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This Is How Your Home Will Impact Retirement
For most of the last sixty years, investing in a home has been considered a sure way to get started on preparing for retirement. Thousands of Minneapolis homes for sale and Saint Paul homes for sale have sold as safe vehicles for working professionals to accrue value in the form of home equity. It's a reliable and effective strategy.
But today's financial picture is a lot more complex in many ways. Paying off a mortgage before retirement is no longer a sure thing. At the same time, those who have substantial home equity have more ways to access it, even if they decide not to sell. How close you are to a full mortgage payoff also makes a difference.
The practicalities of selling your home and downsizing before retirement are easy to understand. Many people want a smaller home that's easier to clean and navigate. Smaller homes also cost less in heating, cooling, and lighting. But the financial impact of deciding to sell before retirement isn't always as obvious.
Let's consider some key ways homeownership can influence your retirement:
- Selling Before Retirement May Introduce Unexpected Complications
There's always some demand for single-family homes, even when the larger economic picture is depressed. However, if you sell at the wrong time, you could lose thousands of dollars in stored equity. That cuts into your proceeds and your ability to save or reinvest. Sometimes, staying put is the best solution. - A Home Means Less Variability in Costs
Even if your home is not fully paid off, your costs are often more predictable over time than the costs absorbed by renters. Property taxes and maintenance costs may increase, but rent in a desirable location can outpace this growth by leaps and bounds. - You Have More Options for Controlling Costs Even Where They Are Higher
It's not unusual for a homeowner to spend 1% to 2% of a home's asking price on annual maintenance. Along with that responsibility, however, comes a potential for deep savings. A more efficient roof, HVAC system, or solar panels can substantially change your ongoing cost picture. - You Can Access Home Equity Without Selling
A reverse mortgage enables homeowners who are at least 62 years of age to access their stored home equity while still living in their home. In general, repayment begins only when you move out of the home. This gives seniors a method of accessing emergency funds without divesting from the market or retirement accounts. - You Could Use Your Existing Property for Income
"Stay or go" aren't the only options on the table. You also have the opportunity to use your home as an income property. Many retirees allow a management company or local real estate agent to oversee property rental for them. They can use these funds to pay rent or a mortgage on a home that better suits their lifestyle. - In the Long Run, Home Ownership Presents Tax Opportunities
Homeowners whose property is paid off should think very carefully before deciding to sell. Always calculate the savings on rent (and associated taxes from accessing and paying out funds) as a baseline of your savings. Many homeownership costs are tax-deductible, while rent is not.
When it comes to planning your retirement, it's fair to say there's no "one size fits all" solution. Even if you are unsure about moving, it's a wise idea to get as much information as you can. A local real estate expert can help you understand your options and your home's potential market value.
Counselor Realty is here to advise you. Call today to find out more.