Housing’s often not at the top of many people’s lists when planning for retirement even though it should be, says a recent Wall Street Journal article that recommends a “sooner rather than later” approach to downsizing.
“The financial benefits may not seem huge at first, but over time they can make a meaningful difference in extending the life of a nest egg,” says the article. “As retirees age, there are lifestyle issues to consider, such as being in a community with other older adults.”
Another benefit: moving while both spouses are still alive can help ensure that a surviving spouse or an adult child won’t have to deal with going through years’ worth of accumulated belongings and selling the house on their own.
“If it makes sense, don’t wait” to downsize, Steven Sass, an associate director at the Boston College Center for Retirement Research, told WSJ.
While swapping a home that’s owned outright for a rental or a condo with association fees and other attached, reoccurring costs may seem counterintuitive, it may actually cost less in the long run.
“In a home, the expenses are hidden,” Lawrence Glazer, a financial planner at Mayflower Advisors, says in the article. “It’s maintenance, a roof, a boiler, heating and landscaping.”
Even when mortgages have been paid off, housing often eats up 30% of retirement budgets, according to the Center for Retirement Research. Downsizing to a more modest home that generates smaller utility bills, or one that’s located in a mediocre school system with lower property taxes, can have a big impact on retirees’ financial plans, says the Wall Street Journal.
Moving from a house worth $250,000 to one valued at $150,000 can result in approximately $75,000 of profit that can be added to someone’s retirement savings, Sass calculates. The retiree can benefit dually from having more money available each year to withdraw from savings, along with lower expenses associated with the new, smaller property.
Read the full article at the Wall Street Journal.
Written by Alyssa Gerace