Retirement

Is It a Good Time to Sell and Downsize Your Home?

interior of a house - sell & downsize your home today

Many people blame the baby boomers for the housing shortage in the real estate market. According to stats, baby boomers hold the biggest share of real estate wealth in the U.S. And they do not sell their homes as they grow older.

Recently I have learned that there is approximately $8 trillion worth of home equity locked up in older people’s homes.

Housing experts agree that the baby boomers’ generation is healthier than the previous generations. That is why they do not need to move in with their kids or to a nursing home. Also, they do not want to move because they want to age in place. Most of them like their neighborhoods and their friends.

But with skyrocketing home prices, some people think that now is a good time to sell and downsize your home before the real estate market starts cooling off.

Downsizing can be the right path for many baby boomers who want to cash out their biggest asset and live out their golden years with more money in the bank.

Everyone likes the idea of making a profit by selling a big house and buying a small one. But be careful with this decision because today’s market might present some challenges.

High home prices, low inventory

For a long time, downsizing has been associated with empty nesters living in a big house with no kids.

A popular retirement planning approach is to sell a big house you raised your kids in and then go and buy a smaller less expensive house. The best part of this approach is that you can use all your home equity you accumulated over the years to pay for your life in retirement.

But in recent years, the concept of a smaller house has captured our society. Downsizing has become more attractive for many financial reasons.

Less space means less money, less maintenance, and less hassle overall. And the smaller space the easier it is to furnish and decorate. Also, you can spend the saved money on something more important such as travel, hobbies, and time with the family.

After all, a smaller space has more value not only for your wallet but for your lifestyle.

However, with inflated home prices downsizing is not as affordable or profitable as it was before. If you think about cashing in on your home’s equity and downsizing to something smaller and cheaper, you might meet some challenges.

If you decide to sell now, you will be selling at the top of the market with high home prices and low inventory. But on the flip side, you are going to spend more money for your next purchase even something smaller.

When downsizing you will be looking at the smaller homes with modest square footage. Keep in mind that there are a lot of buyers competing for this kind of purchase. Smaller homes, condos, and townhouses became very popular lately and that often leads to steep bidding wars.

In many cases that smaller home you want to buy may end up being more expensive than you have originally planned.

When you sell and downsize your home do not forget about other expenses such as real estate agent fees, attorney fees, real estate, and capital gain taxes.

Prepare to pay 5 to 6 percent of the purchase price to cover realtor agent fees, which are typically paid by the seller. Add to that an extra 2 to 4 percent of the price to cover attorney fees, transfer taxes, and other expenses called ‘closing costs’.

So, if you sell your home for $750,000, you could end up paying $37,500 in realtor fees and $15,000 minimum in closing costs. Total of $52,500 just to sell your house.

Capital gains tax is another costly part of selling your home. Per IRS rules you do not need to pay capital gains taxes on the sale of your home if the profit is less than $250,000 (for an individual) or less than $500,000 (for a couple). But if your sales proceeds are higher than these numbers you will owe to IRS as much as a 20 percent capital gains tax on the profits.

If you live in a state where homes have appreciated in value significantly over the years, it might cost you a lot in capital gains taxes. For example, after selling your home for $750,000, you will pay to IRS $50,000 capital gains tax on a $250,000 profit.

High mortgage rates

Mortgage rates have increased more than 2.5 percent since the beginning of this year. And if you are planning to finance your new home it will be significantly more expensive than it was a few months ago.

According to Freddie Mac, today’s average mortgage rate is 5.78 percent on a 30-year loan. By comparison, in 2021 a 30-year fixed rate mortgage was only 2.93 percent.

If you have a mortgage on your current home with a low-interest rate and looking to downsize and borrow money for your next home, keep in mind that the rate you can get will be much higher than your existing one.

Unless you want to pay cash for your new home, downsizing might not be worth it financially if you want to apply for a new mortgage.

If you are retired and live on a fixed income, downsizing will give you some significant savings down the road. But you have to compare it with how much interest you will pay over the time of the loan.

With the average interest rate of 5.78 percent on a 30-year loan, you will pay around $443,000 in interest costs on a $400,000 home.

Also, qualifying for a mortgage might be a problem if you are not working. Keep in mind that most of the mortgages are issued and approved based on your income and not on your assets. If you are not working, it will be harder to get financing because you cannot show the constant stream of your income.

Moving cost is growing

We all know that moving is stressful. Sorting through your belongings, packing, and cleaning can be overwhelming. And with high inflation and high gas prices, your moving costs will be expensive.

According to the latest report from the Bureau of Labor Statistics, the annual inflation rate in May 2022 was 8.6 percent. It is the highest level since 1981 as measured by the consumer price index.

In today’s world everything involved in a move will cost you more – movers, truck rentals, supplies, storage, etc. In addition to downsizing your home, you will need to downsize and replace your furniture – replacing a big sofa and club chairs with a smaller couch, a king-size bed with a queen-size bed, or a big dining table with a smaller kitchen-size set.

Do you still want to sell and downsize in today’s market?

There are still many financial reasons to sell and downsize in today’s market. And if you are getting closer to retirement, downsizing can come with lots of benefits.

If you are ready to sell on the top of the market and do not want to wait for the interest rates to settle because you will be paying cash for your next purchase, then go for it. Even with the high-interest rates but low inventory, sellers are still demanding a premium for their homes.

For example, you carry a $100,000 mortgage. If you want to sell your home for $600,000, then downsize to a $350,000 smaller home or condo, you might walk away with a nice profit.

Also, you can buy your next smaller home with cash, without having to take out a mortgage.

You still have to carefully evaluate the market where you buy your smaller home. Look at home prices, the number of listings, competition, and how long most houses sit on the market.

Downsizing your home can help you save a lot of money on housing costs. Today, rising property taxes are a result of higher home values. If you downsize from a $600,000 home to a $350,000 home in the same neighborhood, you will pay fewer taxes overall.

With a smaller home, you will also spend less money on maintenance and repairs, heating and cooling, home improvement, and decorations.

Other alternatives to downsizing

If you do not want to sell in today’s market, there are other alternatives to downsizing if you want to wait for interest rates to settle, and housing inventory to increase in the next few years.

Once you are retired, you can rent your home and move to a rental. It will allow you to avoid the high home prices and high mortgage rates today’s market comes with.

Also, if you need extra cash but do not want to sell your home, you can apply for home equity loans, HELOCs, or consider a reverse mortgage.

There are still many people who would prefer to stay in their homes and retire in place. They want to remain in their neighborhood for life. In this case, homeownership might provide several options to fund your retirement without the risk of stock market investments.

One of the options is a reverse mortgage.

If your home has gained a lot in value, it makes sense to calculate the numbers first to see if it might be cheaper to stay put and take out a reverse mortgage.

Your home will continue to appreciate in value. And by staying put you will avoid paying capital gains tax completely. With taking out a reverse mortgage, you will be able to get the cash out to pay for your living expenses in retirement.

‘A reverse mortgage is a loan available to homeowners, 62 years or older that allows them to convert part of the equity in their homes in cash’.

In simple words, as an older homeowner, you will be allowed to borrow money against the value of your current home.

What are your thoughts on selling your home in today’s market? Share your ideas with us in the comments below.

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How to Organize Your Time in Retirement

by Maggie Leave a Comment

woman reading a book on a grass - organize your time in retirement

For many people, retirement is a chance to finally do things they have always wanted to do but had to postpone before they have the freedom of retirement. You might have a vision of the ultimate retirement lifestyle of getting up at any time, no alarm clock, no morning rush, and no daily schedules, just relax and enjoy your day.

But with no direction or discipline, you will soon find out that your days and weeks will pass without doing what is meaningful. The next thing you know a few months have passed and you have no idea where the time went and what you did with your time.

A successful retirement lifestyle should consist of a mix of activities that provide physical activity, mental stimulation, and socializing with others.

If you add to this mix the household chores such as cooking, shopping, cleaning, laundry, and house maintenance your retirement life might look overloaded again. That is why you will need some form of a time management system to arrange these activities and find time for it all.

Here are a few important tips to help you organize your time in retirement.

Make a Schedule

Sit back, relax, and do nothing all day is still a dream of many future retirees.

Just remember that if you sit around watching TV or surfing the internet for a few months, your health and fitness level will deteriorate quickly.

This is why starting retirement with no plan or schedule could hurt you in a long run. There is no better way to plan for retirement than to have a good understanding of how you will spend your days and weeks.

Time management in retirement does not mean blocking every minute of your day. It is more about establishing goals and priorities and then making sure that you accomplish what you set out to do.

First, organize your activities and household chores on a daily or weekly basis.
Second, use an online calendar or a planner to keep track of your activities and tasks. Many people will have a list of things (a bucket list) they want to accomplish once they stop working. It is a good idea to spread them out over some time, rather than trying to conquer everything at once.
Lastly, make a list and set reasonable and manageable goals of when you want to have items completed. It might be helpful to divide them into categories such as this week, this month, and this year.

Find your rhythm

It can be hard to structure days in your early days of retirement. After decades of working and having your days structured from morning to evening, it is easy to get overwhelmed with so much free time on your hands.

To establish your rhythm, start your day with purpose and write down two or three things you want to get done that day.

Here is an example of a few activities to keep on your calendar:

Cleaning the house
Preparing a meal
Working in a garden
Meeting up with friends
Writing in your journal
Reading a book
Going to the gym/ taking yoga class/ working out

1. Establish your morning routine.

Your morning routine looked the same for the last 40+ years – you would wake up, do some personal hygiene, get dressed, have breakfast (or not) and go to work. Once you are retired, you need to reinvent that part of the day.

There is so much proof behind why your morning routine is important.

man preparing coffee on a table - organize your time in retirement

Your morning routine sets the tone for the day. A good routine gets you on track from the moment you wake up and puts you in the right frame of mind. If you get following a healthy routine every morning you will get a lot of optimistic energy moving around you.

Morning routine examples:

Wake up
Breathing exercise
Have a healthy breakfast
Enjoy a gourmet cup of coffee or tea
Listen to a good music
Read a book
Write your thoughts in a journal.

2. Makes your evenings purposeful.

Evenings could be the most difficult part of the day.

People usually start feeling tired from their daily chores and responsibilities. That is why it is important to make your evenings purposeful. With no discipline or direction, you will discover that you spend most of your evenings on a couch watching Netflix.

You should simply write down a few things you are going to do every evening. For example, if you like to read or write, you can schedule a daily reading or writing in your journal time from 7 to 8 pm every day. I like to cook, so I can schedule preparing a meal from 6 to 7 pm every day.

There are so many other options:

Work in a garden
Water your flowers
Take a daily evening walk after dinner
Meet with a friend
Listen to a podcast
Sit outside to watch a sunset

It is also okay to do nothing and watch TV. But you are better off spending your evenings outdoors than indoors because it will give you more energy and motivation for new things.

3. Combine structured activities with free time.

If the idea of maintaining a daily schedule does not appeal to you, you can establish a less time-based approach.

Start your mornings by writing down two or three things you want to get done that day. Then, once you have done those two or three chores, you can spend the rest of the day doing whatever you want.

You will probably end up with a mix of structured activities, free time to spend however you like, and to-do lists.

4. Limit your time watching TV.

Just do your best to limit time mindlessly watching TV or browsing the internet.

Decide how much time you will allow to do passive activities and do your best to stick to it. For example, you might allow yourself only 30-minutes every morning and every evening to check emails, Facebook, Instagram, Twitter, and any other social media channels.

Tips for a Smooth Transition to Retirement

Add something new to your life

Retirement is the ultimate time of getting out of your comfort zone and trying something new.

Most of us spend our lives dedicated to duty – building a career, raising a family, and taking care of grandchildren or parents. And unfortunately, we often put our dreams on a shelf.

But retirement is a perfect time to explore something new.

Go back to school. There are so many educational classes, both in-person and online that can help you grow your mind, meet new people, and stay relevant to the modern world.

Public universities often offer special tuition discounts for seniors. If you are not interested in getting a degree, try taking classes at a local community college. Choose a subject that you have always wanted to learn more about.

But if you want to gain more knowledge for free and from the comfort of your home, I recommend listening to podcasts on a topic you want to learn more about or even watching something on YouTube.

Engage yourself in new culture and language. Traveling is one of the most popular ways to do this. It can teach you the new and insightful things and open windows to diverse experiences.

Spend time on your hobbies and interests. Fill up your time with what makes you happy. Think of the activities you would do all day long and use your time in retirement to enjoy those activities.

4 balls of yarn - find new hobbies in retirement

If you do not have any hobbies or interests you are passionate about, try picking a new one from the list below.

Here is a list of interests and hobbies to help you think about new possibilities for retirement:

Design and remodeling
Entertaining
Cooking/ baking
Decorating and DIY projects
Organizing
Painting/ reading
Playing musical instruments
Singing/ acting
Pet care/ animals
Teaching/ mentoring
Traveling/ learning a new language
Sports/ fitness
Babysitting
Gardening
Learning new technology

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Learn how to slow down

It is important to establish a healthy balance between work and relaxation.

Once you stop working you do not need to follow your working schedule and pack your days with tasks to the brim. Being constantly busy does not mean achieving any sense of fulfillment. You do not have to be busy every minute of the day. Stop putting pressure on yourself and learn how to slow down.

I know that for some of us it is hard to relax. You might not need to set a schedule for everyday tasks. Instead, just finish a few chores when you are ready and take the rest of the day off. Be flexible and allow yourself to move activities and tasks from today’s list to tomorrow or next week. In the end, it will all get done.

The main thing to remember is that you can be more productive and energetic when you are physically and mentally fresh. So set aside enough time in your schedule for rest.

Get sufficient sleep at night.
Take breaks between tasks, especially when you are doing physical work.
When working in front of your computer, take 5 to 10 minutes breaks to stretch and move around.
Set a timer on your phone or computer to alert you when you have been online longer than a specific time. Then, shut it down.

How do you organize your time in retirement? Share your ideas in the comments below.

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How to Keep Yourself Fit for a Healthy Retirement

by Maggie Leave a Comment

man and woman in kitchen cooking-keep yourself fit for a healthy retirement

All the advances in medicine and technology have created a dramatic increase in life expectancy. People are living longer than ever, including much more years in retirement. We all hope for a happy and healthy retirement, but unfortunately, getting older comes with concerns over health.

Making an active effort to stay healthy will not only allow you to live longer but will increase your chances of having a more fulfilling and energetic retirement doing the things you love.

So how do you keep yourself fit for a healthy retirement? The best advice is to start planning for it today.

In this article, I will look at the problems related to physical, mental, and emotional health and find ways to improve each.

Find time for physical activity

Whether you are planning to retire in a few years or already retired, get moving.

We all know that exercising is important. Studies have consistently confirmed that regular exercise reduces your risk of heart disease, diabetes, stroke, and even slows down the development of dementia. So, if you want to have a healthy and active retirement, then find time for regular exercise.

Many experts argue over how much exercising is healthy. But everyone agrees that some moderate exercise is better than none. Whether it is aerobics, lifting weights and doing sit-ups, or practicing yoga and gardening, we should all get engaged in some moderate physical activity.

The important part is to find the activity you like so you will keep doing it regularly.

Do not wait until you retire or do not wait until your health starts to decline. Choose something you would enjoy and make it part of your daily routine.

Many books and YouTube videos can help you to do a workout from the comforts of your home.

15 Best Quick and Easy At-Home Workout Moves

Here is my favorite home workout on YouTube. It only takes me 30 minutes to follow the workout playlist any time I want.

Family Fitness – 30 Minutes Body Workout

If you prefer to exercise with other people, you can join a gym or take group fitness classes. But if you do not want to spend extra money on expensive personal trainers or gym membership, walking, running, or cycling outdoor will be more than enough to stay in good physical shape for years.

Explore your local walking and jogging trails. Those 30 minutes a day you need to spend walking can be done in a local park or greenway path. Leave your car at home and walk or bike to the local store, bank, or post office. Gardening or decluttering are also easy ways to keep you active and fit.

Have a healthy diet

As you age you are more likely to have problems with health linked to nutrition. That is why a healthy diet is more important than ever.

Eating healthy is similar to exercising every day. And it works better if you plan for it. Plan your meals so you will not end up snacking up on ice cream before dinner because you are hungry.

If you want to eat a healthy diet avoid too many saturated fats in meat and dairy. Healthy people usually restrict the amount of sugar and salt in their diets, and they drink lots of water and tea.

According to various studies, a diet rich in fruits and vegetables is linked to a reduced risk of obesity, diabetes, and cancer. So instead of eating fast food, you should choose to eat fresh food. For people over age 65, it is recommended to have five or more servings of fruits and vegetables every day.

For me, the Mediterranean diet works as a great inspiration. People in the Mediterranean region live longer because they follow a healthy diet rich in whole grains, vegetables, fruits, and low-fat dairy products. Their diet is low on animal products, and they prefer to cook fresh fish.

You need to make sure that you are always working on how to improve your diet by choosing foods that are good for you and cutting down on packaged food. Do not forget to shop smart and always read food labels to avoid foods high in cholesterol and saturated fat.

veggies and fish - healthy diet for retirement

I try to eat healthy every day and plan all our meals. I like to have a healthy breakfast – orange juice, oatmeal, fruit, and green tea. I try to eat less at dinner because I watch my calories and do not want to gain extra weight. I prefer to eat meat or fish during lunch. And I serve all our meals with at least one green vegetable or salad.

And the main thing, I try to go easy on sugar (chocolate and ice cream are my weakness!) and drink plenty of water with lemon.

Learn new things

Keeping yourself fit in retirement is not only related to physical activity. In general, being fit means a combination of different factors including physical fitness and mental health. Staying sharp mentally is as crucial as staying physically fit.

When you are engaged in physical activities you focus on your muscle strength training. The same kind of training should go for brain activity. To stay mentally fit you need to challenge your brain with various exercises.

One of the best ways to keep your mind young and active is by learning new things.

Here is a list of ideas:

Learn how to play a musical instrument
Start (or join) a book club
Learn how to paint
Take a pottery class
Learn how to be a photographer
Take a cooking or baking class
Write a poem
Write and publish an e-book
Learn new digital skills – open an Instagram or Twitter account.

I believe that keeping our minds sharp is an important part of prolonging the time we can enjoy in retirement.

Monitor your health

Many health issues are age-related.

Our body gets weaker as we age. Many people will experience aging issues such as heart disease, arthritis, diabetes, dementia, osteoporosis, and more. That is why regular medical check-ups are a must.

You should visit your doctor regularly and do not skip any recommended health screenings and tests. If you are a woman, you need regular tests for breast and cervical cancers. If you are a man, your doctor should help you decide about a prostate cancer test.

Keep an eye on your blood pressure and cholesterol level to avoid a heart attack or stroke.

Maintain an active social life

People who have plenty of friends and enjoy a close relationship with their families, typically live longer than people who are lonely.

When you retire, you do not just leave your job, you enter a new stage in life.

Leaving the workforce will reduce your social interaction with colleagues. Friends and neighbors might retire and move away. Death can take a spouse or close friend. Those are all sad life events because loneliness is linked to poor health and early death.

We all know that having a strong social support system helps us deal with stress.

It is important to stay involved and engaged in life, so you do not feel lonely. Being engaged in a community gives people a sense of purpose, security, and connection. It is important to have a reason to get up every morning, go out, and do things.

Find new purpose in life

If you are ready to leave the working world, think about how you will spend the 40 + hours a week you spent previously at your job.

The reality is that you may feel ready to retire, but on the other hand, you may feel nervous and doubtful.

What are you going to do with all that free time? One of the best things you can do is create a plan for your retirement.

You need to decide what will be important in your new life and how are you going to spend your days and weeks. The minute you say goodbye to coworkers you need to know what is next for you.

It is not a secret that when you feel like your life has a purpose and meaning, you will experience less stress. And with less stress comes fewer negative health effects.

Having a purpose in life makes people stay more physically active and more willing to take care of themselves.

Finding Your Purpose in Life in Retirement

Find hobbies to fill your days

I think everyone had some interests in life before they were forced to put them on a shelf during their working years. We spend our lives doing things that we have to do – career, kids, family. But retirement gives us a new opportunity to start over again.

Many retirees struggle to feel useful after they stop working which can negatively affect their health. Instead of being depressed and unhappy, refocus your energy on learning something new and more interesting than your previous job.

I believe that desire to travel the world is a big factor for people wanted to retire. Travel is important at any time in life. But travel in retirement gives you a new opportunity to explore the world, learn a new language, and use your social and communication skills.

Another big factor is a desire to complete a bucket list. Creating a bucket list is a helpful tool to set up your retirement goals or have a list of things you want to complete at least once in your life.

15 Ideas on What to Do in Retirement

Work on your relationships

Retirement can be a challenging time for relationships. When you stop working you will leave most of your friends at work behind. Sadly, many will disappear from your everyday life the day you leave.

two women on a bench - friendship in retirement

Growing older could be lonely unless you have support, love, and even friendship from your family.

Do you have a good relationship with your spouse if you are married? Do you stay connected to your children and their families? Do you spend enough time with your grandchildren?

There are many things to do together as a family. Go to the game or concert with your kids and grandkids. Consider a family vacation together. Spend all holidays and other celebration times together.

Do you stay connected with other parts of your family like your brothers or sisters? What effort do you make to stay in touch with them?

Unfortunately, many of us spend more time on Facebook, Instagram, or Twitter to stay informed and connected with former classmates or colleagues because they post often rather than spend time with people who are important to us.

I recently read that one of the greatest regrets of people who are getting closer to the end of their lives is that they didn’t spend enough time with their loved ones.

Life is short! Make sure that you spend enough time with the most important people in your life.

Takeaway

Taking care of yourself and making your physical, mental, and emotional health a top priority in retirement is the best gift you can give to yourself and those you love.

How do you keep yourself fit and healthy? Share your ideas in the comments below.

If you enjoyed reading, share this post so that others can find it, too!

5 Common Mistakes to Avoid When Choosing a Place to Retire

by Maggie Leave a Comment

old town-bridge-choosing a place to retire

The best thing about retirement that finally you can live anywhere you want. You no longer need to live closer to where your kids go to school or your work. Instead, you can move to a place with beautiful views, a better climate, a lower cost of living, or just a place you were dreaming about.

However, deciding on where to retire can be a difficult task. It will take a lot of time and effort. Unfortunately, one of the biggest mistakes people make when they choose a place to live in retirement.

You need to envision it, set up the priorities, do the research, make a list of areas, and then visit several places before you finally decide where to move in. Besides the financial issues such as cost of living and taxes, you need to consider the weather, amenities, environment, and how close you want to live to your family.

Planning to move in retirement can be exciting and stressful. However, some common mistakes can ruin even the most carefully planned retirement.

To help you make smart decisions, I came up with a list of 5 Common mistakes to avoid:

1. Not visiting enough places before deciding where you want to live.

Have you thought about your retirement priorities?

Do you like to live closer to the beach, golf course or near the mountains?
Do you want to move into an active adult community, a small town, or prefer rural areas?
Have you discussed your plans with your spouse or partner?

Every retirement website recommends doing detailed research before you commit to one place. The internet has lots of information on retirement communities, places to retire, and the cost of living there. It is a good idea to start planning early before you retire so you can avoid the costly mistake of moving around until you find the place you really like.

Start with creating a checklist of your priorities because it would help you narrow down the number of places you want to move in.

It will be smart to visit the places on your wish list if you are still working. Internet research is great, but often you need to see a place with your own eyes. Because while everything looks amazing online, a half an hour drive to the nearest grocery store can ruin the comfort of your daily life and would become a huge inconvenience.

My favorite go-to website is TopRetirements.com

This website provides you with tons of information for the best retirement communities, active adult communities, and places to retire. If you are at the beginning of your research, start with this website to get some ideas and then decide if you are ready for a visit.

When you travel, make sure to explore the town you like as a potential “best place to retire”. Drive or walk around and decide what you like or dislike about the neighborhoods. Take a tour through any active adult communities if there are any in the area.

It is always a good idea to talk to locals and ask questions about their life there. If you are planning to visit several neighborhoods do not forget to take notes so you can refer to them later. Recently I read that some people even prepare pros and cons spreadsheet while visiting retirement communities.

When you visit a place, do not spend all your time near the hotel. Walk around, visit neighborhoods to get a sense of people. For me, the ideal place to move in would be the place with:

Walkable streets
Close to shopping areas
Close to parks or green spaces
Short drive to the beach
Access to public transportation
Proximity to medical facilities

Another tip for avoiding common mistakes is to visit your favorite place during different seasons. Weather is an important factor, and you want to make sure that you like your new home in all seasons.

lake-snow-trees - choosing a place to retire

I do not like hot and humid weather, so even we want to move to Florida I cannot stay there during the summer. Because of that, we would need to have another place where we can escape the hottest months of the year.

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2. Not renting before buying a retirement home.

I am sure you heard the stories about retirees who regret that they did not live in the area before they bought their retirement home. It is so easy to get excited about the community or new development that seems to meet your dreams. But once you settled down it might be too late to realize that you miss the comfort and amenities of your old life.

It is hard to really know a place before committing to that area unless you rent it first. But if you do not want to rent a place before you buy it, make multiple visits during different seasons to get a feel of this area you will call home for a long time.

Renting a home in the neighborhood you like can help you live like a local. Also, renting make sense if you are considering a move to a new lifestyle. In retirement, we are planning to move from the suburbs to a city. It will be a huge change in lifestyle for us, so we want to test it out for a few years by renting an apartment and see if we like it there.

Renting can also be a temporary step if you are not financially ready to buy a house. More retirees are renting these days because they do not want to be in charge of maintenance or yard care.

Buying a home at any stage of life is a major purchase and not a quick decision. It costs a lot to move to a new home, so you have to plan wisely.

It is important to remember that your retirement life can last for 20 or 30 years. Therefore, you need to find a home with an understanding of your long-term needs. It is great If you healthy right now, but it might change in the future. If one of the spouses gets sick, you will want to live closer to the medical center for regular appointments rather than travel for hours to see a doctor.

The best advice is to rent before you buy because you will get fewer surprises in the future. Otherwise, it can be a costly mistake.

3. Moved to be closer to family.

Many people move to be closer to their children and grandchildren when they retire. In many cases, it is a great idea.

But the situation might reverse, and you will be chasing your children around the country if they choose to relocate. You do not want to be in situation when you move to the area and then find out that your family will be moving away.

grandma with granddaughter baking - moving closer to family in retirement

4. Not doing your due diligence before moving to a new place:

Moved to the wrong environment.

That is a common mistake for many retirees. That is why you need to make sure that the location meets all your needs before you move in.

Everyone knows that staying socially active makes you happier and healthier in retirement. But where are you going to meet new friends? Does a new place have social events, clubs, or gathering places? Is it close to a coffee shop, pool, library, or movie theater?

We live on the east coast. Here everything is close enough if we want to drive for a few hours to get to another state or town. But if we move to Texas or Arizona, I will miss the variety of New England scenery and proximity to a familiar environment. Everything will be far away if we want to have a change of scenery.

If you are planning to move to one of many retirement communities, make sure that it will be a good fit for you. I would recommend renting a unit and spend a week there. Go to the restaurant where everyone eats and see if you like the food and ambiance. Go to the games room, swim in the pool, and talk to residents about life in the community.

The best advice is to find a place that matches your lifestyle when choosing a place to retire. Hence, do not move to a rural area if you love going to museums and theaters.

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No access to good healthcare.

Keep in mind that access to good healthcare and medical facilities is a must when looking for a place to retire. When you are in your 60s and 70s, you are still active and healthy and probably need only routine doctor visits.

But as you grow older, you will need access to retirement facilities, home care providers, and transportation for people with disabilities. And you do not want to move to another place in search of better healthcare in your late 80s.

5. Not considering the design of your retirement home.

That is a common mistake for many retirees when they buy for today and not for tomorrow. You are healthy and active today, but unfortunately, your mobility will decline with age. That is why you need to consider the design of your home with the idea of how it might change in the future.

Everybody loves living in a new two-floor modern-designed home. But what happens if one of the spouses will lose mobility and will be in a wheelchair? How will you go around the stairs? It will be stressful to start looking for a single-level house while trying to sell and move out of your brand-new home.

Have you thought about if your house is accessible for your future needs?

You might not need it right now, but life can change very quickly in 10 or 15 years. It will add a lot of stress and money if you need to renovate your home later to fit your physical abilities.

The important thing to remember that if you are moving to a new place make sure that your house is a comfortable place to age. In the end, it can be expensive and difficult to remodel a place with lots of stairs, a second-floor master bedroom, tall kitchen counters, narrow doorways, and more.

Final Words

Choosing a place to retire may be one of the biggest decisions you will ever make. Hence, do not make it in a rush. Take your time and choose wisely.

But do not be discouraged by the amount of work you have to put in upfront. After all, you will benefit greatly by living and enjoying the retirement of your dreams.

What are your top retirement mistakes to avoid?

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Checklist for Retirement Planning in Your 60s

by Maggie Leave a Comment

woman making notes at table outdoor - retirement planning in 60s

When you are in your 60’s you know that your retirement is around the corner. Getting closer to the retirement date can be both exciting and stressful. Everyone wants to have a happy and comfortable retirement.

But when you have a limited number of remaining years you need to take time to understand your retirement picture. You do not want to be one of those people who want to retire, but when that day finally arrives, they just let it happen. You want to be smart and invest time in planning and preparing for a big day. Before you take the plunge make sure that you are ready!

Here is a checklist of helpful steps to take for people in their 60s who plan to retire in the next 5 to 7 years:

1). Understand your retirement lifestyle.

Before talking about finances, I want you to answer the following questions:

Where do I want to live in retirement?
What do I want to do in retirement?

Answering these questions is important because it will determine the cost of your retirement. Most people already have a vision of their next phase of life. But not everyone goes into the details of planning it.

Think about retirement in stages. Your early years of retirement are going to be the most active. Then you will settle down and face a slowdown in your activities. Your retirement lifestyle will determine the cost of your retirement.

For example, I love to travel and have a long bucket list of places I want to see and countries to visit. plan on traveling the world when we retire. Once we retire, we are planning to spend half a year abroad traveling. That will take a significant amount of money to cover our travel expenses. But we already have determined a retirement budget for the first 5 years of our travels. Eventually, we will slow down and start spending more time at home. Going on one or two big trips a year will be all we can afford to pay for the cost of traveling.

Being in your 60s is an ideal time to look at your retirement plans. You are close enough to retirement to have a realistic idea of how you want to spend your golden years.

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2). Finalize your income and expenses.

Once you have a picture of your retirement lifestyle you need to finalize your financial assets and see if you have enough money saved to pay for this life.

Income

Financial experts suggest that you need about 80 percent of your pre-retirement income to maintain the same standard of living in retirement. Suppose my current annual income is $60,000. Multiply that number by 80 percent ($60,000 X 0.8 = $48,000). So, I will need around $48,000 in retirement to live the way I do today.

This number is a good rule of thumb if you do not plan on making any major budget changes when retire. However, not all retirees spend less in retirement. And if I have expensive hobbies like traveling, I will need a higher number.

Now when you are close to retirement, the rule of thumb “80 percent of pre-retirement income” should be replaced with real numbers. This number should include your daily living expenses and the money you want to spend on hobbies and activities.

Sources of retirement income:

When you are working you probably have a single employer and a single source of income – your salary. In retirement, everyone has different sources of income. As a retiree, you receive income from multiple sources:

Guaranteed income:

Social Security
Pension
Annuity – a guaranteed income you must purchase yourself

Other sources of income:

Part-time job
Rental income
Business
Dividends

Income from your retirement funds:

Tax-deferred accounts – 401(k), IRA
Tax-free – Roth IRA, Roth 401(k)
Taxable investment accounts
Taxable bank checking and savings accounts

While working, you receive a paycheck regularly – probably every two weeks. When you retire, you might receive income monthly, quarterly, annually, and even irregularly. Getting a clear picture of your retirement income should help to make sure that you have enough money to cover all your living expenses.

Expenses

I know nobody likes to read about budgeting. But the best advice is to create an estimated retirement budget based on your current and future expenses. You might have a general idea of what you spend now. But you will be better prepared if you have a clear picture of your expenses now and how that might change in the future.

When you retire you do not need a lot of things that you did when you were working. The costs of commute, take-out lunches, and business clothes will go down. But you will start spending more money on travel, hobbies, and activities. And your medical expenses will increase with time.

lake-boats-flowers-retirement planning and retirement expenses

It is important to include big-ticket expenses into the retirement budget as well. Paying for a wedding, buying a new car or a lake house will require a significant amount of money withdrawn from your retirement funds.

If you do not know how to create a retirement budget or organize your finances for retirement, I recommend reading my articles:

3). Minimize your debt.

When you are in your 60s make it a goal to pay off your credit card debt, student loans, car loans, home equity loans, and any personal loans before your retirement date. Do everything you can to retire debt-free and even pay off your mortgage if possible.

When you stop working and start living on a fixed income you will need to stretch those retirement dollars as far as you can. How can you enjoy your retirement if you must spend a portion of your retirement income to make mortgage or debt payments each month?

Credit cards

If you are carrying a high-rate credit card debt you are putting a lot of pressure on your finances. There are two most popular debt payment strategies – the snowball strategy and the avalanche strategy.

The snowball strategy works by paying off the credit card with the smallest balance and then working your way up until all credit card debt is settled. The avalanche strategy allows you to pay off your highest interest rate debt first and then work it down. I recommend focusing on your highest-interest debt first because the longer it takes you to pay it off, the more money you will pay towards interest.

And if you can help it, do not add any more debt to the pile while paying off old debts.

Over the years Roman and I have accumulated $170,000 in debt – car loans, student loans, construction loans, and medical expenses. It took us 21 years (from 1999 to 2020) to pay them off. The only debt we have left is the mortgage. We try to increase our payments towards the principal. Recently, we refinanced but I do not think we will finish paying it off in full before we retire.

Mortgage

When you are in your 60s, one of the smartest things you can do is to pay off your mortgage before you retire. A mortgage-free retirement is usually best because you can spend more money on the fun stuff. Retirees often have to withdraw money from their retirement funds to cover their mortgage payments.

Unfortunately, those withdrawals typically trigger more taxes. That is why it is better to pay down your mortgage while you are still working, so you can keep your housing expenses low.

Look at your mortgage balance and try to figure out how much extra you can put toward your mortgage each month. Those extra payments can reduce your principal balance significantly. Also, instead of sticking with the traditional monthly payments, you can start making bi-weekly mortgage payments. In addition to that look into refinancing your mortgage to get a lower rate and to reduce your monthly payments.

However, for many people paying off the house is not financially possible. When a payoff is not feasible, you should reduce mortgage debt by refinancing it. We recently refinanced our mortgage with AmeriSave Mortgage Corporation at 2.5 percent. It helps to lower our monthly payments and save us $500 a month.

When you are in your 60s, getting out of debt should be your priority. At this age, you have to make the most of your remaining years in the workforce to increase your retirement savings within the next 5 to 7 years.

I recommend reading my article:

How to Pay Off Debt Before You Retire

4). Maximize your retirement savings.

When you are only a few years away from retirement, being short on retirement savings can be problematic. The best option is to start spending less so you can put more money into your retirement savings.

Whenever possible, increase your retirement contributions up to the maximum allowed in retirement plans such as 401(k), IRA, and Roth IRA.

The 2021 contribution limits are:

$19,500 for 401(k) retirement plans. And if you are age 50 or older, the catch-up contribution is an additional $6,500. So, you can save a total of $26,000.
$6,000 combined contribution for traditional IRA and Roth IRA. And the catch-up contribution for people age 50 or older is $1,000. So, you can save up to $7,000 with your pre-tax money (IRA) and after-tax money (Roth IRA).

When you are getting closer to retirement, maximizing your traditional 401(k) and IRA accounts is important but not always enough. While you are still working you can make it a priority to save even more money in your Roth IRA account, emergency fund, and perhaps taxable investment funds if possible.

Another way to increase your retirement savings is to work longer. The goal is to make the most of your working years. You need to maximize the time you have left. Earning an income for a few more years could improve your financial security in retirement.

I am sure you may not like to hear this, but the fastest way to save more money for retirement is to cut your expenses. If you start practicing how to curb your spending and live on less money today, it will make your life easier in retirement.

Many people in their 60s enjoy the life of empty nesters. When the kids are gone, they start spending more on luxuries. It is easy to get used to a luxurious lifestyle, start spending more and saving less. However, it will be tricky to save money and even to retire if you let your spending get out of control. After all, the less you spend the more you save.

5). What is your retirement income plan?

After decades of earning and saving money for retirement, you need to shift gears and start spending what you have saved. And being just a few years away from retirement date is the best time to find out how much income you can pull from your nest egg.

There are three sources of your retirement income:

Social Security
Pension income (if you are the lucky one)
Income from your investments and savings

When you stop working you need money to pay for your retirement expenses. After you retire, you will receive Social Security payments. But that will be only a portion of your retirement income. You will start receiving payouts from your retirement savings.

But you will have to figure out a strategy of how to withdraw money from your retirement funds. This withdrawal strategy should give you the income you need from your first month of retirement through your 80s or 90s.

The “4% rule” is a well-known rule of thumb and a good starting point. According to this rule, you can withdraw 4% of your account balance.

For example, if you have $500,000 saved in retirement funds you can withdraw 4% of that amount – $20,000 in the first year of your retirement. You can adjust that number every year for inflation but following this rule should help you not to run out of money for at least 30 years.

Though, you have to be aware that there are a few problems associated with following this rule:

Return risk – the risk of earning smaller returns than it was in the past.
Longevity risk – the risk of living a long time and running out of money at the end of your life.
Series of return risks – the risk of a market downturn during your early withdrawal phase.

Even it is not perfect, the 4% rule is a good starting point you can adjust with time.

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6). Decide how to cover medical expenses.

You will become eligible for Medicare at the age of 65. If you plan to retire before age 65 you will need to find a separate plan to cover your medical expenses.

Your health insurance provided by your employer ends when you stop working. Even though your current employer promise to cover your health insurance in retirement does not mean they will not change their mind in the future or reduce coverage significantly. Thus, you will need to find and buy your health insurance coverage. Individual health insurance is expensive and could cost more than $1,000 a month. Make sure to shop around for the best prices.

Even being eligible for Medicare brings its own set of challenges because it does not cover all medical expenses. Medicare does not cover premiums, deductibles, co-pays for doctor visits, dental and vision care, long-term care, personal care, and other expenses. This means you need to include healthcare costs in your retirement budget.

7). Protect yourself and those you love.

Have you thought about how to protect yourself as you age and how to help your family care for you if you need it? When the time comes that you need assistance who will manage your finances, your medical care, and your regular day-to-day life? I understand that these are difficult topics to discuss. But it is a part of reality to grow old. And if you love your family you will plan for it, so your loved ones will not struggle and may have to scramble to care for you.

I write often in my articles about the cost of medical expenses in retirement. I want to remind my readers that healthcare is the second biggest expense in retirement after housing and you need to plan for it. Medicare is not free. It does not cover all your medical expenses and does not pay for long-term care.

Long-term care insurance is the most recommended way of planning for future expenses. It will cover nursing homes, assisted living facilities, and in-home care. It will help you not to be a financial burden on your family if that time comes. And you do not want to leave your husband or wife with nothing because the entire nest egg was used up taking care of you.

8). Think of tax strategies.

In retirement, we still need to pay taxes, but not all sources of income are taxed the same.

American dollars on a table - prepare tax strategy in your 60s

Withdrawals from tax-deferred accounts such as 401(k) plans and traditional IRAs will be taxed as an ordinary income. Withdrawals from Roth IRAs and Roth 401(k) plans will be tax-free. If you want to withdraw money from taxable investment accounts, you will have to pay capital gains taxes.

In addition to taxes, you need to remember about required minimum distributions (RMD). You will face this requirement when you reach the age of 72. By the US tax law, you are required to start taking withdrawals from your retirement accounts such as 401(k) and IRA (excluding Roth IRAs). The amount you must withdraw will be determined by the IRS. If you have more than one retirement account, you can withdraw money from each account or total RMD from just one account.

It is important to remember that your RMD withdrawals might push you into a higher tax bracket.

Think about what tax strategies will work for you the best. If it makes more sense, you can roll your assets into Roth IRA before you reach RMD age. Another option is to start taking withdrawals from your retirement accounts before RMD kicks in so you would not face the sudden jump in taxes.

9). Reallocate your investments.

The last few years have been volatile years for financial markets. Many people pulled money out of the stock market. When you are close to your retirement date is tempting to stay away from stocks to reduce the risk of losing money in your retirement funds.

But keep in mind that stocks provide growth. And investing in growth is important at this stage of life. If you retire at 65 and spend 20 to 30 years in retirement, you need to have enough growth to make your money last that long.

Put it on your checklist to review your asset allocation and make sure your portfolio is diversified and invested for growth. What I am suggesting is to have a balanced mix of stocks, bonds, mutual funds, and other assets that fits your retirement goals.

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Final Words

Your 60s is a decade full of transitions. Perhaps your kids are out of the house, and you are thinking about downsizing. Perhaps you would like to relocate to a warmer climate. Medicare will kick in at 65 and you may also find yourself ready to leave the full-time job that defined so much of your daily life. Somehow you have to navigate the various transitions in this new period of your life.

Regardless of how you plan the transition to retirement, your most precious asset at this stage of life is your attitude. How you envision your future is everything. A positive attitude will carry you forward into the future and your golden years.

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