Lifestyle and Housing
Think about what’s important to you? Are you a social person? Do you live alone? Do you see yourself having big dinner parties, or Sunday picnics for the grandkids? What about caring for a big yard, or would you prefer living in a condo? Will your mortgage be paid off, and will you be able to afford the taxes, insurance, and maintenance?
You need to think about where you want to live during retirement, because this will affect your plans. How important will employment, educational, social, medical, and recreational opportunities be to you? For instance, during retirement it may be important to have medical facilities close at hand, as well as public transportation, shopping, and possibly family support nearby. Obviously, there are many things you need to consider when it comes to your housing and retirement.
Your Home is An Asset
If you own your home, you probably have some equity built up in it. Equity is your home’s cash value minus any claims against it. If you choose to access this money, you need to decide on one of several equity conversion options:
- Reverse Mortgage. When your home is completely paid off, or when sufficient equity is present, the equity may be paid back to the owner in monthly payments. This is a loan, and the terms vary depending on interest rates, the amount you’re borrowing against, and length of the loan. There are several ways to repay it, like when you sell it, or with life insurance when the homeowner dies.
- Sale or Leaseback. Also called “life tenancy arrangements.” This is when the owner sells the property to an investor, retaining the right to live in the house as a renter. The investor pays the owner in monthly installments over an agreed-upon period and covers such obligations as home insurance, taxes, and repairs.
- Deferred Payment Loan. Such loans are usually provided to low-income people at a low interest rate by a local government. Homeowners defer payment of principal and interest until they die or the house is sold.
- Homeowner Equity Accounts. These loans allow you to borrow against a portion of the equity. This lets the owner set up a line of credit secured by a lien against the home. The owner can draw on this credit using a credit card or by writing a check.
The major drawback to using your home as collateral for a loan is you open the possibility of losing your home. Good legal, tax, and financial advice is very important, so consult with a qualified financial advisor before making a move to sell property after your retirement.
What If You Want to Move?
If you decide you want to move, review your options the same way you examined your lifestyle. Some of the options available are:
1. Single-Family Home
2. Home within Adult or Retirement Community
3. Manufactured or Mobile Home
4. Condominium
5. Cooperative or shared Home or Apartment
6. Rent a Home, Apartment, or Condo
7. Lifetime Care Housing with room and board, recreation, and medical care.
Do Your Homework First
Consider all the aspects of housing and location before you move. Consult with experts and neighbors under similar circumstances. Spend a little time researching so you won’t regret an uneducated decision. If married, you need to discuss plans for retirement housing, location, and lifestyle with your spouse. Two people may have differing ideas about where and how they want to live. A strong relationship includes compromise to meet both your needs.
Accessing your home equity during retirement
There is a lot of information online about the best ways to access the equity in your home during retirement. Each option has a number of benefits and risks especially if you move early or must go to an assisted care facility. You should understand all of the pros and cons of each option before you sign any paperwork. As in any financial deal, there are always some risks involved.
Visit www.reverse.org or www.aarp.org for information, calculators and good questions to ask yourself as you do your homework.