Retirement homework: Deciding where you want to live

It is more than a lifestyle choice — the decision should be a key part of your retirement planning. Here is what to consider, according to Bank of America.

Thinking about downsizing to a condo or relocating to a retirement community? Maybe the idea of living on a houseboat appeals to you. Or you may prefer to remain comfortably ensconced in the family home. Among all the decisions you will make as you approach retirement, perhaps the most important is where to live. 

For many people, their home is their largest single investment, so the decision of whether to keep it or sell it opens up many financial questions. “Because there are so many financial, health and lifestyle considerations, it is wise to plan ahead,” says Cynthia Hutchins, director of financial gerontology for Bank of America. And be prepared to revisit your decision. “What is perfect for you in the early years of retirement may not be the right choice for you as you age,” says Hutchins. The insights below can help you sort through the most popular options.

Staying put? Think about age-proofing your home.

Remaining in their current home is the top choice of most people approaching retirement, says Hutchins. It could be your plan for just the next few years — or indefinitely. “To age in place successfully, you have to assess not just your home, but also your community,” Hutchins says. “Safety should be a primary consideration.”  

It is a good idea to consult a geriatric care manager to help determine what renovations — wider hallways, accessible bathrooms — might be required. Also ask yourself: Is there good public transportation? Are there reliable car services? What local resources are available so I can stay socially connected and physically active? “Social isolation and loneliness are among the fastest accelerators of cognitive decline,” notes Hutchins. All of these factors have a financial dimension. For example, unless you have family nearby who will pitch in, you may need to budget for more help around the house later in life. 

“If you are planning to stay in your current home and still have a mortgage, consider whether it makes sense to pay it off,” says Ben Storey, director, Retirement Research and Insights at Bank of America. “You will lower your monthly expenses — but you will also lose your mortgage interest tax deduction.” A financial advisor and tax professional can help you weigh your options.

Upsizing, downsizing or relocating? Consider the costs.

Many retirees opt to move closer to family — or to a warmer climate. Others move from a country home to a city condo, or vice versa. No matter your choice, the same general issues — safety, social networks, available healthcare, transportation — require your attention. 

Downsizing to a smaller house could make sense if you are looking for a simpler lifestyle. You might be able to use the proceeds from selling your home to pay for a new one. Still, sinking most of your cash into a new home could limit your ability to cover unexpected expenses. 

Buying a larger place, Hutchins notes, could allow you to share a home with your adult children, perhaps helping them out financially now and calling on their support later. A larger home might also be the right choice if you’re interested in a “co-housing” arrangement, in which a group of friends share a home. Another popular option is an age 55-plus community, which may offer amenities geared toward active, healthy lifestyles while also relieving you of the need to maintain your home and yard. 

“Whether you are upsizing or downsizing, be sure to consider taxes and the cost of living in the new area,” Storey says. “Costs of goods and services can vary dramatically.” 

Looking ahead to long-term care needs?  Start planning now. 

One option is a continuing care retirement community, where you can live independently, then progress to assisted living and finally to 24-hour skilled nursing care, if necessary. There is a significant buy-in cost and depending on the facility and the contract you sign, you may be covered for everything you need, or you could be charged for increasing levels of care. 

Selling your current home could help finance such a move, says Storey, but he cautions against overestimating how much your home’s sale might bring. “If you expect a dramatic appreciation and the house sells for less, that can really change the outcome of your plan,” he says. 

If you decide to purchase long-term care insurance to help cover your needs as you age, think about getting a policy in your 50s, when premiums will be lower and you are less likely to have disqualifying preexisting health conditions, says Storey. 

With so many housing options to consider, the decision often seems overwhelming, notes Hutchins, but it can be a positive, liberating experience, too. “Look at what you have always wanted to do, and then put the pieces in place to make that happen,” she says. 

For more information, contact Merrill Financial Advisor Don P. Martone of the Hughes Landing office at (281) 882-4818 or don.martone@ml.com.
 

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