Don’t Let Your House Put Retirement on Hold

Category: Financial and taxes in retirement

June 25 — Seems like there is no end of articles about folks delaying retirement. Millions of boomers are planning to work longer than they had intended. But just how long should you delay: how good are your reasons, and even if you don’t retire – should you hold onto your current home? We will explore these questions in this short article.

There are several main reasons for delaying retirement – most, but not all of them, have to do with money.
– Haven’t saved enough – need more money… to live on
– Want to work a few more years and delay social security payout to increase monthly payment at full retirement age
– Can’t sell your house, which is key to the new retirement lifestyle
– Waiting for one spouse to hit pension or retirement age
– Enjoy working, don’t want to retire

The Red Herring
These are all good reasons for delaying retirement. But our contention is that the third one, “can’t sell your house”, is often a red herring and a poor reason for not retiring. Here’s our thinking:

– Your house is not worth what it once was. And it might not be for a long time, if ever. The real estate market is different today. With so many foreclosed and under-water houses on the market, prices are way down from their 2006 peaks. Those heady prices are not coming back any time soon, however.
– Don’t assume you can’t sell your house. It is true you can’t sell it for what it was worth in 2006. But reasonably priced houses do sell if they are in good condition and marketed well. Ask your real estate agent at what price he or she thinks it will sell, and be reasonable when you set a price.
– If you are a baby boomer the chances are your house is still worth a lot more than you paid for it. So be happy with that instead of fretting about what it was worth at one time.
– The good news – you can turn around and buy a bargain. So many real estate markets, particularly in the sun belt so popular with retiring boomers, are filled with bargain homes. You can either easily find a rental, or you can have your pick of thousands of easy to maintain, easy to live in homes – all at reasonable prices.

Bottom Line – Sell Now
Of course if all the pieces in your retirement decision are not in line – not enough money saved, don’t want to quit working – retirement doesn’t make sense. But as far as selling your home goes, we think a good case for parting with it now can be made. You can save money by downsizing, and you can upgrade to a home that is more appropriate for today’s baby boomer lifestyle. We hate to hear of people who are really ready to retire and move to their dream home – but won’t pull the trigger because they don’t want to “give away their home”. In our opinion, it’s worth what it’s worth – take it and move on to a new chapter.

Comments:
Please share your opinions and strategies about putting retirement on hold in the Comments section below. We’ve taken a bold stance, maybe you don’t agree.

For Further Reference:
Don’t Let Your House Become a Retirement Burden
Should You Put Retirement on Hold
Many of Us Won’t Be Able to Retire Until Our 80’s
Retirement – The Event That Shall Not Be
People Plan on Working Into Their 70’s

Posted by Admin on June 25th, 2011

14 Comments »

  1. Boy that last paragraph sure hits home with me! Thanks!!

    by Victoria — June 26, 2011

  2. Here are two terms from behavioral economics (backed by research) that apply to selling a home. 1. Anchor – we have in our mind a certain price that our home should sell for, and we are anchored to it. It becomes very difficult for us to sell it for less than our anchor price. 2. Loss Aversion – we are more bothered by a perceived loss (getting less for our house than we think it’s worth) than by a gain (we’d get a great deal on a new house). Behavioral economics sheds a lot of light on why we do/think what we do. It’s a combination of psychology and economics – we don’t always act rationally.

    Jan Cullinane, Co-author, The New Retirement: The Ultimate Guide to the Rest of Your Life (Rodale)

    by Jan Cullinane, co-author The New Retirement: The Ultimate Guide to the Rest of Your LIfe (Rodale 2007) — June 27, 2011

  3. I appreciated your comments about going ahead and trying to sell your home even though you might not get what you want for it. If you are trading up, staying close by, or moving somewhere where housing costs are higher…… then no, financially it might not make any sense if you can’t afford to do that. What DOES make sense is to sell and then move and buy a house somewhere where the cost of living is a lot lower. We live in CT (AKA the “tax you to death state” – LOL!) and while we might not be able to get what we could have gotten for our house just a few years ago, we can buy a house in the south (Virginia, where we want to move) for considerably less than what we get for our house here………. so it should be okay.
    A lot has to do with where you want to move, if indeed you DO want to move. So yeah, there are some positives.

    by Chris — June 29, 2011

  4. Jan’s last phrase wins the prize for “Understantement of the Week Award”!:grin:

    by Linda — June 29, 2011

  5. Virginia is an excellent choice, Chris. We love the Shenandoah Valley, not only for its dramatic natural beauty, but also for its wealth of history and historical sites. The Shenandoah Active Adult Community (between Winchester and Front Royal) is a fun place with a great bunch of folks and a vibrant activities program. It’s on the shores of a pristine 120-acre lake, and although it’s close to the pleasures of Washington DC it’s far from that city’s tax base! Check it out!

    by Jan — June 29, 2011

  6. I built my house in 2003. I want to sell it now and move to another state, but it’s worth $100,000 less that it cost to build. That wouldn’t give me enough to move to an area more desirable to me. So I do feel stuck.

    by Cindy — June 29, 2011

  7. Even though we will not retire for two more years we took a chance and put our house on the market this past spring. We bought the house 15 years ago when prices were still somewhat low (for California). We considered several downsides to keeping the house including the possibility of losing out on the current capital gains tax breaks. Bottom line is we sold the house in the first week for what we were asking and can now move to another state, buy a newer house for cash and not hurt our retirement savings one bit. If we had waited for two more years we are sure we would have sold for much less.

    by Larry — June 29, 2011

  8. Sort of a catch 22, if you wait until the value of your house appreciates, the property you want to buy for retirement will also appreciate so it is doubtful you’ll gain by waiting.

    by Bob — June 30, 2011

  9. I retired two years ago. We were in a large home and wanted to downsize. The market for homes of our size was poor. We expected to have to market it for 6 months or more. I decided to go back to work. I searched for an employer who offered a complete relocation package. I figure I saved at least $100K. We are now relocated and renting. I got a sign on bonus and am in a positive cash flow situation. I’m not withdrawing anything form our savings. I wasn’t required to sign a contract but plan to stay for at least a year. We are enjoying being a new location and meeting new people. This approach isn’t for everyone but it has worked well for us.

    by Ed — June 30, 2011

  10. My wife and I were fortunate to be able to sell our Long Island home in only 3 months back in 2009. Real estate prices were dropping each month and our house was worth almost $100K less than from its peak. We believe we priced it right at the time considering the market. As the article points out there is a new paradigm in the real estate market and those lofty prices of 2006 aren’t coming back soon. When considering the much higher real estate taxes and costs in NY compared to NC, our decision was made. We were able to buy an even larger, newer and nicer home for cash and our real estate taxes are 25% of what they were in NY. Our lifestyle is much less stressful and easier without all the higher costs and congestion of the metro NY area. What we lost at the NY end on our home we made up on the NC side. We couldn’t be happier. Each month we stayed in NY was costing us money in the form of higher taxes coupled with the continual decline in our NY home’s price. If home prices is the only issue holding you back…get out now if you can.

    by Artie — July 1, 2011

  11. We’re planning on moving to Florida after our daughter finishes w/school.

    Does anyone know if they tax state pension plans for retirees in Florida?

    Ongoing helpful suggestions/comments regarding moving to Florida would
    be greatly appreciated. Living in the New England area is really a drag. Not to mention out of sight property taxes, cold, snowy, windy/rainy weather conditions.

    by judy hawks — July 1, 2011

  12. Comparing homes in Texas in Colorado, the taxes are signifcantly lower than here in NJ, where homes stay on the market for well over a year. We were surprised to see a neighbor’s home sell within 2 months, and my guess is it was well priced. With real estate taxes topping 16K a year, it is silly to stay in a home we’ve out grown in order to hold out for a top buyer. Best wishes to all – the buyers and the sellers!

    by Samantha — July 5, 2011

  13. Glad to see Texas finally mentioned. We are in Wisconsin. It’s one of the 9 states in fiscal peril which to me means taxes will go up as we try to work this out. We are looking into becoming Texans during part of the year (summer in WI) to avoid state income tax. That money could be used for a cruise every other year. Not considering Florida or Arizona because it is more expensive. We love to travel and don’t want to tie up our money in an expensive state. Any suggestions to where we should be in Texas? We liked the Mission/McAllen area last winter. Felt safe and everything is new looking. Went to Progresso, Mexico and felt safe. There are a ton of people there that get their dental care in Mexico. Shocking to me but they seem happy with their care.

    by Susan — July 6, 2011

  14. Judy – regarding Florida, we moved here in January and there are no state taxes on pensions or on anything else. We love it, our cost of living is substantially less. We moved to Leesburg FL to an active adult community called Arlington Ridge. We golf 4x per week, we are very happy! Especially with the lower taxes!

    by Katie Everett — July 6, 2011

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