means one thing: You have to total all of the costs associated with moving to see if it makes sense.That doesn't mean that you won't end up profiting from selling your house for retirement, you’ll have to calculate your own numbers to make an educated choice.
And that's all before you start thinking about health.
As you age, your health will become more of a deciding factor in all your retirement decisions. If you (or your spouse) have mobility problems, a two-story home probably isn’t the best place to live. You can make accessibility accommodations, but the costs could be high.
On the other hand, if your layout has fewer stairs or is all on one floor, widening a few doors for walkers isn’t that much compared to the costs of selling and moving. If you’re younger and thinking about aging parents (or looking ahead to being one), do a home makeover upgrade using universal design standards – designing for people in all stages of life. This will allow you to stay in your home for as long as you would like without having to make modifications for your later years. Of Course more serious health concerns may be a reason for moving to some form of senior housing.
The Middle Ground
If you're not sure what to do, there's a middle ground to explore. Instead of selling, you could rent your home and move into something smaller, using the rental proceeds and banking the extra money to assist with retirement. You’ll probably need a management company, especially if you don’t have experience as a landlord and this allows you to continue cashing in on the rising value of your home. Obviously, this also helps if your retirement goal is moving to a new city and you need to test it out prior to committing to the move.
Other Reasons to Sell
If you’ve paid off your home, trying to hold onto it without burdening yourself makes sense. However, sometimes selling is still the best idea. If you plan to travel a lot, you may only need a small place to call home. If you need extensive, ongoing medical care that your local or regional hospital can't support, relocating also might be advised.
The Lifestyle Perks May Be Worth Moving Up For
As a retiree, you hope to be able to make some choices about how you live that don’t center on money.
Location is everything but what each retiree wants out of where they live is going to be different. Active seniors want to be near the action—whether that’s skiing, golfing or social activities. To access their desired activities, several seniors are choosing to upsize to a new community. Seniors can easily find these perks in senior communities around the country, but they are going to pay more for it. Even if the square footage of their new home is in the same range, often the homes are pricier because of the close by amenities.
Our home buying processes makes selling your home easy and convenient. We pay cash for your house – no delays at the closing table, no hassles with bank mortgage approvals, and no reason why your home can’t close in 7 days in most cases.
Whether you’re ready to sell your house today, or you’d just like a little more information about the process, give us a call at 414-375-9091 or contact us through our website form. With just some general information about your property, we can schedule a time for a visit and evaluate your home to present a free, no-obligation cash offer to purchase your home. We look forward to talking with you.