Home in On Your Best Retirement Plan

More than 8 in 10 Americans at least 65 years-old own a home – And surveys report, that not moving is the later-life American Dream. Older homeowners report that they intend to “age in place”, rather than move.

That makes plenty of emotional sense, but I want everyone nearing or in retirement, to make sure they have a house-smart plan.

• Can you afford to stay put? If you want to stay put, I insist that you have the mortgage paid off before you retire (more on this in a sec). But you also need to carefully think through if you will be able to afford the ongoing costs of owning your home: the property tax, the insurance, the maintenance and utilities – And add in more for the maintenance; even if you are an eager DIYer today, as you age, I think it is prudent to expect you may want to hire help for some chores.

There are free online calculators that will estimate what your monthly retirement income might be based on your savings, Social Security and other income sources. Once you get an estimate, compare it to what you think your ongoing housing costs will be. If you think that’s going to be a stretch, I encourage you to stand in your truth. Moving today to a less expensive home or renting, can be the smartest move.

I don’t want you – or your adult kids – having to face facts when you are 75 and 85 years old – that you can’t afford to stay in your home. Make a move from a place of strength today, rather than put you and your family of having to react to a financial pinch later on.

• Will your home be kind to a later-life you? Do you have to deal with lots of stairs outside and inside? Is there a bedroom on the main floor? And does the bathroom have enough elbow room to accommodate a walker? Are the washer and dryer inconveniently stuck in the basement or another floor? If you don’t intend to have help with the laundry, that can be a big problem.

Please don’t roll your eyes and think you will deal with this later. Later is going to be too late. Later is when you trip going down the stairs, or don’t make it out to see your friends because you don’t have the energy to deal with the flight of stairs to get in/out of your home.

One option is to consider some renovations that can make your home safer and more comfortable for an older you. For instance, a bathroom reno that accommodates grab bars and a walk-in shower with a bench, can be a great investment. I’d love for you to pay for any age-in-place upgrades with savings. If you intend to borrow, please keep your budget modest enough that you can pay back your home equity loan or line of credit in just a few years.

Of course, another option is to move to a new home that has all the features that will make for a comfortable retirement.

• Retire mortgage free. A troubling trend over the past 15 years or so, is that much-older homeowners still have a mortgage when they reach their retirement years. I think that’s a risky mistake. A mortgage is likely your biggest cost; it is going to eat up a lot of the fixed monthly retirement income.

If you are still working and want to retire in your current home, you must make it a priority to get the mortgage paid off before you retire. Contact your lender and ask for an amortization schedule that would have your mortgage paid off by age 65.  By now, you have heard me say that working until 70 is a smart retirement move. That hasn’t changed. But I want you to aim to have your mortgage paid off even earlier, to give yourself some breathing room, in case working or working full-time becomes impractical after 65.

The best way to come up with the additional monthly money to pay off your mortgage faster is to trim your current spending. Please have the proper mindset: you aren’t denying yourself today, you are giving yourself amazing security in your retirement years. 

If reducing your spending doesn’t give you the money you need to speed up your loan repayment, you have my permission to reduce your retirement contributions and put that money toward repaying your mortgage.