Retirement, San Diego

Retirement, San Diego

Retirees Dilemma 

Rent or Own

Retirement, San DiegoRetirement, San Diego

Retirement is filled with decisions. Decisions like, do I retire now, or wait five years, and if I do retire, will I downsize? Retirees who are facing the decision, do I downsize and rent, or should I keep my home instead, are facing one of the biggest decisions they will ever have to make. More baby boomers are putting “For Sale Signs” on their homes this year in hopes to unlock the equity regained since the housing downturn. The median age of today’s home sellers has risen to 54 from 46 since 2009, which indicates that empty nesters were simply waiting for the housing market to recover (WSJ, 2016).

Today, baby boomers across the US are starting to list their properties for two reasons, one, to sell when the market is up, and two; to seek a more simplified life. For homeowners with oversized houses, coupled with an inadequate retirement savings, the decision to sell is simple, financially speaking. Selling a home could be the difference between retiring comfortably or not. The sale of a home to many baby boomers, who have not put away enough funds for retirement, this is the one chance at having a simpler and safer retirement.

“If retirement savings present the risk of shortfall, one of the best things you can do is liquidate real-estate assets.”  Says Christine Benz, director of personal finance at Morningstar Inc. “That’s more palatable than hearing you need to keep working till you’re 72.”

Important Considerations Before Selling:

  1. It is important to consider the financial needs of not just the first 2 decades, but also the costs of the final 1/3 of retirement.
    • The last years are the most expensive, most individuals will be in a care center for the last 1.5 years of their lives,
      1. The current average cost ranges from $120, 000 – $180,000 per year for assisted care.
  1. Renting Advantages & Disadvantages of renting:
    • Advantages:
      1. A wide range of options are available.
      2. More flexibility.
  • Repairs, landscaping, and up keep are not your responsibility.
  1. If you choose a retirement community
    1. A chef depending on the community you choose, some offer laundry services, as well as a place that has activities that keep you active, and prepares meals.
  • Disadvantages:
    1. Rising rents on a fixed income
    2. Usually rents start at about 30% to 40% below the prior mortgage payment.
  • Research suggests that seniors should have rent costs that range from 15% to 25% of their living expenses.
  1. Average costs for a free and clear home should expect to pay about 3% of the home’s value in taxes, insurance and maintenance per year.

Please remember the only time a home is a financial asset is when you’re trading down. Taking equity from a primary home and buying something lower priced, makes you debt free and lowers expenses.

Wall Street Journal, March 28, 2016