Retirement homework: Deciding where you want to live

THINKING ABOUT DOWNSIZING TO A CONDO in the city or relocating to a retirement community? Maybe the idea of living on a houseboat in France appeals to you. Or you may prefer to remain comfortably ensconced in the family home. Among all the decisions you’ll make as you approach retirement, perhaps the most important is where to live.

“For many people, their home is their largest single investment, so the decision — to keep or sell — opens up many financial questions,” says Marcus Rowe, a Merrill wealth management advisor in St. Augustine, Florida. For that reason alone, where you choose to live takes on added significance throughout retirement.

“Because there are so many financial, health and lifestyle considerations, it’s wise to plan ahead,” says Cynthia Hutchins, director of financial gerontology for Bank of America and author of the recent report “Housing in retirement: Your life, your choice.” And be prepared to revisit your decision. “Our lives are dynamic. What’s perfect for you in the early years of retirement may not be the right choice for you as you age,” suggests Hutchins. The insights below can help you sort through some of the most popular options as you prepare to live the life you want in retirement.

Staying put? Think about age-proofing your home.

Remaining in their current home is the top choice of most people approaching retirement, says Hutchins. It could be your plan for just the next few years, or you may hope to stay indefinitely. “To age in place successfully, you have to assess not just your home, but also your community,” Hutchins says. “Safety should be a primary consideration.”

It’s a good idea to consult a geriatric care manager to help determine what renovations — wider hallways, more accessible bathrooms —  might be required later in life. Also ask yourself: Is there good public transportation? Are there reliable car services? What community and healthcare resources are available so I can stay socially connected and physically active? “Social isolation and loneliness are among the fastest accelerators of cognitive decline,” notes Hutchins.

All of these factors have a financial dimension, says Rowe. “Unless you have family nearby who will pitch in, you’ll need to budget for renovations and more help around the house later in life.”

TIP: “If you’re planning to stay in your current home and still have a mortgage, consider whether it makes sense for you to pay it off,” says Ben Storey, director, Retirement Research and Insights at Bank of America. “You’ll lower your monthly expenses — but you’ll also lose your mortgage interest tax deduction.” It’s not an all-or-nothing choice, though, he adds. A financial advisor and tax professional can help you weigh your options as you decide whether to pay all or part of your mortgage off in retirement.

Upsizing, downsizing or relocating? Consider the costs.

Many retirees opt to move closer to family — or to a warmer climate. Some become ex-pats. Others move from a country home to a city condo, or vice versa. No matter your choice, the same general issues — safety, social networks, available healthcare, transportation — also require your attention when you relocate.

Downsizing to a smaller house could make sense if you’re looking for a simpler lifestyle, and you might be able to use the proceeds from selling your home to pay for a new one, perhaps in an all-cash transaction. Still, says Rowe, “sinking most of your cash into a new home could limit your ability to cover unexpected expenses.”

Buying a larger place, Hutchins notes, could allow you to share a home with your adult children, perhaps helping them out financially now and calling on their support as you age. A larger home might also be the right choice if you’re interested in a “co-housing” arrangement (think The Golden Girls), in which a group of friends share a home for companionship as well as savings.

Another popular option is an age 55-plus community, which may offer amenities geared toward active, healthy lifestyles while also relieving you of the need to maintain your home and yard. Read “Choosing a retirement community: 7 questions to ask first” for more useful insights about everything from homeowners association restrictions to resale value before you buy.

Tip: “Whether you’re upsizing or downsizing, be sure to consider taxes and the cost of living in the new area,” Storey says. “Costs of goods and services can vary dramatically.”

Looking ahead to long-term care needs?  Start planning now.

One option is a continuing care retirement community, where you can live independently, then progress to assisted living and finally to full, 24-hour skilled nursing care or memory care, if necessary. There’s a significant buy-in cost and depending on the facility and the contract you sign, you may be covered for everything you need, or you could be charged for increasing levels of care.

Selling your current home could help finance such a move in the later years of retirement, says Storey, but he cautions against overestimating how much your home’s sale might bring. “If you expect a dramatic appreciation and the house sells for less, that can really change the outcome of your plan,” he says.

Tip: If you decide to purchase long-term care insurance to help cover your needs as you age, think about getting a policy in your 50s, when premiums will be lower and you’re less likely to have disqualifying preexisting health conditions, says Storey. And talk with your advisor about other ways you might be able to cover added expenses for the care you may need to continue living more independently.

With so many housing options to consider, the decision often seems overwhelming, notes Hutchins, but it can be a positive, liberating experience, too. “Look at what you’ve always wanted to do, and then put the pieces in place to make that happen,” she says.