Deciding Where to Live in Retirement

Written by: Andrew Briesacher, Senior Wealth Manager

Deciding whether to relocate, downsize, or renovate in retirement is a major decision, and each option comes with its own set of considerations. Here’s a breakdown of factors to keep in mind for each choice:

1. Relocation

Relocating can be an exciting fresh start, but it also must involve careful planning.

Considerations:

• Cost of Living: The cost of living can vary significantly depending on where you move to and may be much higher in the areas you’re considering than your current location. Research housing prices, taxes, and healthcare costs in different areas even within different neighborhoods and counties within the same area.
• Proximity to Family and Friends: Being close to loved ones can be important for emotional and social well-being. Consider how far you want to be from family, especially if you foresee needing help later or if there’s a chance grandchildren may be added to the picture in the future.
• Tax Implications: Some states have favorable tax policies for retirees, while others may tax pensions, social security, or retirement accounts more heavily.
• Liquidity: If relocating to an area where real estate values are higher, you may need to touch current assets with tax implications or other considerations. Careful consideration on funding the new purchase must be given and potential short-term options may make sense as well.
• Testing the Waters: Relocating to another area can sound exciting but you may want to test the waters by taking an extended vacation to the area to make sure that it’s a lifestyle fit for you and your family.

2. Downsizing

Downsizing typically means moving to a smaller home, which can reduce maintenance costs and free up equity.

Considerations:                           

• Financial Impact: Selling your current home could release a significant amount of capital, but consider how much you’ll get after selling costs and whether it’s enough to meet your financial needs and justify the change. Make sure to run the numbers when calculating the impact on expenses, because smaller doesn’t always mean lower cost!
• Simplified Living: Downsizing can make day-to-day life easier. Fewer rooms mean less cleaning, less furniture, and generally less stress.
• Long-Term Financial Benefits: Reducing the size of your home could lower mortgage payments, property taxes, insurance, and maintenance costs, which can be especially helpful in retirement.
• Emotional Attachment: Your home may have sentimental value, and moving can be an emotionally difficult decision. Weighing the pros and cons of emotional attachment versus practical needs is important.
• Accessibility: A smaller home might be a more accessible, practical choice in terms of stairs, bathrooms, and layout, which is key for aging in place comfortably.
• Handling excess items before downsizing: Many people overlook this step until they’re already dealing with the hassle and cost of renting dumpsters, hosting garage sales, or paying for storage units to house belongings that no longer fit in their smaller home.

3. Renovating

Renovating your existing home can be a great option if you love your current location but want to adjust your living space.

Considerations:

• Cost of Renovations: Determine if your budget allows for the renovations you need. Sometimes, home improvements can be expensive, especially if major systems (like plumbing or HVAC) need upgrades.
• Longevity of Your Home: Will renovations extend the life of your home? If your home is aging, it might be worth it to invest in structural or energy-efficiency upgrades.
• Aging in Place: As you age, it might become harder to navigate stairs or use bathrooms. Renovating to add features like ramps, wider doorways, grab bars, or a walk-in shower can make the home more accessible.
• Return on Investment (ROI): Will the renovations add value to your home? If you’re planning to sell soon after, you’ll want to ensure that any money spent is recouped in the sale price or is otherwise essential to your ideal retirement.
• Disruption: Renovating can be noisy, dusty, and inconvenient, especially if you’re living in the house while work is being done. Consider how comfortable you’ll be during the process and how long renovations may take.

Ultimately, the best choice depends on what you want out of retirement and what financial resources that you have available. Do you want a fresh start, less space, or a more comfortable living environment without leaving your home? Balancing practical concerns with your personal preferences and financial capability will help guide you to the right decision.

As always, contact Wheelhouse if you would like to discuss any of these three options for your retirement and to determine what financial considerations need to be given for your specific situation.