It’s quite common for retirees to decide to renovate, downsize, or move to different communities entirely after they finish working. Before, during, and even after this process, mistakes are prone to occur. To avoid costly pitfalls, it is important to identify the most common errors and plan thoroughly in order to avoid them.
1. Hanging Onto the Past. Retirees may have sentimental ties to family homes. However, these houses may be larger than you want or need. Big houses typically bring higher energy bills and demand more in the way of upkeep. Instead of waiting to downsize, you might want to consider a move sooner rather than later. This can help save a great deal of money on utilities, maintenance, and taxes. Additionally, if the home prices in your area are as high as they are in the South Bay, it can advantageous to sell while the market is hot.
2. Poor Investing. When retirees decide to downsize and are able to pocket a profit from going smaller, it is vital to invest as much money as you will need for the future. It is easy to spend savings on travel or other luxuries, so make sure to allocate some form of budget to short-term necessities, long-term necessities, and the nice-to-haves. Furthermore, consider the fact that some financial advisers recommend living on the proceeds of your home sale and saving retirement funds for a later time.
3. Consider the Negatives of a New Area. Retirees are often attracted to the idea of relocating to another area, perhaps for the weather, perhaps for proximity to family members, and perhaps for somethings else entirely. However, make sure to think about the downfalls of these areas. For example, cost-of-living, taxes, and medical care are all items that should be considered before a big move.
4. Keeping Two Houses. Some retirees keep a primary residence and a summer house. To make this plausible, you need to carefully analyze the costs of each. Eventually, individuals may be forced to choose one place to live or to consider renting their second home when it’s not in use. This, too, comes with its own considerations.
5. Having a Mortgage. Even though mortgage rates are still favorable and you can deduct your loan interest when filing income taxes, experts advise against retirees taking out a new mortgage if at all possible. They note that the tax incentive is not as much as you might think, and avoiding mortgage payments can help you delay taking Social Security distributions early when they will be smaller.