7 What About Retirement Housing?
Eric and his wife agreed that they wanted only one thing in retirement: to stay in their treasured home, the one in which they’d raised their children and made so many good memories. Their problem, though, was affording it. The home had aged rather badly, needed some major repairs, and still had a modest mortgage left to pay off on it. Eric and his wife had poured their modest finances into raising their children and enjoying family life. It wasn’t until the children were all out of the house and out of college that they began to work seriously on funding their retirement. Eric kept looking at their modest retirement savings and all the work their home needed, while wondering whether staying in the home in retirement was both wise and possible.
Housing
Housing during your retirement can be a big issue. Housing is a retirement issue for several reasons. Retirees may spend a lot of time at home, much more time at home than when working full time before retirement. Your housing in retirement may thus affect how much you enjoy retirement. Ideally, your housing in retirement should be desirable, conducive to a peaceful and pleasurable retirement. Indeed, if you want to have a good retirement, think first of where and how you want to live, meaning both in what location and in what type of housing. Do you want to live in a warm climate, on a golf course, in the country, in the suburbs, in the city, or near your children and grandchildren? Well, then, find a home there. Yet you’ll also need to decide if you want a one-level home for access as you age, a home with a yard for pets and grandchildren, a newer home with lower maintenance costs, and a home with a nice kitchen, porch, or deck. Or you may already be in the home in which you wish to retire, hoping that you can afford to stay there. Which reminds us that you also need to be able to afford your home within your retirement budget. All these considerations make your retirement housing a big and important issue.
Finances
A home is the American dream for more reasons than the housing that it provides. Owning a home, especially one free and clear of a mortgage and home loan, is also a financial foundation. Once you pay off your home, you free your household budget of mortgage or rent payments. You still have real estate taxes, insurance, maintenance, repairs, and utilities to pay, all related to your housing. But relieving yourself of a housing payment should enable you to direct more of your household budget toward retirement savings, before you retire. And once you reach retirement with your home still paid for, you relieve your retirement budget of a housing payment. You also have the equity in your home as a fall back out of which to pay for retirement needs if necessary. Selling your home may, for instance, help you fund assisted living or nursing care late in your retirement. Or selling your home early in your retirement may free up some savings on which to draw for needed extra income. If you downsize into a modest apartment, its monthly rent may be no more than the real estate taxes and other costs that you were paying on your home. So, owning your own home can be a key strategy toward funding retirement.
Costs
The cost of your housing in retirement can be a significant issue in funding retirement. Housing is almost invariably expensive, even if you own it free and clear. If you don’t own your housing, then you’re likely paying monthly rent, when rents are historically high. If you own your home but have a mortgage still to pay on it, then you’re effectively still renting your home in the form of mortgage payments. And if you own your home, you have real estate taxes, insurance, maintenance, and repairs on it. When planning your retirement budget, be frank about your housing costs, whether you expect to rent or own a home with or without a mortgage. Include all housing costs in your retirement budget. And if the budget doesn’t look like it’s going to work with the retirement savings and income you’re going to have, then look hard at reducing your housing costs. Your housing costs may be your biggest expense in retirement. If you can still maintain the retirement lifestyle that you wish after downsizing your housing and reducing your housing costs, then seriously consider doing so. Don’t let housing costs strap your retirement budget and drain your retirement finances.
Location
As already suggested above, the location of your housing in retirement can be a critical factor to your retirement success. Your choice of location can certainly involve your needs or preferences on the climate, whether warm year-round, mildly seasonal, or with a full-on winter. Health may be a factor. Certain climates are better for certain chronic disease conditions, such as warm and dry for arthritis, mild with low humidity for asthma, or moderate temperatures for heart disease. Recreation may be a factor, too, such as to play golf and fish year-round or instead to enjoy winter sports, too. Proximity to children and grandchildren may also be a factor. Plenty of retirees move closer to children and grandchildren as soon as work ceases and they have the liberty to move and time to enjoy them. Cost may be a factor, too. Living in high-population coastal areas may bring high housing, food, transportation, and other costs that are hard on a limited retirement budget, while living in less-populated central regions can ease the retirement budget strain and stretch out retirement savings across a longer duration. Consider carefully the pros and cons of location.
Lifestyle
The housing you choose for retirement also affects your retirement lifestyle. Housing in the city may facilitate enjoying the arts and cultural events but present security and transportation issues. Housing in the suburbs may facilitate shopping, healthcare, and other services but lack cultural events, a sense of history and place, and other distinguishing features. Housing in the country may facilitate peace, quiet and a slower pace but lack amenities, especially nearby healthcare facilities. Developers offer some housing specifically for certain retirement lifestyles, like housing along a golf course, housing with a pool, tennis courts, and exercise facility, and senior housing with a community center, assisted living, and a nursing facility with an on-site clinic. The specific housing you choose can also affect your lifestyle. Apartments and condominiums require less maintenance and repair, freeing your time up for other activities, but may permit less gardening and home modification, and offer less privacy. Single-family homes can require significantly greater maintenance and repair obligations but also provide greater privacy and more options for pets, gardening, landscaping, and home modification. Consider lifestyle preferences when choosing your retirement housing.
Access
Your retirement housing may need to provide you with greater access, in the event of your decline or disability. You may, for instance, suffer a fall and injury, an acute illness, or the progression of chronic disease, requiring that you temporarily or intermittently use a wheelchair, walker, crutches, or other assistance with ambulation. If your retirement home is on two levels or even just has multiple steps to enter and exit, you might not be able to access and occupy your home until your recovery. Ensuring that you can live on one level in your retirement home, without multiple steps, through periodic health conditions that reduce your mobility, could extend your stay in your home and help you avoid needing to move into assisted living quarters or a nursing home. If you do have a multi-level home, having a kitchen, bedroom, and bathroom on the main floor may be sufficient to accommodate periodic or long-term disability. Easier vehicular access can also help retirees facing disease, disability, or decline. An attached garage or covered area immediately adjacent to the home may ease transfers from home to vehicle and back again, for both person and goods. Consider access issues when choosing retirement housing.
Continuity
While you may wish to choose your retirement housing based on the above factors and other considerations, continuity of housing can also have its benefits. You may, in other words, prefer to remain in your long-term home. You presumably modified and appointed your long-term home to your preferences. Remodeling and decorating a new retirement home may be enjoyable, but it may also be costly and may not produce the results you wish, like your old long-term home. Your long-term home may have encouraging memories of raising your children, celebrating graduations and anniversaries, and maturing and enjoying life together. You also have familiar routes, habits, and routines in and around your home. You can easily make your way to the grocery store, drug store, doctor’s office, church, and other locations without even thinking. Familiarity can ease stress and provide substantial reassurance. Don’t undervalue continuity in your retirement housing. Stay in your current home if you wish and can.
Modifications
If your current home is not especially conducive to retirement living, but you wish to stay in your current home, then you may be able to modify it to your needs. If, for instance, you have one or two steps into your home, when you anticipate mobility issues, then you may be able to install a ramp to eliminate the steps. If wheelchair access inside the home looks like it may be necessary, you may be able to widen a bathroom or bedroom doorway to accommodate it. If you have no bedroom on the main floor, you may be able to make a bedroom out of a main-floor office or other living space. If your laundry room is downstairs, you may be able to install a smaller washer and dryer in a closet on the main floor. You may also be able to replace a climb-in tub in the bathroom with an accessible shower unit and install bathroom railings for wheelchair transfer. Railings, lifts, decks, or other modifications or equipment in other locations in and around your current home may make it adequately accessible. Get a consultant and contractor familiar with disability needs to help you determine the necessary modifications and their cost.
Transition
Retirees shouldn’t necessarily expect to remain in the same home throughout their retirement. Doing so may be your preference, and with appropriate planning and preparation, you may be able to do so. Yet some retirees enjoy the thought and process of moving. And other retirees find a move or two necessary, whether they wish to do so or not. Your retirement housing plan may thus involve an expected move. You may, for instance, desire to stay in your current home all the way to the point that you need to move into assisted living quarters. Or you may determine that your current home is appropriate for another five years before you wish to move into an accessible unit in a warmer climate. Or you may remain in your current location but make progressive moves from your current home into a condominium or apartment and later into assisted living. If you can be flexible over housing as your abilities and needs change, then all the better. But consider planning for one or more moves during retirement.
Moving
One or more housing moves may be necessary, appropriate, and even desirable at points before and during your retirement. Be aware, though, of the significant transaction costs of moving. Housing moves have financial costs. When you sell a home, you generally incur real estate agent fees, closing costs, and moving costs. Those costs may be in the tens of thousands of dollars. Even if you’re only renting a single-family home, condominium, or apartment, you’ll face some costs, particularly moving costs but also potentially some fees, in a transition out of that rented housing and into other housing. If you move multiple times during retirement, those moving costs multiply with each move. Money, though, isn’t your only or even your primary cost. While moves can be exciting and rewarding, they can also be stressful and discouraging. A home is more than housing. It’s also a sense of belonging, identity, routine, and place. Each time you move, you not only expend significant time and energy in accomplishing the move but also lose and have to reestablish your sense of belonging, identity, routine, and place. Beware multiple moves in retirement. And if you choose to move or must move, expect costs and a sense of loss, and be patient with yourself and others.
Reflection
Have you paid for your current home so that you have more income to devote to retirement savings? Is your current home a valuable, appreciating asset that may contribute toward your retirement funding? Is your current home suitable in location, lifestyle, affordability, and accessibility for retirement housing? If your current home isn’t sufficiently accessible during times of disability, are modifications to make it accessible both possible and affordable? If so, should you begin those modifications now? Or would you prefer to move or need to move into a different home for retirement? What is your preferred location to live? What is your preferred lifestyle in retirement, as it relates to your home type and location? Do you expect to make transitions in housing during your retirement? If so, can your retirement budget afford the costs of those moves? And are you up to those moves, both as to the time and energy they take, and the sense of loss and disruption with which they may leave you?
Key Points
The quality of retirement housing can influence retirement success.
Owning your own home free and clear can help you fund retirement.
Housing costs in retirement can be a big part of a retirement budget.
The location of your retirement housing can make a big difference.
Choose your retirement housing for your best retirement lifestyle.
Ensure that your retirement housing provides you with disabled access.
Consider whether you wish to remain in your current long-term home.
You may need to modify your current home for a retirement lifestyle.
Transitions in housing may be appropriate in retirement stages.
Moving from home to home has financial and personal costs.