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Selling your home to help Fund your Retirement? Top considerations to ensure your long-term financial fitness

If you’re on the verge of retirement or working on your financial plan, you may feel as if you don’t have enough money saved. In these instances, certain questions may keep your head spinning:

  • When will I be able to stop working?
  • Is there a way I can get the money I need before retiring?
  • Should I keep this house, even though it’s only me, or only me and my spouse?

Understanding Your Financial Position

Knowing where you stand financially is the first step in determining whether or not selling your home is a good idea. Fortunately, you aren’t alone. The National Association of Realtors indicates that 54% of people selling their homes are over the age of 54.1

Of course, you will have to start cutting back as you consider your financial position. One of the smartest questions you could ask is whether or not you need to keep your house, especially if there is way more space than you actually need. There are a number of pros and cons when considering selling your home so close to retirement.

Renting vs. Buying

If you decide to sell your current home, you have two options: purchase a smaller home, or choose to rent. The most important thing is to assess the figures and determine whether or not you have enough money to be comfortable once you retire. According to AARP, it’s best to save about 10 to 12 percent of your current income.2

Getting Down to the Basics

In order to determine whether or not you should sell your home, you need to see how much you still owe, and the appraised value. This is where you need to get your realtor involved. When interviewing a realtor, make sure they understand the situation and are familiar with the intricacies of retirements planning. The current equity in your home plays a role in determining future income.

Should You Sell Your Home?

For some, this is a viable move. A home is an appreciating asset but may cost you more to maintain once you start your retirement. There are additional considerations, including repairs, utility costs, maintenance, and other little things can quickly add up. You may end up spending more on your home during your retirement years than you originally anticipated, subtracting from the funds you could have used to travel or fund your retirement lifestyle. Selling your home can give you additional funds to invest and cover a smaller place or the rent if you choose to do that.

Is Renting the Key?

Renting is very low maintenance, as you won’t have the maintenance, upkeep and other expenses associated with a large home, even if it’s already paid for. You will not have to worry about taking care of the lawn, the pool, or appliances if they fail. One phone call to the property manager and everything is taken care of. Another perk to renting in retirement: you can choose how you want to live.

You can rent an apartment, single-family home, townhome or whatever you wish. By doing this, you will not be obligated to reside in one place. If you want to move to another city or state, you’ll have the flexibility to do so.

Taking Care of Family

One of the downsides to selling your home is the fact that you will no longer have an asset for your heirs. Additionally, without that asset, if you need emergency money, you don’t have the security of your home to pull from.

The key to determining whether this is a good move is to determine where you want to be and the things you want to do in retirement. The rest is up to you.

As with all important financial decisions, there are two key components two consider Qualitative Information (Psychological and behavior aspects) and Quantitative Information (Financial Modelling/Illustration of potential outcomes).  Financial decisions are often very personal and unique to each person's circumstances.  Finding someone to coach you through this process is very important.

At Enduro Financial, we will coach you through both aspects of your decision to rent vs. purchase in order to help you feel at peace knowing that you made the best decision with all of the available information.

To help the client make a decision, we will help the client make some important assumptions and things to consider:

1.  How long do you plan to live in the home?

2.  Is there longevity in your family?  How long have your relatives lived?  Are you currently in good health?  How close to health care facilities do you want/need to be?  What type of specialists do you expect to visit?  Have you factored in cost of assisted living (either now or in the later years of retirement)?

3.  What are your pre-retirement and retirement living expenses?  Do you think they will change? 

4.  How much home can you afford?  Is it better to pay cash or take out a mortgage?  How much home do you need?  How do you foresee living out your retirement years (traveling, active lifestyle, working, etc)?

5.  If you rent, what will you do with the proceeds of selling your current home?  If you invest the proceeds, what is a reasonable return assumption given your time horizon and risk tolerance?

6. Do you have other family considerations?  Do you want to be close to grandkids? 

7.  Tax considerations (especially with the new tax law).  How much will you pay in property taxes?  Would it be better to buy in a more affordable location or state? 

The great news is that Enduro can Financially Illustrate the impact on your overall retirement goals, helping coach you through this decision process.  You don't have to make a decision based upon "your gut", the advise of non-financial professionals, or the trends of the day.  You can make a personal decision which is best for you, your family, and your retirement goals.  Here is a typical Financial Model Enduro will provide its clients (Disclaimer:  This example is just for illustration purposes.  It does not reflect your specific situation and it is not intended to provide any general recommendations regarding renting vs. buying a home).

Enduro Financial Illustration example Eagle, ID Enduro Financial

If you have questions regarding Relocation and would like personalized advice specific to your situation, you may contact us here:

1 https://www.nar.realtor/sites/default/files/reports/2017/2017-home-buyer-and-seller-generational-trends-03-07-2017.pdf

2 https://www.aarp.org/work/retirement-planning/info-2015/nest-egg-retirement-amount.html

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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