Planning for Housing Expenses

It is common for advisors to warn retirees and pre-retirees to set aside enough money to pay for healthcare in their golden years.  However, these individuals may be better off if they were told to ensure they have enough income and assets to pay for housing and home-related expenses after ager 65. 

According to a new report published by the Employee Benefit Research Institute, these expenses (mortgages, property taxes, insurance, etc.) comprise of the largest spending category for older Americans.  “Given that home-related expenses remain the largest spending category among the retirees, I think it is pretty important that they manage these costs well.”

Many people would prefer to retire without a mortgage, and fortunately only about 29% of households age 65 and older are retired with a mortgage.  “You can substantially reduce the share of housing costs by paying off your mortgage before you retire.”  Furthermore, “[D]ownsizing can be an important way to both create some additional money that can be used to fund retirement, as well as have a home that was easier to maintain.”

If downsizing is not possible, consider a reverse mortgage.  This is a good idea using the reserve wealth retirees have accumulated for living needs.   Be aware, however, since “These work best at older ages when the income is higher . . . So rushing out to get one just because they’re there isn’t a good idea.  Using them wisely when needed is a better idea.”

See Robert Powell, Housing is Biggest Expense for Retirees, Market Watch, Sept. 30, 2014.