Housing Costs Complicate Retirement

One of the most critical issues for those headed towards retirement is how much your house will cost you once it has been paid.  The more expensive your home, the more likely it will drain you in terms of property taxes, maintenance, homeowners insurance and more.  “I’ve always been an advocate of modest homes.  A large house means higher costs in retirement and it makes it more difficult to save while you’re working.”

Whatever you pay for your house, it will generally end up costing you at least 2.5 times as much over the long term.  These housing costs can make it difficult to retire, because they hinder our ability to save while working and increase the nest egg needed to retire comfortably. 

Experts advise individuals to buy homes costing no more than 2 to 2.5 times their gross income.  This is doable in many parts of the country, but nearly impossible if you live in a major city in the East or West Coast.  By doing this “you’ll have more financial breathing room—and less financial stress.”

Provisionally cutting back spending is a central financial tool, especially for retirees faced with tough financial markets.  The lower your fixed living costs, the more flexibility you will have.

See Jonathan Clements, Big Homes Can Complicate Retirement, The Wall Street Journal, Nov. 22, 2014.