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July 15, 2009
Residence options: tips for deciding whether to move or stay put at retirement
By Julie Filby
When planning for retirement, some picture themselves moving to a bungalow on the beach, while others are perfectly happy continuing living in the familiar home where they’ve spent many years.
As 76 million Baby Boomers retire (or prepare to retire), where they will reside is an important consideration decision, financially and emotionally.
According to a survey released by American Association of Retired Persons this year, more than one-third of respondents indicated they would like to move to another home or area in retirement.
Financial advisors recommend that pre-retirees allow plenty of time, do as much research as possible, and focus on needs and values when considering this decision. Start the process by making a list of concerns then determine the highest priorities.
Cost of living
Compare the home values and taxes (income, sales and property taxes) of the current location to the areas being considered. It can be surprising to discover that states with lower income taxes often make up the difference with higher property and sales taxes. Also consider that property values vary widely by state.
Proximity to family
For those who value family and friends above all else, proximity to loved ones likely will be a key factor in the location decision.
Small town versus city living
Do you prefer the sense of community from living in a small town or rural area or does the hustle-bustle of city life with its cultural opportunities, restaurants, shopping and public transportation better fit your lifestyle?
Some people yearn for year-round sunshine, while others enjoy the richness of a four-season climate.
If you plan to move to another part of the country—or the world for that matter—it is wise to do reconnaissance on the geography and culture of the area. Sometimes people find out they are annoyed by the accents and culture of a different location.
Availability of healthcare
If fitness and good health are top priorities, consider living in an area where quality healthcare and a variety of recreational activities are available.
Because home equity can constitute a significant portion of household assets, some people sell their homes to raise capital for retirement. The goal of this strategy is usually two-fold: to cover the cost of a new residence, plus provide excess funds to be used for day-to-day living expenses. There are factors to consider with this alternative:
Severing emotional ties
Will it be difficult to sell this home? Were you planning to pass it on to your heirs?
Are you prepared for the resulting downsizing or relocation?
Real estate volatility
The housing market is subject to volatility and there is no guarantee your home will be valued, and sold, based on your expectations.
The AARP study showed that nearly half of respondents would like to continue living in their current homes for as long as possible. For someone who decides to stay in their current home, there are financial implications to consider. For example, if the mortgage is paid off, housing expenses will be lower. However, there can be maintenance costs that some experts say can equal about 2 percent of the home’s value each year.
Whatever the circumstances, it is important allow ample time for research and reflection to make the choice that best matches your requirements, values and budget. In the end, home is where the heart is, and where you feel most content and comfortable.