6 Important real estate questions to ask yourself before retiring.
Have you paid off your mortgage? Keep in mind that once you retire, you'll no longer receive salary, bonuses or raises. So retirement is not the best time to take on new debt. Paying off the balance of your mortgage can really put your retirement on sound footing. It's best to consult your financial adviser on the proper path to take. They will be in the best position to determine the most sound plan based on your risk aversion and financial status.
Do you plan on downsizing? Once the kids have moved out and maintenance of a large home becomes too burdensome, downsizing can make life much more manageable. But be sure to take your time and do your homework. When considering downsizing, instead of settling for the standard two bedroom condo, consider spending the extra time and money to find a three bedroom or two bedroom with an office. This extra room may make all the difference in the long run of your happiness and will make the transition to a smaller space much easier. Also, just because you are downsizing doesn't mean the expenses will be lower. If you are unfamiliar with condominium associations, be sure to have someone experienced look over the financials and disclosures. Be sure to find out the associations track record, and learn how often they have special assessments and how often they have increased the monthly assessment.
Will you relocate? If your dream has always been to retire somewhere warm and sunny, be sure to do your homework. Even if it is a location you've vacationed dozens of times before, living there full time is likely much different. Summers in Florida and Arizona can be quite oppressive if you've never been down at that time. Also you'll want to be sure to research the town more. Check crime rates, public transportation access, taxes, and any special insurance that will be required that may not be necessary in Chicagoland. Be aware of health care options that you are comfortable with and confirm they are covered by your insurance and are taking new patients. If your intention to relocate is to be closer to your kids, be sure you like the area enough to live there on your own or have the financial ability to move again if needed. Your children may get relocated and you would have to make a decision at that point to stay or move again. You certainly don't want to go broke chasing your kids around the US, their company may be covering their relocation expenses, but definitely not yours.
What will you do with any profits from downsizing? If you downsize and are fortunate enough to walk away with a large sum of money, remember you cashed out for a reason. It's okay to use some of the money to take a long awaited vacation or buy that dream car you have put off until retirement, but be sure to secure the rest in savings or investment accounts to ensure a comfortable retirement. If you have any doubt as to what to do, get some referrals for financial advisers and interview each one to find the best plan of action for your unique situation. Whatever your investment risk tolerance was before retirement, it should be lower during retirement. Sometimes much, much lower.
Is now the time to finally do those renovations? Now that the kids have moved out, it may be time to treat yourselves to the new kitchen or master suite. As long as the finances are in order, feel free. One thing I would like to stress before you commit the time and money, is be sure you can live in this home for a long time. Primarily it means addressing stairs. As you get older, stairs will be the main thing that will force you out of your home. To avoid having to move shortly after you've spent money to renovate, it might make sense to look at switching to a home with a first floor master suite, first floor laundry, and attached garage. These are things not easily or cheaply fixed. Down the line you can add grab bars in the bathroom, a step-in shower if needed, and additional lighting.
Do you want to own two homes? Winters in Chicago get more tiresome each year. A winter home down South may just be what the doctor ordered. Be sure you are financially ready, and it may make sense to rent by the month until you are at a point where you can spend three or more months down South. Another thing to consider, is states like Florida have no state income tax. Spending over half the year down there and treating Florida as your primary residence to avoid Illinois' state income tax may make financial sense depending on your retirement income level, but please consult a tax professional first.
Do you plan on downsizing? Once the kids have moved out and maintenance of a large home becomes too burdensome, downsizing can make life much more manageable. But be sure to take your time and do your homework. When considering downsizing, instead of settling for the standard two bedroom condo, consider spending the extra time and money to find a three bedroom or two bedroom with an office. This extra room may make all the difference in the long run of your happiness and will make the transition to a smaller space much easier. Also, just because you are downsizing doesn't mean the expenses will be lower. If you are unfamiliar with condominium associations, be sure to have someone experienced look over the financials and disclosures. Be sure to find out the associations track record, and learn how often they have special assessments and how often they have increased the monthly assessment.
Will you relocate? If your dream has always been to retire somewhere warm and sunny, be sure to do your homework. Even if it is a location you've vacationed dozens of times before, living there full time is likely much different. Summers in Florida and Arizona can be quite oppressive if you've never been down at that time. Also you'll want to be sure to research the town more. Check crime rates, public transportation access, taxes, and any special insurance that will be required that may not be necessary in Chicagoland. Be aware of health care options that you are comfortable with and confirm they are covered by your insurance and are taking new patients. If your intention to relocate is to be closer to your kids, be sure you like the area enough to live there on your own or have the financial ability to move again if needed. Your children may get relocated and you would have to make a decision at that point to stay or move again. You certainly don't want to go broke chasing your kids around the US, their company may be covering their relocation expenses, but definitely not yours.
What will you do with any profits from downsizing? If you downsize and are fortunate enough to walk away with a large sum of money, remember you cashed out for a reason. It's okay to use some of the money to take a long awaited vacation or buy that dream car you have put off until retirement, but be sure to secure the rest in savings or investment accounts to ensure a comfortable retirement. If you have any doubt as to what to do, get some referrals for financial advisers and interview each one to find the best plan of action for your unique situation. Whatever your investment risk tolerance was before retirement, it should be lower during retirement. Sometimes much, much lower.
Is now the time to finally do those renovations? Now that the kids have moved out, it may be time to treat yourselves to the new kitchen or master suite. As long as the finances are in order, feel free. One thing I would like to stress before you commit the time and money, is be sure you can live in this home for a long time. Primarily it means addressing stairs. As you get older, stairs will be the main thing that will force you out of your home. To avoid having to move shortly after you've spent money to renovate, it might make sense to look at switching to a home with a first floor master suite, first floor laundry, and attached garage. These are things not easily or cheaply fixed. Down the line you can add grab bars in the bathroom, a step-in shower if needed, and additional lighting.
Do you want to own two homes? Winters in Chicago get more tiresome each year. A winter home down South may just be what the doctor ordered. Be sure you are financially ready, and it may make sense to rent by the month until you are at a point where you can spend three or more months down South. Another thing to consider, is states like Florida have no state income tax. Spending over half the year down there and treating Florida as your primary residence to avoid Illinois' state income tax may make financial sense depending on your retirement income level, but please consult a tax professional first.
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Gary Lee, CFA | Baird & Warner
25 West Chicago Avenue | Hinsdale, IL 60521 Cell: 630.449.2110 Email: [email protected] |
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