Should you buy your retirement home now?

Q

: You recently gave good advice to a woman whose children were hounding her about selling her house and moving to a retirement facility shortly after the poor lady became a widow. You wisely told her to wait at least 18 months before making such a weighty decision.

Years ago, after watching my parents struggle through a similar situation, my husband and I decided to make the choice about where to live out our days early on so we could thoroughly explore our future residence before it became a decision made under stress. We have our “future home” and are renting it to pay off the mortgage. If all goes according to plan, when we retire it will be paid off and the sale of our current home along with our retirement plans will easily pay all our living expenses. Maybe you should encourage your readers to consider this strategy?

A

: Bravo! Excellent planning and yes, this is a great strategy! In looking at retirement, there are a number of things we should consider. I like to start with leisure activities. Notice I say “activity?” Staying active and engaged throughout our lives is important in many ways!

If you love to golf, for instance, finding a retirement facility on or near good courses will not only provide exercise and a healthful environment but joining a club provides the opportunity to socialize and meet new friends. Similarly, if you enjoy tennis or pickleball, finding a facility that supports these activities can be key. Exercise, socialization and sunshine are extremely important for healthy living. Not into golf or tennis? Consider joining a service club such as Rotary or Lions. While the chances for exercise are limited, the opportunities to socialize and volunteer can be extensive.

If you need to finance the new purchase, undertaking the financing piece before you retire will make it easier to qualify for a good loan. At present, rates

have never been lower so it could be a good time to act. You may consider getting a line of credit on your current home to finance the new place and later refinance at a lower rate. This way, you are a “cash” buyer so when making an offer on the new place you can close quickly — all this helps get you the best deal possible on your new purchase.

Using qualified retirement funds to purchase rather than borrowing is also an option. Just remember to consider the income tax consequences of withdrawing from your IRA. Speaking of taxes, if the new home will be in a state other than your own, be sure you understand the income, property and sales taxes of that state and build them into your financial plan.

Some retirement facilities have restrictions on renting out your place when not residing in it. Be sure you can rent if you plan to use that income to pay off the mortgage, as you have done. Other costs to consider include expenses associated with moving to your new home, travel expenses to see the kids and grandkids and, of course, an emergency fund for unexpected expenses. It is a great plan and just knowing that you have that part of life squared away should provide you with significant peace of mind — always a benefit to our

Liza Horvath has over 30 years experience in the estate planning and trust fields and is a Licensed Professional Fiduciary. Liza currently serves as president of Monterey Trust Management. This is not intended to be legal or tax advice. If you have a question, call (831)6465262 or email liza@montereytrust.com