Whatever your vision for retirement, you have to consider whether or not you will continue to live in your current home. Some retirees downsize from a large house that was once full of kids. Others want to stay forever, if possible, where they’ve lived for decades. Which option is right for you?
Benefits of Selling Your Home in Retirement
There are plenty of reasons to sell your large family house as you approach or enter retirement. Here are the top ones:
1. Influx of Funds
“Many people today go into retirement without enough savings. If you own your home outright or have a lot of equity built up because you have either paid down your mortgage or your home has appreciated in value, then selling could produce the extra funds you need to enjoy your retirement.”
You might also find yourself in a situation where you still owe a lot of money on your family home and are paying a large monthly mortgage. By selling the home, you can remove the burden of this large mortgage and free up cash by renting at a much lower monthly expense.
2. Create Passive Income
One of the biggest myths of homeownership is that it is an investment. It isn’t. Owning a home that you live in is an expense, not an investment. An investment generates cash flow. There may possibly be some appreciation of value in owning a home, but when you factor in maintenance costs, property taxes, insurance, and inflation, your ‘home investment’ could be making you nothing, or even losing you money.
“Selling your home and renting may free up money that you can invest. That keeps you liquid and can increase your overall income during your retirement years. Investments often grow at a faster rate than real estate appreciates, making them an even better use of your money.”
3. Liquidity and Options
Some retirees live solely on pension money—Social Security benefits, annuity payouts, or a government or union plan. They don’t always have large sums of liquid cash. Without sufficient assets on the sidelines for unexpected expenses, the regular costs of owning and maintaining a large home could be ruinous.
By selling their home, the proceeds can be re-invested in holdings with more liquidity, such as stocks or bonds. This way, if there is a ‘rainy day’, it does not become a catastrophe and there are options.
4. Tax Savings
Property taxes keep increasing dramatically year over year. The property tax you are paying on your home could very well outpace the appreciation of your home value and thus result in an ‘investment’ that actually loses value over time.
Was the home purchased originally to meet the needs of a big family? Are all of those extra rooms now used only when grown children or grandchildren visit? The larger the house, the higher the cost of property taxes.
Are crucial retirement funds being wasted on a large annual property tax bill related to a large home you no longer need? Property tax is factored into your rental rate, but it is much less, because it is spread over many tenants in one building.
5. Eliminating Maintenance Costs
Major repair expenses could become a very troubling financial circumstance while on a fixed income during retirement. Not to mention ongoing costs such as lawn care, snow removal, etc.
“Homeowners who go into retirement and have paid off their home and no longer have mortgage payments are not off the hook. You will have to contend with continual maintenance costs, and the older your home, the higher those upkeep expenses will become.”
6. Insurance Costs
Annual home insurance costs are a similar burden as that of high property taxes, and come at a significant cost for carrying a large home that you may no longer require. When renting an apartment, you have to pay tenant insurance to protect your belongings, but it is a very small fraction of the cost of home ownership insurance.
7. Ability to Relocate
The perfect home probably also means something different to a retiree than it meant when they were younger. You might have looked for a home in the best school district or near a workplace, but you likely have different priorities as a retiree. Selling your home may allow you to move closer to your grandchildren or newly desirable amenities such as a recreational center, nature park, or golf course.
The Bottom Line
Selling isn’t always an easy decision, as retirees may have years or even decades of memories tied up in their home. To help overcome this hurdle, it is important for retirees to focus on the positives of downsizing, which include more time to be able to spend with loved ones and a lower monthly mortgage or rent payment, freeing up cash flow to do more of the things you love such as travel and hobbies.
When it comes to a home, retirement planning depends not on a single answer but an individual and specific financial picture. Find a trusted financial advisor or planner who will know which questions to ask, help you do the math, and think through the issues.
Renting with Thrive Living
If you are looking to sell your home and rent an apartment, Thrive Living has a beautiful rental suite waiting for you. At Thrive Living we strive to deliver a remarkable lifestyle for our residents. Creating a beautiful and comfortable home that is safe, clean, and convenient is our duty to you. With an abundance of amenities and connected to beautiful communities, living with Thrive delivers on happiness, while granting you the lifestyle you deserve.
Contact us today! We are always happy to answer any questions and help you find a location that works best to suit your needs.
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