Q. I own my home with a small mortgage and I’m thinking of downsizing when I retire in three years. Some people say it’s not worth the bother unless I move to Florida or someplace with lower taxes. What should I think of in deciding?
— Nearing finish line
A. Congratulations for nearing the finish line.
We’re glad you’re not just making the move without thinking it through. Where you live will have a huge impact on your retirement happiness and overall financial success.
The most important things for any retiree are cash flow and expenses.
The lower your expenses, the greater your chances of not running out of money, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.
Your home will have several costs that will matter to your bottom line. You need to consider taxes, maintenance, mortgages and the opportunity cost of the money in your home.
“If your home is smaller, in theory, your maintenance should be less, taxes should be less, and potentially it frees up more money for you to spend on yourself in retirement,” Lynch said. “These things can be quite substantial, especially over 10 or 20 years.”
But separate from the money issue, you need to consider your lifestyle.
Look carefully at your current home and think long term.
For example, how many floors does your home have?
“Anything more than one floor means at some point you will need to move to a home that has no stairs,” Lynch said. “It is easy to get up and down now, but in 20 years it is not going to be easy or potentially even possible.”
You don’t want to be forced to make a move later in retirement, so keep this in mind today.
Lynch said you should also consider this: Do you want to be the old person on the block with no friends or other people your age around?
“Just using my stairs example above, let’s assume that you do move from your current home in your mid-80s into a nice senior community,” Lynch said. “Who are you going to meet? If you are at a point in your life where you are not that mobile, it will be very difficult to meet new friends and you are not going to have any fun.”
That’s another reason why moving now may be the smart choice.
Lynch said you really need to look at people 10 or 15 years older than you and see who is having fun.
“Social interaction is very important and setting this up in advance is critical in the planning,” Lynch said. “I like communities where there are a lot of similar people to me. As you get into retirement, this will become more and more important.”
Email your questions to moc.p1511541321leHye1511541321noMJN1511541321@ksA1511541321.