For some people, deciding whether to sell their home when they retire is simple. They’ve thought it out for years and they’re ready to move on. Selling is a no-brainer. However, if you’re like most soon-to-be retirees, it’s slightly more complicated than that. On one hand, there are so many lifestyle questions to ask yourselves. On the other hand, you’ve got financial considerations as well. Even after you put a great deal of thought in the matter, you might still end up asking yourself, “Should I sell my house when I retire?”
That’s when a little research might be a good idea. It’s always helpful to get some perspective on a big decision such as the one you’re about to make. So with that in mind, here are some questions to ask yourself. You may find that, after reading them through, the benefits of selling may actually outweigh the rest.
Are Your Family and Friends Still in the Area?
According to the National Association of Realtors, the top two reasons Boomers give for moving are:
- Retirement
- The desire to be closer to friends and family
It’s true that as you age, your friends seem to be more likely to live far away. Some retire and move to the location of their dreams. Others move to be closer to far-flung adult children so they can be near their grandchildren. That creates a domino effect. As they leave the old neighborhood, the old circle of friends gets smaller and smaller. That’s a primary reason that many homeowners start to consider selling their home after they retire. After so many of their friends move, it’s just not the same anymore.
Do You Know All the Hidden Costs of Home Ownership?
Having your mortgage finally paid off is cause for celebration. But as you know, your monthly housing costs don’t go away completely when you’re mortgage-free. While it may be relatively easy to predict your monthly costs in a home you’ve lived in for decades, it’s a whole new ball game when you’re shopping around for a new home.
For instance, the following costs vary widely from house to house and region to region:
- Utilities. The price of electricity, gas, water, fuel, and trash collection can range from $246 per month to $439 per month. That’s according to the Department of Housing and Urban Development and the Census Bureau. Together, they conduct the American Housing Survey every two years.
- Property Taxes. That same survey collects data on the property taxes that homeowners pay. Here, the national median monthly cost of property taxes is $200. NYC tops the cost list in this department, at $600 per month for property taxes.
- Insurance. Home Insurance Premiums can deliver a punch to the wallet, too. In case you’ve lost touch with national prices, the national median is $67 per month. Premiums can go as high as $119 per month in Miami, Florida and $100 per month in Boston.
- Total Hidden Costs. Among the nation’s 15 largest cities, the hidden monthly costs of owning a home tops out at $1,574 in New York City. The national median is $875 per month, which is nothing to take lightly, either. That’s a good chunk of change to pay for housing when you outright own the home!
- Routine Maintenance. Don’t forget about expensive repairs, major appliance replacements, and even that driveway that needs recoating every so often. Also, there’s shoveling, landscaping, and all the other little things you do for your home and yard when you own your own place.
If you do decide to sell your house when you retire, it’s a good idea to be able to identify these hidden costs of home ownership. Many retirees find that, even though they’re buying a smaller home (downsizing), it’s these hidden costs that add up and make them regret their decision from a financial perspective.
One solution is buying into a retirement community that offers independent living arrangements. Many of these “hidden” costs are covered. Another benefit is that if it’s a continuing care retirement community (CCRC), additional levels of care and services can be accessed if and when you need them.
Are You Aware of the Capital Gains Exclusion?
Lots of would-be home sellers who are about to retire are afraid they’ll end up paying all their gains to the tax man. That’s a misguided belief. Today’s capital gains tax rules are very forgiving of home sellers. If you’re married, you can exclude up to half a million dollars from the capital gain on your tax return. If you’re single, you can exclude up to $250,000, according to the IRS.
Do You Need the Money?
As long as we’re talking costs and expenses, we may as well explore all the financial considerations at hand in your big decision. For many retirees, a huge deciding factor was whether they needed the cash from their home sale to fund their retirement. According to a Merrill Lynch Retirement Study, seniors have, on average, at least $200,000 tied up in home ownership. Compare that equity to their retirement savings, which is less than $100,000 on average, according to a survey performed by The American College.
If you’re part of that group, selling your home after you retire could end up being a great idea. The profit could make a significant difference if you invest it. There are several ways to invest, too. Whether you use the profit to supplement your nest egg or you invest it in an independent living community, access to your equity is a major draw for people like you, who are asking, “should I sell my house when I retire?”
If you think this might be the path for you, there are plenty of ways to get started. Once you’re ready to take another step towards finding a new home, you can begin your research right here with Acts Retirement-Life Communities. To get started, choose a community to get pricing information now. Then, give us a call when you’re ready to take a tour. And in the meantime, good luck with all the exciting events ahead, whether you decide to stay put or downsize and move!
