5 steps to take now to make your house work for you in retirement


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Whether retirement is around the corner or many years away, your home can be an important part of your post-work life, if you take the right steps.

Experts agree that whether you still have a mortgage or you paid it off (congratulations on that), homeowners should come up with a plan for their house during their later years.

Most people age 50 and older, 76 percent, said they wanted to stay in their current residence as long as possible, according to the 2018 Home and Community Preferences Survey, or ACS, by AARP. As more people choose to age in place, it’s important to make that decision wisely so that you can enjoy retirement and maximize your home’s potential.

Here are five important home-related considerations that can impact your finances and quality of life after retirement:

1. Treat your house as the key personal asset that it is

Homeowners should not only look at their homes as a functional asset — where they sleep, eat and keep their stuff — but also as a financial asset. For people who own their homes, equity is part of their net worth. In retirement, every penny counts so it’s a good idea for homeowners to assess how their equity figures in to their larger financial picture.

For example, using equity to pay off high-interest-rate credit card debt can help you save thousands of dollars, depending on how much you owe. The average interest rate on credit cards is currently hovering around 18 percent, whereas home equity loan rates are about 4 percent.

Those with a balance on their home loan at retirement shouldn’t panic. Carrying a mortgage into retirement is not necessarily a bad thing, says Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at The Wharton School, but homeowners should be aware of how much they’re spending in interest and where they can cut corners.

“People are reaching retirement age with more and more debt — and it tends to be mortgage debt. They probably had ARMs, bought more expensive houses and put less money down. If they can get out of an ARM or downsize, that could help them as they move into a fixed income,” Mitchell says.

Homeowners who still owe on their mortgage should see if they can obtain a lower interest rate through a refinance, and do that while they are still collecting a paycheck. As rates have fallen in 2019, some folks might be able to refinance into a lower rate and shave their monthly payments. Similarly, homeowners who have adjustable rate mortgages should consider refinancing into a fixed rate now. This is one effective way to save money on your monthly housing bill. While you’re at it, try to take the shortest possible mortgage term your budget will allow so you can be mortgage-free faster.

2. Rightsize where you live

Everyone has some version of a retirement fantasy. For those who imagine their home as a gathering spot, you might be tempted to keep your large house or even upsize in retirement.

The problem with maintaining a large property is that you could overspend on your housing budget, while also overestimating how much you’ll use the space, says Martin Eiden, broker at Compass Real Estate in New York.

“Baby boomers had the fantasy that the entire family would come for the Thanksgiving Day Parade or New Year’s in Times Square. However, pragmatic logistics never really work out with grown children and their kids’ hectic schedules. As a result, the property is underused or not used at all,” Eiden says. “Similarly, do you really need the 6-bedroom lakehouse?  Maybe (instead consider) a 2-bedroom condo on the lake that has a pool.”

Finding the sweet spot between your needs and budget is important when heading toward retirement. Those who plan on traveling frequently might want to consider going from a house to a condo to cut back on upkeep costs, like pool and lawn maintenance as well as utility bills. But, Eiden warns that even condos can get expensive if they come with hefty HOA fees.

“It may be nice to say you have a golf course, tennis courts, Olympic-size pool, hot tub for 20 and a clubhouse…but will you use all of it?  Be in a condo community that has the amenities you will actually use, not brag about,” Eiden says.

3. Consider living with family in retirement

Living alone can be a challenge as you age. From driving to changing a light bulb, big and small tasks can become obstacles to independence. One solution is moving in with family or letting family move in with you, says Richard E. Reyes, CFP at The Financial Quarterback.

“You obviously want to live with someone that you know. I have a number of clients who have their adult grandchildren move in for some time,” Reyes says.

Rooming with family is not uncommon, according to the ACS. Most respondents 65 and older — 68 percent — lived with a family member. There are compelling reasons to share space with a relative, whether that’s your adult children or grandchildren.

From a financial perspective, sharing housing costs can help you sustain your fixed income in retirement. The money you save on mortgage payments or utilities can either stay in your savings or help fund a more comfortable and freewheeling lifestyle.

Another option for homeowners who need assistance as they age is to sell their home and use the money to build an accessory dwelling unit, commonly known as granny suites, on a family member’s property. More than half of adults with grown families, seven out of 10, reported being open to this idea, according to the ACS.

4. If the item doesn’t spark joy, say bye-bye

The decluttering revolution has arrived, in part because of minimalist dynamo Marie Kondo and her credo to only keep things that “spark joy.” She’s the lifestyle expert that got famous for her international best-selling book “The Life-changing Magic of Tidying Up.” And experts think lightening your load is a good idea when you’re approaching retirement, too.

Filing cabinets full of old business receipts, boxes of newspaper clippings, clothes, exercise equipment and other belongings you no longer need or use should be kicked to the curb to maximize your space and minimize how much time you spend cleaning and organizing. This also takes the burden off your loved ones, who might end up inheriting your stuff.

For people who plan on aging in place, making your house as easy to maintain as possible, while you still have the energy and ability to do so, is smart planning.

“The issue of taking care of a home becomes more and more of a daunting task for many. The more your home doesn’t get taken care of due to age, time, or money, the worse the surroundings become (and even more expensive to maintain),” Reyes says.

There are companies that help seniors declutter and organize their spaces, so you don’t have to do it alone.

5. Consider modifying your home

Speaking of aging in place, home modifications are helpful in supporting independent living for seniors. Think about how your house can work better for your abilities as you age. This is especially important if you plan on living alone, because you won’t be able to depend on a partner or family member to help you navigate steps or reach a high shelf.

“My aging clients wrongly believe that their kids will take care of their homes, health and needs. Unfortunately, many of their loved ones don’t live in town or are dealing with their own personal needs and can’t be too much help,” Reyes says.

Simple modifications include moving downstairs if you own a two-story home, so you don’t have to navigate steps. Mobility can become a challenge as we get older, so replacing bathtubs with walk-in showers can also be helpful.

The main thing is to approach your house as a resource, rather than a burden, as you near retirement. Consider how you want your lifestyle to be five, 10 and 20 years from now.

Analyze all aspects of homeownership — from mortgage payments to how the space is serving you — and see what areas can be tweaked for better performance to get the most out of your space.

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