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Boomers retiring not so rich

Other tips for scraping up extra cash? Rent out a spare room in your home or hold an estate sale. Hushbeck says seniors ready to retire can often pay off credit cards, car loans or other high-interest consumer debt by selling off attic treasures.

"It's amazing how much money you can make just by going through your basement and garage," she says. "It's very helpful to have this extra income, and it can sometimes make the difference between being able to stay put and having to move."

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Put your house to work
Homeowners are perhaps best-positioned to bridge the gaps in their retirement funds, especially those with property values that have soared.

Trading down to a smaller home, for example, will not only reduce your monthly mortgage bill, but also free up extra cash from the sale of your home to invest for future income. Investing just $50,000 in home-sale profits at an average 7 percent return would produce $3,500 in annual income; $100,000 invested at that rate produces annual income of $7,000, while a $300,000 investment would yield $21,000 per year.

You'll get the biggest bang for your buck, of course, by relocating to a lower-cost area altogether, paying in full for a smaller abode and investing the difference. If you currently reside in the Northeast or on the West Coast, for example, retiring to the South or Midwest will almost surely save you money. But Hushbeck of AARP warns all retirees to look before they leap. Too many, she says, let tax havens alone become their guides.

"Moving to states like Florida or Texas that don't have an income tax could save you money, but you might find that states with lower taxes also have a lower provision of services," she says. "When you're young and healthy, that's not much of an issue. But as you get older, you'll have infirmities. Some retirees actually relocate to enjoy the tax benefit when they don't need health services and move back in their 70s."

The other major drawback to moving out of state? No friends or family nearby. Without a family support network, you'll likely incur higher expenses for caregivers as you age. You'll also need to factor in a bigger travel budget for trips back home.

In its "Late Savers Guidebook," NEFE suggests that anyone looking to relocate during his or her golden years should visit the area first and, if possible, rent before buying. Inquire about medical facilities, cultural and entertainment attractions, weather and employment opportunities.

If you're not ready to pack your bags, there's another way to tap the value of your home. Reverse mortgages allow homeowners 62 and older who own their homes outright to convert a portion of their equity into cash.

Unlike a traditional home equity loan, homeowners need not repay the money they borrow until they sell the house or pass away. When your home is no longer used as your primary residence, you or your estate repay your loan in full, plus interest and other fees. Take note, however, that reverse mortgages are complicated, and closing costs are high. They also reduce the value of your estate.

-- Posted: Nov. 1, 2006
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