by Parshalla Wood, Financial Consultant, Wedbush Securities
As you grow older, housing issues become an integral part of your retirement plans, and you may find yourself in a number of different scenarios. You could be living on a fixed income and want to get additional cash from your home. You could feel isolated in the big house you bought 30 years ago and want to move into something smaller. Perhaps your health isn’t what it used be, and you may need around-the-clock care.
Each person has a different story and residential needs in retirement, making it important to prioritize determining as many of these factors as you can before you reach retirement age.
It’s important to remember that when determining your living situation, financial, emotional and physical considerations will drive your decisions, and careful planning may allow you to enrich the quality of your retirement years, enable you to get the health care and services you need, and allow you to live in a place where you feel most comfortable.
Should You Stay or Move?
If you are living on a fixed income, you may want to use the equity in your home to obtain additional cash through a reverse mortgage, which allows you to defer repayment until a later time. A home equity loan or second mortgage may also provide you with cash, but does not defer repayment. Renting your house may also provide you with additional cash flow and tax benefits. Or if you plan to leave your home to your family, you may be able to avoid estate taxes and continue using the home as your principal residence through a personal residence trust.
You should carefully consider your housing options before moving out as you may be able to take advantage of in-home health-care services, household help or personal care assistance. However, if you do decide to move, you also have a number of choices.
Moving in with or near your children often seems like the obvious choice, but be aware of your emotional and physical needs before taking over the spare room in your child’s house. If you need independence but don’t want to buy another house, consider an independent living community or a retirement community, where you can rent or own a condominium or townhouse. If you are faced with physical or medical limitations, assisted-living options may be your best bet. Typical assisted-living arrangements provide you with a room or apartment, housekeeping services, meals, transportation and some nursing services.
Continuing Care Options
Continuing care retirement communities (CCRC) are an increasingly popular assisted-living arrangement for retirees. If you are currently in good health, a CCRC will agree to provide you with housing- and nursing-home care throughout your life. When seeking the CCRC right for you, compare entrance fees, monthly fees, any additional insurance requirements, medical care provided and the financial condition of the facility. Be aware that a portion of your fees may be tax deductible as medical expenses. When you need more care, your last resort may be a quality nursing home.
While the prospect of entering a nursing home can be frightening, there are many good facilities that provide care and services not available elsewhere. Examine the quality and the cost of the medical care, look at the appearance of the facility and grounds, find out about safety and security, ask about recreational activities and staff-to-resident ratios, etc.
The bottom line is, while no one can predict the future or potential health concerns that may arise in later years, the earlier you begin planning, the more equipped you’ll be to make an informed decision about your living situation when the time comes.
