Tag Archives: Retirement Goals

Rent or Buy in Retirement 

Rent or Buy in Retirement This is the big question for many people who are contemplating retirement and also thinking of downsizing. Should they Rent or Buy in Retirement? Or should they sell their current home. Should they purchase another smaller home that has a lower cost profile. Or should they invest their equity from the sale of their home and rent a place? This is a tough decision for many people on an emotional level as well as on a financial level. We will discuss some of the issues that consumers should consider when making a decision like this.

Rent or Buy in Retirement

Advantages

  • Mortgage interest write off
  • Property tax write off
  • Asset appreciation
  • Freedom to make changes as desired
  • Renting can mean a short term commitment to test a location
  • Renting might be cheaper – run the numbers
  • Moving into a brand new apartment with new amenities

Disadvantages

  • Repairs and maintenance of a home
  • Gaining access to equity can be difficult or slow
  • Selling a home can take a long time
  • Coming up with a down payment to buy a home
  • paying the mortgage each month
  • Landlord can change his mind and force you out
  • The apartment is unlikely to be upgraded over time
  • Leaving the family home can be difficult

Each person needs to evaluate each of these issues carefully. Then make the best decision for their personal situation. They also need to run the numbers for both scenarios to assess which one meets their financial needs. Build-in inflation for things like rent increases, utilities, etc to ensure that you do not get a big surprise.

Retire Successfully – 10 Steps to Focus On

Retire Successfully - 10 Steps to Focus OnThe following are the ten major things that every baby boomer and anyone who is planning to retire in the near future should look at. We will provide a few comments about each on, however obviously you will need to apply your own personal situation to this list. Also you may want to get the assistance of an expert financial planner to help with the details and calculations. Once you properly go through each of these steps you will have an idea of your situation when you retire. The next step then is to take action to improve each area and then reassess once action has been taken and every year there after.

Retire Successfully – 10 Steps to Focus On

Prepare a pre-retirement budget – what income will you have and what will your day-to-day expenses be? You may need to take steps to re-balance your expenses to ensure that your cash flow is sufficient to meet your needs.

What tax bracket will you be in – knowing this number will help with your budget. How much tax will you be obligated to pay and what action can you take to lower your tax obligation?

Plan a mix of growth and income investments – a financial planner can help with ensuring that there is the right mix of income investments, growth investments and what changes you need to make?

Figure out your real estate situation – is your mortgage paid off, should you downsize, what improvements do you need to make to sell your home or make it comfortable for you during retirement. These decisions will have a large impact on your budget.

Refinance your home before you retire – if you need to refinance your home, do it while you are still working. The finance companies will re-evaluate your income etc and risk profile once you retire.

Verify your car situation before retiring

Do you need to update your car, pay it off, downsize from two to one car or complete major repairs before you retire?

Audit your health insurance now and after – what health insurance will you have once you retire a

Retire Successfully - 10 Steps to Focus OnThe following are the ten major things that every baby boomer and anyone who is planning to retire in the near future should look at. We will provide a few comments about each on, however obviously you will need to apply your own personal situation to this list. Also you may want to get the assistance of an expert financial planner to help with the details and calculations. Once you properly go through each of these steps you will have an idea of your situation when you retire. The next step then is to take action to improve each area. Then reassess once action has been taken and every year there after.

Retire Successfully – 10 Steps to Focus On

Prepare a pre-retirement budget – what income will you have and what will your day-to-day expenses be? You may need to take steps to re-balance your expenses to ensure that your cash flow is sufficient to meet your needs.

What tax bracket will you be in – knowing this number will help with your budget. How much tax will you be obligated to pay and what action can you take to lower your tax obligation?

Plan a mix of growth and income investments – a financial planner can help with ensuring that there is the right mix of income investments, growth investments. they can help decide what changes you need to make?

Figure out your real estate situation – is your mortgage paid off? Should you downsize? What improvements do you need to make to sell your home or make it comfortable for you during retirement? These decisions will have a large impact on your budget.

Refinance your home before you retire – if you need to refinance your home, do it while you are still working. The finance companies will re-evaluate your income etc and risk profile once you retire.

Verify your car situation before retiring and Retire Successfully

Do you need to update your car, pay it off, downsize from two to one car? Or complete major repairs before you retire?

Audit your health insurance now and after – what health insurance will you have once you retire and w

nd what changes do you need to make?

Give yourself a health assessment – while still working, have a complete health checkup. Take action to improve your health, whether it is more exercise, diet etc.

Update your living will and your regular will – talk to your lawyer and make sure that these two documents reflect your current requirements.

Develop a game plan – summarize all of your actions that are needed, prioritize them and take steps to complete them. Re-evaluate once a year or after any major changes in your life style. Finally once you do retire, adhere to your budget and re-evaluate everything annually!

Action is more Important Than Goals

Action is more Important Than GoalsIt is important to have goals and plans relative to your retirement. However we also know that action is more important than goals. Since many people have plans and never turn them into action. They never get started with their savings plans. They never seem to set up an automatic savings tool. Or they just have too many other money issues that they are dealing with. They just don’t get around to putting some money away. This can be one of the biggest mistakes that you might make in your life. It will have a significant impact as well.

The quality of life you lead in retirement could be less than you expected or desired. You could end up working longer than planned, you might not be able to pay for health issues. You may have to live in substandard housing etc. The list goes on and on. Start early and you will have to save a smaller amount per week than if you begin in your late forties.  It is more difficult to save when you are raising kids, paying a mortgage and a car loan.

Starting later in life to save for your retirement means that you have to save a great deal more because you will not have the interest or dividend income to add to your savings in your younger years. This compound income can be worth more to you over the long run than all of the money you deposit.

Action is more Important Than Goals – What to Do

Start right now by taking 10% of your salary regardless of what it is and put it into a savings account. Keep doing this until you retire. Once you have enough money in the savings account to invest in an investment, transfer the money so that you get a better interest rate. Invest diversely and never place all of your money in one investment. The earlier you start, the larger the nest egg will be when it is time to retire. If you also have a pension, you will be well off and your savings can be considered a bonus to your standard of life quality.

Action is more Important Than Goals – don’t Touch the Money

It is very tempting to draw on your retirement savings. Maybe there is a new car that is needed. maybe there is a down payment on a home, or major bills to pay, the kids education, etc. Unless it is a dire emergency, do not touch this money. It is your retirement money and will be the only thing that contributes to the quality of life you are planning. Once you take out the money, you lose the compounding of interest income and your overall savings plan will be less than it would have been otherwise.

Get started now and set aside 10% of your paycheck now!

Choosing a Retirement Location

Choosing a Retirement LocationThis is one of our biggest issues, choosing a retirement location. Were do we retire to? Should we stay were we are or move somewhere where it is warm. What about earthquakes , tornadoes, fire and hurricanes?  There always seems to be a negative with places that are warm. There is the entire family issue. We do not want to be far away from the grand kids, while at the same time we need to live our lives too and enjoy the few years we have left. This is the dilemma we are facing along with many Americans and Canadians in choosing a retirement location.

Depending on what your priorities are, some locations will be better than others. Here is a list that we are currently struggling with. They are not in any order of priority since each person or family will rank these items with their own set of priorities. They will be different for everyone. You may want to assign you own priority to each item on the list.

Choosing a Retirement Location – Criteria

Here is our list that we are using to make a decision about choosing a retirement location:

  • Climate, warm weather.
  • Health care
  • Emergency health care
  • Personal safety
  • Proximity to the grand kids
  • Proximity to friends
  • Interesting things to do
  • 2nd Careers for some people
  • Volunteer organizations that you belong to
  • Financially affordable
  • Living costs
  • Sentimental ties to home and area you live in
  • Tax issues
  • Travel costs to return home to visit the family
  • Length if time you can stay in a foreign country

These are just a few of the things we are thinking about. In fact it is too many and the net result is that we will be paralyzed by too much indecision. We do like our home and neighborhood, however the winters are not fun and we enjoy the sunshine and warm temperatures of the south. We do not want to be around hurricanes, tornadoes and earth quakes or fires.  Millions of people deal with this every day, however when you come from an area were the main issue is cold winters, this seems minor compared to a hurricane.

Move to Another Country

One option is to go to another country. Health costs are a big issue as are landed immigrant status and tax issues. If you plan to move to another country, you must take into account these issues and have a well defined plan, particularly for health coverage. Changing countries these days is very complex and this alone will scare many people away from say moving from Canada to the US or Mexico.

Safety is another major issue for many people. The area you may be moving into must be safe for you and your family. While no place these days is truly safe, some are much better than others. Many people are opting for gated communities, however in my opinion this is an illusion. It keeps the rift raft out and tourists, but if a criminal really wants to get in, he or she will with no problems what so ever. It does stop the opportunists.

Quality of Life

It really comes down to quality of life, which for us means that family and friends are really important. This seems to be the highest priority for us, which means we will stay right were we are and enjoy our family and friends. Of course we will take longer trips and travel quite a bit, but our home base will be right were we are today other than perhaps down sizing to a smaller home.

For the time being we are going to stay right where we are and not move. We will rent condo’s in various locations to see if any of these locations would be interesting to us as a retirement  place to live. We can get to know the city, the people and whether we can be away from the kids that long. This is a compromise or perhaps a cop out as some people might put it, but this is what is working for us at the moment.

We would appreciate your ideas and thoughts about this subject of choosing a retirement location.