Choosing where to live in retirement is a financial decision, as well as an emotional one.
People may want to live in a different climate, trade in the work of a house for the ease of a condo. Fewer taxes and a lower cost of living is often a big draw.
Some retirees, however, opt to retire in place.
For some people, choosing a retirement spot is an easy decision after years of planning. For others, though, it takes research and introspection — and the more, the better, say financial advisors and retirement experts.
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Richard Haiduck, a retired executive and author of an upcoming book, "Shifting Gears: 50 Baby Boomers Share Their Meaningful Journeys in Retirement," says whether to move or stay is a complex set of motivations.
There is no one answer for the question of what retirees want or need, as Haiduck found when he interviewed about 75 individuals for a picture of retired life.
One thing Haiduck found surprising: "Everyone's first reaction was to go to a vacation spot," he said.
Almost immediately after, however, they realized it didn't fit with the rest of their life. They enjoyed vacationing there, but it didn't mean they wanted to live there, he explained.
Home or homes?
Retirement is often a two-phase process, says Cyndi Hutchins, director of gerontology at Bank of America Merrill Lynch in Bel Air, Maryland.
Those two different stages may well mean that the home that works for you early in retirement, when you're much more active, may be totally different from the home that works for you in your later years.
"Sixty-four percent of retirees say that they are likely to move at least once during retirement," she said.
Here's a look at other home-related expenses and decisions to think about in retirement.
Pay off mortgage or not?
Should you pay off your mortgage? Conventional wisdom says yes. But right now, mortgage rates are at historic lows.
"Do a fairly simple calculation to see if it would make more sense to pay it off or keep the mortgage and put money into the market," said Robert Wyrick, president of Post Oak Private Wealth Advisors in Houston.
Unfortunately, you won't know which option is better until after you've decided. "You could pay off the mortgage, and if the market tanks, that was a good decision," Wyrick said. "But if it goes up, you'll wish you had [invested] the money."
Ask yourself if you can earn more than 3% in the market, Wyrick suggests. If you think you can earn more by keeping the money invested, then it could make sense to put it in the market instead of paying off the mortgage.
The emotional side of the decision is just as important, Wyrick says. For some people, having the mortgage paid off brings peace of mind. "There's Finance 101, and then there is real life," he said. Financial decisions can mean carrying an emotional burden as well.
Think small
Downsizing, such as moving to a smaller, more manageable property in the same area, is the most typical move people make, says certified financial planner David Abate, senior wealth advisor with Strategic Wealth Partners, in Independence, Ohio.
It makes sense from several perspectives.
"It's most likely to be in line with lifestyle goals," Abate said. "Your life isn't uprooted.
"You can maintain some routines, but the property is more manageable" he added. You no longer have the upkeep of a house that fit when you had two or three kids at home.
The money could make it a beneficial move as well. "It can free up tens of thousands of dollars, if not more, that can be reinvested or used to build up emergency savings fund," Abate said.
Sometimes it's a matter of using the same space differently. Retirees may not need extra rooms for their kids, who are now grown, but perhaps they want an exercise room.
To that point, Wyrick says he has seen people move to their weekend home.
"Then when they get older, they realize the need [better] access to health care," he said. "Maybe it works for the first few years of retirement, but we all get older and health care becomes a really big deal."
No family to come over
People without children or spouses have to plan retirement a bit differently, says Peter Sperry, 63, who relocated to Greenville, South Carolina, in retirement.
"There's not going to be any family to come over and make dinner, clean the house, do the shopping," he said. "At one point I was looking into continuing care communities."
Sperry's top advice is to research extensively.
"But the first thing to research is yourself," he said. "Know what you want and the type of life you want to have — and are capable of having.
"Those two are not always the same."
For instance, an acquaintance told Sperry she was planning to buy a mountaintop house in the country. "What will you do when you're 88 and trying to get up and down that mountain in the winter?" Sperry asked. People need to give more than a passing thought to their future needs.
Ultimately, Sperry decided a continuing care community didn't suit him. They're expensive, for one thing.
On top of the initial payment, which averages $329,000 but can soar as high as $1 million, residents pay monthly fees of $2,000 to $4,000, according to AARP.
Sperry made several trips to the area to drive around and check out real estate and local attractions. He happened on a billboard advertising a new development targeted to people who wanted to age in place. Among the draws: single-level homes and maintenance fees that would free him from yard work.
Area highlights were bike trails, parks and nearby Furman University, which offers the education for adults through Osher Lifelong Learning Institutes.
With all-in purchase price of under $240,000, he says his new home was the best combination of neighborhood, amenities and affordability he could find.
'Everything is cheaper'
Frank Scortino, 53, began planning his retirement 10 years ago. A little ahead of schedule, he and his wife decided it was time for him to retire from his 30-year career as a pharmacist.
They moved to Simpsonville, South Carolina, in July from Long Island, New York.
They downsized in price, but not in size. "Homes are so much less expensive," Scortino said, of local real estate.
A 3,000-square foot home was $270,000 in South Carolina. Their former home in Long Island was $475,000 and 2,000 square feet. Their property taxes also dipped, from $11,000 a year to just $2,000.
"Sales tax, income tax, capital gains tax," he said. "You can't find anything more expensive, everything is cheaper."
Bottom line for Scortino was the gain in funding more years of retirement. 'This gained us 8 to 10 years of not having to work," he said.
Had he stayed in more-expensive New York, he would have had to keep working.
Locked in the house
A reverse mortgage could make sense if your retirement isn't well funded.
One pitfall to be aware of, however, is that the money you transfer could disqualify you from other needs-based programs, such as Medicaid. When the equity is in your home, you are still eligible, but you could easily reach the asset limit, Abate says.
Also, a reverse mortgage can lock you into that house. "You can't move out, and it has to be your primary residence," Abate said. "If you find that it no longer fits your lifestyle, five years from the time you decide, you are stuck."
Refinancing is a simple way to access some extra cash. Analyze your current borrowing rate against the borrowing rate, and see how long it would take you, in months or years, to recoup any closing costs that come with the refinancing.
"A general rule of thumb is that if you can repay the difference within two years and you plan on staying for longer, then it's a low-risk option," Abate said.
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