As we continue our "Cost of Aging" series we cover the possibility of downsizing. Bendix Anderson addresses some of the challenges.
Moving from a larger home to a smaller one may help older adults lower their costs or help pay for their needs as they grow older.
However, moving comes with its own set of challenges and expenses.
Many older adults have an emotional connection to their home and neighborhood – about two-thirds have lived in their current home for over a decade. “Many (older adults) prefer to remain in their current homes and communities,” according to the Joint Center for Housing Studies.
However, if they have raised a family, their current home may have space that is no longer being used......
A smaller space would probably be less expensive for older adults who rent. Homeowners may use the proceeds of a sale to help finance other costs of growing older.
Many older adults also live in homes that will become progressively more difficult to navigate as they age, with too many stairs or narrow doorways that could not fit a wheelchair, if needed. The cost of renovating a home can be high. The neighborhood around a home can also pose challenges, if it is impossible to get around without a car and an older person is no longer driving.
Moving costs money, however. Both renters and owners will need to pay for movers – typically several thousand dollars – and face the challenge of selling or donating furniture and goods that won’t fit in their new, smaller home.
For homeowners, selling a home also involves high transaction costs, eating into the proceeds from the sale. At least the proceeds of selling a home are generally tax- free if you owned the home at least two years and the capital gain – the sales price less selling costs and the price you paid – is less than $500,000, or $250,000 if single, according to Center for Retirement Research.
The total costs of moving typically cost about ten percent of the value of a home, according to the CFRR.
Under all circumstances, a reverse mortgage should be considered by home owning or buying retirees. It can be a way to hold onto income producing cash as well as lower carrying costs for a home. Thereby dramatically increasing ones quality of life and still leaving an estate for inheritance or donation to a charity. Call me to discuss and analyze these options for you and your spouse.
Marc has 36 years in financial services and 6 years in teaching.
Visit Us on Google