Buying retirement home early can be risky proposition

It’s OK to purchase a place to retire if your final paycheck is only a few months away, but it’s a different story if you don’t plan to move for several years.

Q. We live in the Midwest, but we plan to sell our home and move to Florida or Hawaii when we retire about five years from now. We know that home prices in both of those states are rising quickly, so we have been thinking about buying our future retirement home now (at today’s prices) and renting it out to tenants until we leave our respective jobs in 2022 or ’23. What do you think of this idea?

A. Buying your future retirement home now may seem tempting, but it’s an idea that is also fraught with risks.

Sure, prices in many retirement hot spots are soaring today. But there’s no guarantee that they’ll keep climbing, especially over the next five or six years before you and your spouse expect to quit working.

You would kick yourself if you bought the new house for top dollar now, only to find that the historic rise-and-fall cycle of real estate values put the property at the bottom spoke of the wheel when you’re finally ready to move.

In addition, because your proposed retirement home would be hundreds — or even thousands — of miles from your current house, you would need to hire a professional management company to find a tenant and handle day-to-day chores because you would be too far away to manage the property yourself. Management companies typically charge 10 or even 20 percent of a property’s gross rental income, which would cut deeply into your bottom line.

Perhaps the biggest issue, though, is that a lot of personal things could happen between today and your expected retirement date in five or six years. You or your spouse might decide to work longer, become sick or disabled, or simply decide to stay in your current home because you don’t want to leave relatives or longtime friends behind.

Those are just a few of the “what ifs?” that could drastically alter your future housing plans.

I wouldn’t object to your idea if your retirement date was just six months or a year away. But you and your spouse don’t expect to stop working at least a half decade from now, so buying a retirement home in a faraway place today just seems too risky.

REAL ESTATE TRIVIA

An analysis of U.S. Census Bureau statistics conducted by the nonpartisan Pew Research Center found that more than 19 percent of sunny Florida’s roughly 21 million residents are 65 years of age or older, the highest percentage in the nation. Chilly Alaska had the lowest, at about 9.5 percent.

Q. We bought our first home last spring. We filed our federal tax return a few weeks ago, and our fat deductions for mortgage interest and the like are earning us a big refund. How long will it take for the check to arrive?

A. The Internal Revenue Service recently stated that about 90 percent of all refunds are issued within 21 days after a completed return is received, so your check should be in your mailbox soon.

The fastest and easiest way to check the status of your refund is to visit the agency’s website, www.irs.gov, and click the “Where’s My Refund?” link on the right-hand side of the home page. Folks who don’t have access to the internet can get the information by calling the IRS at 800-829-1954.

Either way, you’ll get the update after providing your Social Security or Tax ID number, your filing status and the exact amount of the refund you are owed.

Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.