Looking to Move When You Retire? 8 Considerations to Keep in Mind
If you are thinking about moving when you retire, you are definitely not alone. Age Wave and Merrill Lynch reported in their study that 64% of retirees have moved or anticipate moving in retirement. But is moving right for you? There are a number of things to consider before putting up the “for sale” sign and reserving a moving truck.
1) Can you afford to retire?
Considering whether or not you can afford to retire in the first place is key. Paying off your debt helps to ensure you won’t be in a position where you need to sell your home because you are out of money. Plan ahead. Consider refinancing while still gainfully employed. This secures a lower mortgage payment if you plan to stay in your home and want to use some of the equity you’ve built. Run some calculations with your financial advisor or through your retirement plan. Or use an online retirement calculator like AARP’s retirement income calculator to see if you are in a position to depart the workforce.
2) Figure out a budget
Planning carefully can be the difference between having loads of fun in your golden years and having stress and financial complications instead. Don’t make one of the biggest retirement mistakes people make by spending too much of your nest egg too soon. Develop a budget that helps you plan for the course of your retirement, including anticipating potential changes and events.
You can maximize the size of your nest egg by reducing the size of your home and/or relocating to a less expensive area. Downsizing cuts down your costs as well as your responsibilities. If you plan to use home equity as part of your retirement income strategy, going smaller is the way to go. You’ll see a reduction in home-related costs, and smaller spaces are less expensive to heat and cool.
4) Moving expenses
There are both costs and savings with downsizing, so careful consideration of moving expenses is vital. Some of the elements to take into account are the sale price and equity in your current home, the price of a new home, taxes and associated costs of selling and buying, the cost of living in the new area, realtor fees, closing costs, moving expenses and redecorating costs.
5) Potential savings opportunities
The big questions are: Can you afford to move? And in the same vein: Can you afford to stay? Possible savings opportunities with moving are lower taxes, insurance premiums, utilities, maintenance, and a cheaper cost of living. Potential to increase your available funds each month by downsizing and relocating can increase your purchasing power exponentially.
6) Where to move
Some know just where they are moving to – they’ve been dreaming of it most of their adult life. If you find yourself in the camp of not quite sure, take into consideration what you like to do, what you are looking for, and how you will spend your time. This will help narrow the possibilities and flush out just how relocating will add to your quality of life. How easy or difficult will it be to visit family? Access to airports and medical care are also key elements in finding the place to call home. Some envision offering free babysitting services for their grandkids, others dream of hiking in the mountains and enjoying visits from kids and grandkids throughout the year. It all comes down to what makes you happy.
7) Should you rent or own?
This decision requires you to think long term. There are pros and cons to each. Renting offers more flexibility and less responsibility. You can upsize or further downsize if needed, and renting makes it easier to move again if you find that another location is more suitable. It relieves the stress of home maintenance, let’s you figure out what part of town, the state, or the country is the best fit. Renting gives you an opportunity to experience all four seasons (or lack thereof) in a new locale without being locked into a mortgage. Disadvantages of renting include no equity growth or appreciation, and the increasing cost of rent over time. The cost of your rent can double in 24 years.
Owning has its advantages, especially if you have a low tax base and small (or no) mortgage. Owning also provides the opportunity to use your home as part of your retirement income strategy. If so you must be willing to tap into its equity by carrying a mortgage into retirement, selling the home, renting the home, or taking a reverse mortgage. A home’s equity could be used for unexpected or excessive medical costs. Homeownership pretty much guarantees a fixed cost of living while accumulating equity. In a stable economy, as you pay down the mortgage, simultaneously the property appreciates in value. A good rule of thumb: buy if you are planning to stay longer than ten years, rent if your time frame is less than 5 years. The shorter your time frame, the more likely you should rent.
8) When a short sale or foreclosed home is best
Our strong job market has reduced the number of homes that have been foreclosed since unemployment is the major reason why homeowners fall behind on mortgage payments. Still, shopping for a foreclosure can help you find a bigger, better home than you might otherwise be able to afford. The safer choice (if given) is buying homes owned by a bank vs at an auction as auctions tend to sell foreclosed homes to buyers sight unseen. Pre-retirement is not a time to be gambling with the possibility of loads of repairs needed in a home you’ve purchased without inspecting.
Short sale is another option. This is where the seller’s lender is willing to accept a discounted payoff to release an existing mortgage. In these cases the seller need not be in default before a lender will consider a short sale – they may consider if the seller is current, but the home value has fallen or the seller is in over their head. For foreclosed homes and short sales, reserve the right to conduct inspections in either scenario.
Moving can be an ideal transition into the next phase of your life, but at the same time it comes with some risks. Make the best decisions by anticipating what will work for you financially and bring you joy in the decades to come. Don’t go into a situation blind. Tapping into a resource to help protect your interests is your best bet.
As an experienced real estate lawyer, Attorney Joel R. Spivack has helped countless families, in Camden County and throughout South Jersey, buy their forever homes. Let him help you today. Call Attorney Joel R. Spivack today at 856-488-1200.