Probably the most important decision you make while planning your retirement, is where you will be living. It is the most significant expenditure you will make from your retirement funds, plus it plays a huge factor in how you will live out your retirement years. It’s a great idea to consider buying retirement property before you retire! Read on for my list of considerations that are easier made before retirement than after.
Easier to Get a Mortgage
Remember that once you go into retirement, your income will be Social Security and payouts from your retirement savings. Remember, too, that Social Security pays 70% of your pre-retirement wages, so you will be making less money. Payouts from your retirement savings will be considered as income, and of course those draws need to be closely monitored to avoid heavy penalties and taxation. Bottom line is, you will have less income. You cannot be denied a mortgage based on your age, but banks will make it a lot harder on you if you go in with the lower income.
Getting a mortgage while you are still a full wage earner, therefore, is a lot easier. Also, rather than showing your retirement savings as an income, it will show as an asset to your banker. This alone could make the case for getting your retirement home purchased sooner rather than later.
Of course consult with your mortgage professional, or your financial adviser for more details.
You Have More Money and Time to Make Needed Improvements
Once you are on the fixed income of a retiree, it will be harder to make any needed improvement to your retirement home. No house you buy will be perfect, and there will always be expenses. Even a brand now home will need curtains, fencing, and other things builders don’t supply. My daughter recently bought a brand now house, and it didn’t have mirrors, towel bars, or a toilet paper holder in any of the bathrooms. My other daughter also bought a brand new home, and had to sod and fence the back yard, plus put up curtains, etc.
An older, more established home will likely need a few things, even if it is well maintained. You may run into the perfect house that just needs new appliances, or a new roof, or any number of things. Plus there’s always a matter of what you can live with or without concerning decorating. I can live with something remodeled in the 90s, but I just can’t handle 70s carpeting, no matter what shape it’s in. While you’re making a full wage, it will be easier to come up with the money for the improvement needed.
You Have More Funds For Emergencies
When buying a home, there sometimes big emergencies that need to be handled. My daughter recently sold her house, which was only four years old. During the home inspection, they found that the sewer pipe from the house to the street had been incorrectly installed, and needed to be replaced before the new owners could take possession. It was an $11,000 hit that they were not expecting with such a new home. All warranties had expired, and going after the builder for the repairs would take too long, since the house they were selling was under contract, and the home they were buying was under contingency contract. It had to happen before closing. They were lucky they could roll the $11K into their new mortgage.
In a lot of cases, though, you can’t roll a repair like that into a mortgage. Coming up with that kind of cash, while you’re on a fixed income is quite difficult. You can prepare better if you buy the home while you are at your max earning stage.
You Know Ahead of Time What Your Housing Expenses Will Be
This information is invaluable when you are planning a retirement budget. Since you have purchased your “forever” house, you will have already locked in your interest rate and your payment. Retirement planning is hard enough! Getting perhaps your biggest expense locked in takes a lot of pressure off you when you are putting your retirement budget into place.
Your Move Can Be Gradual, and Therefore Less Stressful
Just think. You will know ahead of time if your furniture will fit in the new home. You can know what to pack and take to the new house, and what you can send to your favorite charity. Each time you visit your retirement home, you can take a load of things with you. Once you are ready to sell your old home, you can already be moved out. No scary overlapping closing dates. No storage costs. No hustle to clean the old house while you are paying movers to move into the new place.
When my daughter was moving, they closed on the new house two days after they closed on the old house. They were lucky that the seller allowed them to put their stuff in the garage of the new home. On the day the movers were there to pack up the old home, the contractors were finishing up the sewer pipe repair, and my kids had to fix the landscaping and lay new sod. It was a very stressful time. I don’t think they slept that week!
My sister recently retired. She and her husband had their retirement home built. Their old house sold long before the new home was ready. They incurred a huge storage bill for their stuff. And because they were effectively homeless, they went to stay with their daughter who lives three states away. So, whenever there was a meeting with their builder, there was the expense of an overnight trip. Being in limbo for six months, and making that long drive every few weeks was pretty hard on them.
But if you have your new retirement home already established, you can move without all that stress. Sure, having to pay two mortgages for a couple months is tough, but in a lot of cases, it’s way less stressful than trying to move in a matter of days.
A Few Considerations When Pre-Buying Your Retirement Home
The benefits of having your retirement home already in place when you retire are really helpful in the long run. But there’s a few things you need to consider. You are not buying the home for the “YOU” you are now, but the “YOU” you will be in the future. Your situation WILL be different. And your dreams may not line up with reality. So please think about the following situations as you consider buying your retirement home.
See my articles here about senior housing considerations and retirement location possibilities.
Buy With Your Head, and Not Your Heart
You might be tempted by the huge manicured yard or the lovely views or the isolation of being on the end of a rural dirt road. But you must consider what you are getting into. Do you want acres of yard work that keep you from traveling, and an astronomical water bill to keep all that foliage green? Do you have the money to pay for that fantastic view? Do you really want to be that far away from shopping, social events, and healthcare?
It’s a great idea to spend some time in the new environment you are moving to. Therefore, buying a place before retirement helps with those issues. Think about your future needs. You will likely want to install ADA bathrooms and an outdoor wheelchair ramp, or buy a place that already has those features. You might consider a ranch style home with no stairs. You might want to be close to family in case of an emergency.
Don’t Get Cash Strapped
You may think you can afford a higher priced home, because you see that big lump sum of savings and think that you have earned a little luxury. You might be tempted by that large gourmet kitchen, or that in-ground pool, or that luxury bathroom with the jetted tub. Or you might want to buy one of those ski-in, ski-out homes on the golf course in the resort areas. You might want to pay extra for the HOA amenities.
But remember that fixed income and be very aware of what your payments will be. The main point of retirement is to have a life AND a lifestyle. Downsizing and living within a budget that you can LIVE with are very important to having a fulfilling retirement. Don’t get lulled into buying something that will feel like a big liability boat anchor later.
Make a Priority List
While deciding on a place to live, you need to make a priority list. Think about what you can live with, and what you can live without. It’s kind of like a pro/con list you would use when making any big decision.
My husband and I are in the middle of making our priority list. Some examples of what we are discussing are as follows:
Live near the children or far away from children? One of our kids lives in a high end real estate market that we can’t afford. I mean, we currently own a four bedroom, two bath, four car garage home, and what we paid for it would buy a studio apartment or a run down gut job of a house, if we bought a home near my daughter. The other daughter is in the Navy, and won’t be in any place she can call home for another couple decades. So unfortunately, living close to our kids isn’t really an option.
Live in town or out of town with acreage? We have been batting around an idea of getting a hobby farm and raising our own meat and vegetables, and perhaps selling produce at local farmers markets or farm-to-table restaurants. We are old, but still young enough to do that type of work. But we also feel we need a backup plan, something to rely on until our farm pays off, or in case it doesn’t work out. So we need, we figure, a 10-20 acre farm that’s close to a good jobs area. We want an established farm, with a move-in-ready house, because we need it to pay fairly soon without clearing land, building outbuildings or remodeling or building a home.
Where can we afford to live? We need to consider how retirement friendly our chosen communities are. One big issue is property taxes. If where we move turns into a big tax liability, it will wipe out any gain we get with our hobby farm idea. We need to pay close attention to taxes, mineral rights, cost of utilities, flood insurance, and a boat load of other criteria before we agree to buy a place.
Bathrooms and electric lights. Believe it or not, there are lots of issues with bathrooms at some of the farms we have considered. There are some absolutely beautiful farms for sale, but they have been in Amish family ownership for years, and don’t have bathrooms or electrical power. There would be added expense for septic or sewer hookups. In some cases, electricity drops are located miles from the farm, and the cost of laying a line to the farm is astronomical. I’m sorry but I’m not living by candle light, and I am not going to an outhouse. I need power and at least one functioning indoor bathroom with a flushy toilet!
So many other issues! Open concept? Main floor laundry? Guest quarters? Snow plowing and lawn maintenance? Dish washer? Wood stove or fireplace? Near the park? Dog friendly? Zoned for residential or business? Floor plan (is there a bedroom and bathroom on the main floor, or are they all upstairs? Avoiding stairs altogether?) Garage?
The list goes on and on. So try to think of every possible scenario. Buying your retirement home ahead of time, before you are actually living in it, can help you determine if there are any glaring inefficiencies or if some things are too over-the-top. It would suck to get into a home where you thought there wouldn’t be any big deal, only to find out it became an extreme annoyance.
Do It While You’re Still Young
Consider nailing down that retirement home while you are still young. You will be more able to do any hard physical labor associated with remodeling and moving. You are more able to afford to buy it in the first place, as well as pay for any improvements needed. And you can start enjoying your forever home, long before you move in for retirement, so in case there are other choices or life events, you can change your mind and move somewhere else.
How Can I Afford to Buy a Place Now?
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You really should consider getting your retirement home lined up before you retire. It can make retirement planning so much easier in the long run. Retirement is complicated enough, and any steps you can plan beforehand make it that much easier. So, consider getting your forever home now, so you can enough it now and later when you do eventually retire.
Please put your comments and questions below, and thank you so much for reading!