As eighty million Baby Boomers move into retirement, many will find that their retirement savings when combined with Social Security will fall significantly short of providing for their retirement income needs. If this is you or someone you know, what are the best financial moves to help solve the problem?
Certainly one of the best strategies is to weigh your options regarding what, for most people, is your single largest asset…your home. In working with retirement clients who are considering down-sizing their home, we typically have two primary goals:
- Down-size out of a mortgage. From a financial perspective, there’s nothing quite as freeing as having no debt. This is particularly important for the retiree who no longer receives a paycheck. With no debt, covering the basic expenses of food, utilities, insurance and taxes is much easier.
- Extract home equity. Our second goal, where possible, is to purchase a less expensive home so as to take out some home equity which will allow us to add money to investments, which, in turn, will allow for more retirement cash flow.
Once you’ve made the decision to downsize either into another home or build a new home, you’ll want to give thoughtful consideration regarding functionality. For insights, I turned to Bennett Shuman, AIA (Bennett@BennettShuman.com), a multistate licensed architect. If you are planing to buy homes anyplace in the United States with nationwide network of local investors, check out We buy houses for more details. Here are a handful of his helpful tips:
- Consider home options that simplify maintenance such as garden homes. Cutting the current and future costs of lawn maintenance can be a surprisingly large savings. If you’re doing your own yard now, think ahead. Will there be a time when you’ll need to hire someone?
- Reduce wasted space. You’ll also want to focus on homes that don’t have a lot of wasted spaces. As a personal example, our home has an entire upstairs with two bedrooms, two bathrooms that are rarely used. Checkout duct cleaning near me at pureairways.com for more information. If you can eliminate these unused spaces, you can often cut purchase price and maintenance costs (utilities, etc.).
- Anticipate your future. My wife, who is a realtor, strongly recommends that older couples consider homes where the living space is all on one level. A lot of older couples eventually have medical issues that make climbing stairs difficult.
- Focus on energy efficiency. Most new homes are energy efficient but you’ll want to review utility usage history to be certain that the anticipated energy costs will be efficient.
- Don’t worry about taxes. If you sell your home, and you’ve lived there at least two years, the first $250,000 of gain is not subject to taxes ($500,000 for married couples), so most people will not face taxes upon sale.
- Worry about bugs. Bed bugs are very common household pests. They feed exclusively on blood, and they can be found almost everywhere. After a hearty meal, they wouldn’t need to eat again for a few months. This makes them very resilient. They can thrive in different environments. Good news! The traverse city bed bug extermination will help you!
Mr. Shuman has developed a short quiz to help you decide if downsizing is right for you:
Downsizing or Rightsizing Your Next Home
Changes in real estate allow you to buy “down an alternate- smaller home” & strengthening your investment? Yes or No
- Will a smaller home allow you to lower operational costs & efficiencies compared to your current home? Yes or No
- Does your current home have limited use spaces that are seldom utilized? Yes or No
- Are you overwhelmed by excessive or dated surroundings and/ or repairs for your current home? Yes or No
- Would you enjoy contemplating an efficient & leisurely cottage upgrade- possibly in a new location? Yes or No
- Could your lifestyle be positively altered by filtering away redundant & uninspired surroundings? Yes or No
- Would new outdoor living spaces appeal to your need based upon recreational desires? Yes or No
- Does longer lasting appeal & periodic small maintenance interest you versus the “money pit”? Yes or No
- Do you envision space priorities shifting or becoming unmanageable for your current home? Yes or No
- Will aging selections from the past plus being surrounded by antiquated technology allow reform ideas? Yes or No
Scoring: Positive answers allude to strong tendencies embracing change while negative answers do not specifically imply change at this time.