Financial Planning, Retirement Issues


High Housing Cost Makes it Difficult to Retire

High Housing Cost Makes it Difficult to RetireYour home is paid off and yet you are wondering if the high housing cost makes it difficult to retire. When you retire some costs will decrease such as work related costs, however there is a good chance that other leisure related costs will go up since you have more time on your hands. Then of course there are the taxes, utilities and general upkeep on your home that will increase by some amount every year. Depending on your pension and  other income, your expenses could increase faster than your income. For many people this represents a significant problem and may push them out of their homes! In this situation, high housing cost makes it difficult to retire.

High Housing Cost Makes it Difficult to Retire

There are several options however it is important to analyze your costs, how much they will increase year over year as well as your income. Once you have these numbers you can decide on the appropriate alternative to select.

  • You plan to retire and stay in your home
  • Should you down size
  • Sell and Rent

Each of these scenarios should be assessed after assessing the following:

Regular operating costs for things like utilities, heat, electricity and other regular monthly and annual fees that are part of maintaining a home. Some may have HOA fees, while others will hire lawn maintenance. All of these regular fees should be included.

Maintenance costs whether you like it or not occur every year. Small things such as leaking faucet repairs, window repairs, maintenance of lawn mowers etc. While they should not be large amounts they never the less add up over the year.

Housing repairs such as roof replacement, driveway repairs, major appliance repairs or replacement including furnace and air conditioning.  These are big ticket items and need to be budgeted for if you plan to stay in your home. Even if you move, these also could be issues that you need to deal with if you purchase a home that is not brand new.

If you do decide to move, take into account everything associated with the move which could include real estate fees, legal fees, bank fees, land transfer taxes, moving costs, decoration costs, updates and repairs to the home you move to. Even if you move to a brand new home there will be landscaping for example, window coverings, and decoration costs.  Discuss all of these items with your  spouse to make sure that you are agreed on what needs to be completed associated with moving.

Confirm your cash flow in retirement based on the analysis you complete for the above scenarios that reflect your personal situation and then make up your mind regarding which one makes the most sense for your situation.

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