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When the boxes are packed and it’s time to settle into the dream home that’s been waiting at the end of a long, successful career, the package appears perfect. It’s all on one level, few steps to the front door, cabinets and drawers easy to open and close and doorways wide enough to accommodate movement. The picture is nearly complete, and the last element that makes it so is financial security.
Planning for the Future
We all acknowledge that the financial side of things weighs in on every major decision we make; and relocating to that dream home — that oasis of serenity— tops the list. Recognizing retirement goals early and working regularly toward them allows flexibility, so that by the time the move is made, the financial essentials have been ironed out. Several elements have demanded attention and received their due, and careful planning has paid a big dividend.
Among the financial elements to consider are the borrowings, if any, necessary to make your new lifestyle a reality. Consider the cost and remember regardless of age or station in life, debt must be addressed. When retirement rolls around, financial resources, including equity from the sale of another home, 401k, Social Security or other benefits and good old-fashioned investments and savings accounts may eliminate the need for a mortgage altogether. If a home loan is part of the equation, remember that banks or other lenders will consider a request on the basis of debt service requirement, ongoing cash flow, and loan-to-value of the home being constructed or purchased. (By the way, it is against Federal law for lenders to discriminate against any potential borrower because of age.)
The Future is Here
When it’s time to move in, provisions should be in place to provide for ongoing maintenance and to account for property taxes and homeowners’ insurance, in addition to a house payment. Estimates of these expenses can be calculated after making a few inquiries with local agencies.
Check with any service provider for senior discounts, as well as local municipalities, which may offer property tax relief for individuals over 65 years of age. Although mortgage life insurance may be expensive, it should be considered if a loan exists on the property. Life insurance proceeds are not taxable, and any such benefit will relieve a surviving spouse of the stress related to an unpaid balance.
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Fast Fact:
According to the Bureau of Labor Statistics, “older households” (those run by someone 65 or older) spend an average of $45,756 a year, or roughly $3,800 a month10 Costs to Include in Your Retirement Budget
Remaining in your forever home as you grow older isn’t a dream – it’s a reality you can achieve, and it starts with proper planning. U.S. News & World Report offers these 10 points (with a little commentary by us) to make it your reality — and don’t forget to factor in the fun!1. Housing. Unless you pay cash for your forever home, this likely will be your biggest monthly expense. Though a small, well-appointed custom home can be just as expensive than one that’s large but generic, it will cost less to heat and cool, reducing your fuel expenses each month.
2. Medicare premiums. Medicare Part B charges a standard premium of $144.60 in 2020, and Part D, which covers prescriptions, comes with a separate premium. Both should be factored into a “fixed income” budget.
3. Health care. Medicare Part B has a $198 deductible, after which you will be expected to pay for 20% of the Medicare-approved amount for health care services. A supplemental insurance plan can help make these expenses more predictable and manageable.
4. Taxes. While you amassed your retirement funds in tax-deferred 401k plans or traditional IRAs, you will now have to pay taxes on withdrawals from these accounts. Social Security benefits may also be taxed. However, interest made on Roth IRAs is not taxable. Be strategic with investments.
5. Food. This budgetary item is entirely up to you and the lifestyle you wish to maintain. Save a little cash by shopping on “senior days,” which may offer special discounts. (But don’t forget to factor in lingering lunches with friends.)
6. Emergencies. It’s hard to predict how much money you’ll need for an emergency or when you’ll need it. Set aside a little cash each month to cover you in the event of the unforeseen.
7. Entertainment. You now have the freedom to enjoy new things. Take advantage of it, but do it shrewdly. Deals for seniors abound. There’s no shame in your game – you’ve earned it!
8. Travel. Like #7, you’ll now have time to see the world. Again, be strategic to stay within your operating budget. U.S. News offers two great strategies: look for house-swap opportunities (great for extended stays) or travel during weekdays and off-peak times, which are typically cheaper and less crowded (a win-win).
9. Grandchildren. Nothing can change your financial priorities like grandchildren. Consider setting up a trust to help provide for their future.
10. Leaving a legacy. Whether your bequest is financial or sentimental (your forever home falls into both categories), make sure your wishes are clearly defined and communicated.
See also: Smart Budget Strategies for Your Log Home
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