Make a housing plan for retirement
Location, timing and finances are part of a housing solution that will meet your needs in later years.
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One of the major decisions facing us as we age is where to live in our later years. Anyone over 60 who has grown children should be developing a plan for where to live when they're 75, 85 and even older. Like solid retirement-investment programs, your housing plan can be torpedoed by recessions and personal reversals. The current depression in many local housing markets doesn't help, either. But without a plan, you're leaving too much to chance. (Bing: What's the best age to retire?)
When it comes to housing decisions, the world can be divided into planners and reactors. An academic study that looked at how older people who have moved felt about it and how they fared makes it clear that you want to be a planner when it comes to housing decisions. In a 2009 study, Boston College's Center for Retirement Research analyzed extensive information about moves made between 1992 and 2004 by people who were 51 to 61 when the federal government began collecting the information. The study looked at all moves made during the period and reviewed the reasons people gave for relocating. Those who tended to be in control of their own move were classified as planners. They tended to move to get a better location or home because of retirement or financial reasons. People who said they had been forced to move because of family or health issues — the death of a spouse, a divorce, poor health — were classified as reactors.
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Having a financial cushion is, of course, a strong planning aid that gives people some control over the timing of their move and the ability to execute their plan even in the face of some financial reversals. Given the continued weakness in many housing markets, setting aside money to prepare for a move should be part of most housing plans. But so should doing some homework:
- Where do you want to live?
- What's the housing market like there?
- How will the cost of homeownership change in your new home?
- Can you afford these outlays in retirement?
- What's the minimum amount you need to get from selling your current home?
- What's the likelihood of receiving this amount, and are there home-improvement projects you need to undertake to increase the net proceeds from selling your home?
In the study, planners tended to have choices and fared better even if confronted with the kinds of problems that forced reactors to move. Reactors didn't have the same range of choices. "Those moving for retirement reasons are more educated, better off financially, more likely to be married and less likely to be in poor/fair health," researchers said. "Those moving for health or family reasons have the lowest educational-attainment level, the highest incidence of poor/fair health and the lowest level of income and wealth, as measured by Social Security, housing and nonhousing wealth."
Reactors lost an average of $26,000 in home equity when they moved. That's explained, in part, by the fact that a third of them did not buy another home and either rented or moved in with relatives. Planners, by contrast, gained an average of $33,000 in home equity when they moved, and only 18% of them did not buy another home. They had more choice and control and wound up improving their financial situation.
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Older people who felt forced to move tended to include those who were recently widowed or divorced and those diagnosed with a new health condition, researchers said. "Surprisingly, the other shocks — being hospitalized or reporting worsened health, entering into a nursing home and losing a job — do not significantly impact the probability of moving in these households with at least one shock. Thus, again, it seems that family structure is a very important factor in these households' decisions to move."
During the period studied, about 30% of older people moved out of their homes, and major factors cited were family considerations, financial matters, wanting a better location or type of house and retirement. Health was not cited as a major cause of moves, but researchers speculated that this might be because even the oldest people included in the study were only 73 when it ended.
Among people who moved, about 60% stayed within 20 miles of their former home, 20% moved up to 200 miles away and a comparable number moved farther away. A mass exodus to sunnier locales was not a major driver of relocation decisions. Aging in place continued to be the overwhelming first choice.
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"Older adults that continue to live in the same home during older adulthood enjoy familiarity with the house, community and neighborhood," the research said. "They feel more independent, are more socially connected and experience less stress than older adults that change to a new residence. In contrast, moving is characterized as a stressful experience that may result in relocation trauma and symptoms of depression, anxiety, distrust and insecurity."
For those who did move, planning for the change helped them come out in much better shape than people who felt forced to sell their homes because of one or more negative shocks. On the brighter side, both groups said their moves improved their situations. But for reactors, that benefit often was overshadowed by the problems that forced them to move.
vacation1.....I agree with you, living below your means is the key. I retired at 57 (in 2011 with no health insurance) because my wife and I saved for 30 plus years while our friends were spending and living only for today.
kayakdan....While I agree that public sector unions are out of touch with reality I don't condone anyone planning a "stategic default" on their mortgage. Where is your personal integrity? You signed an obligation to pay back money that was lent to you, don't become a loser.
Folks, I hate to say it, but you can't totally blame "the economy." I bit the bullet for 37 years, living below my means, investing in 401k, and yes my company's stock, putting up with major BS to hang in for the long term, took a big hit (of course) in '08 but came back. Retired in 2010. We continue to cruise 4 to 5 trips a year all over the world. For the younger people: you do have control, be smart and don't look for the "quick hit.'
Any advice for those of us that are children of older parents that have not plan? My father is deceased and my 77 yo mother still lives in the home I grew up in. Its ~4000 sq feet on 2/3 of an acre. She can't keep it up by herself, so every visit is just going around fixing everything thats broken, mowing, weeding, trimming...
I'm 39 and having to maintain both my house and hers. She won't move - doesn't even want to talk about it. I've offered for her to move into my mainfloor (she would have own kitchen, bath, bedroom, living room) and she won't have that either. She has already fallen and broken her hip once. And her laundry is downstairs at her current house. So she throws the laundry down the stairs, picks it up and then puts in washer.
If you are going to move after retirement, chose near family because making good friends becomes harder after 60
Have a plan (while you are still working) to fix up, replace or refinish anything that needs it or will need it soon...you don't want to have to replace a roof when you are on a fixed income or try to sell a house that needs work
Suggest you live near family & friends, things mean less as you get older. Also plan on another housing crash within 8yrs, that's the way eco-statics work. Also 401k's will see a major stock market crash again within 8-10yrs. Plan on being in annuities and a modest home.