For many working Americans, housing is their greatest recurring expense. So, it stands to reason that housing will inevitably be their most expensive bill in retirement, too.
Data from the National Institute on Retirement Security finds that 75% of Americans are worried about rising housing costs during their senior years. If that’s a concern of yours, here are some steps you may want to take.
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1. Consider downsizing
It’s not a given that you’ll be an empty-nester come retirement. But if that’s the case, and you no longer need as much space, downsizing could be a great way to stretch your retirement income.
Remember, even if your home is paid off by retirement, there are expenses you’ll face outside of your mortgage. A larger home could mean higher property taxes, insurance costs, and utility bills.
There’s also maintenance to think about. In retirement, you may have more time to tackle upkeep and repairs yourself. But will you have the physical ability to do that work on your own?
If you’re forced to outsource most of your maintenance, you could end up spending down your 401(k) or IRA faster than expected. So, all told, a smaller home could be a much better choice.
2. Look at relocating
There are parts of the country where you’ll pay a lot less per square foot than in others. Those are the parts you may want to consider settling down in if you’re worried about managing the cost of housing, especially if you expect most of your retirement income to come from Social Security. In that case, you’ll want to land somewhere that allows you to stretch those benefits.
Keep in mind that, in many cases, relocating to a less expensive housing market also means moving to a place where living costs are lower in general. But before you relocate, think about what you’ll be giving up. There is something to be said for retiring in an area you’re familiar with, and where you have a social and support network.
3. Be open to having a tenant
Sometimes, affording housing in retirement is easier when you have a way to offset that cost. Getting a tenant could be a great way to boost your monthly income and make it easier to cover expenses like property taxes and upkeep.
Plus, having a tenant could help you solve the problem of struggling to do property maintenance yourself. You may be able to find someone who’s willing to do that work for you in exchange for more affordable rent. That way, everybody wins.
4. Consider renting
It’s true that the cost of renting a home has been on the rise, just as it’s been more expensive to buy one. But if you’re worried about covering the cost of housing in retirement, consider renting instead of owning.
When you rent, you lose the ability to continue gaining equity in a home. But on the plus side, you can more predictably estimate your monthly costs, at least within the confines of each lease agreement you sign.
As a homeowner, you could have a month where a $4,000 repair pops up out of the blue. That’s a tough thing to absorb on a fixed income. With a rental, if you’re on the hook for $2,000 a month as per your lease agreement, at least you get the financial comfort of knowing you’re not going to be charged more.
It’s natural to worry about rising housing costs, both in general and in the context of retirement planning. But these moves might help you keep your senior housing expenses at a reasonable, manageable level. And that could mean a lot less stress for your future self.
