Unless you’re Donald Trump, housing makes up your largest monthly financial expense, which is why it’s so important to not be paying for housing after you retire.
This US News Money article has seven suggestions for reducing this expense. None of them are new but they deserve another look.
- Of course, you can pay off your mortgage. Paying it off leaves you owning your home free and clear. No more monthly payments and you don’t have to move. Here’s an earlier argument from Money on whether or not to pay your house off early. There are some thoughtful insights to both sides of the argument and a quick tour of the internet will load you down with yet more reason why or why not this is a good idea.
- According to the National Association of Home Builders, the average American home peaked at around 2,500 square feet and has declined incrementally for the past few years. Still, unless you purchased your home in the ‘70s when the average home was 1,400 feet, you’ve probably got some extra space. And now that the kids are gone you can generate some extra income by renting out a room or two. Here are some downsides to that idea so think carefully before you do it.
- Consider downsizing. See above on the size of homes. The benefit to downsizing is that you can move into a home more appropriate for aging, smaller to care for and possibly closer to the amenities you need. Here’s an article that looks at how much it costs to have a larger home.
- Refinancing. There are times when refinancing might make sense even if you are close to retirement according to Kimberly Lankford at Kiplinger in this article. It’s important to remember though that you are taking out a new loan, meaning you could be making mortgage payments after you retire.
- Get a reverse mortgage. Make sure that you understand reverse mortgages before you consider this step. Reverse mortgages come with serious risks including the risk of losing your home. AARP has some excellent resources about the pros and cons of reverse mortgages that can help you understand them better.
- Sell your home and rent an apartment. No more mowing the lawn, painting the house or worrying about the roof. Those are some of the benefits to moving to an apartment. If you choose to move to an apartment specifically for seniors some additional benefits can be social and recreational activities as well as the extra security of having people around should you become injured or ill.
- Move in with your kids (or have them move in with you). This isn’t a good option if you can barely speak to each other without raising your voice and your blood pressure but more and more Americans are choosing options that allow multiple generations to live around or with each other. There are health benefits associated with growing older while in the company of a younger generation and there are cost savings as well.
