Baby boomers are retiring in record numbers, and as they do, they are redefining retirement living. After achieving the dream of owning a family home, many retirees are deciding that downsizing to a smaller place makes more sense. If this is the path you’re on, or you have a senior loved one who is, there’s one big question: What to do with your family home? The obvious answer is to sell it, but that may not be your only choice or even the best choice. Selling your family home is an emotional step, and adult children may or may not be on board. If you decide not to sell immediately, you may want to rent it out or simply keep it in the family.
Do You Need Money for Assisted Living?
While this is certainly an emotional decision, it ultimately comes down to how it impacts you financially. You have to cover the costs of renting or buying a new home, or moving into assisted living if that’s your plan. If you’re downsizing because you’re having a harder time living on your own, finding an assisted living community may be the right move. While some seniors can live safely and happily on their own, US News explains why assisted living is beneficial for those who need extra help on a daily basis. These centers provide help with things like meals and managing your medications, but they also give you a good deal of independence in an apartment-style setting. If you’re thinking about this option, we suggest searching online before visiting a few centers to get a feel for the features you want.
Make sure you go into your search with a budget in mind too. The median cost of assisted living in California is $54,000 per year, but of course, this cost will vary depending on factors like your location and what amenities you’re looking for. Some people who move to assisted living will sell their homes to pay for it, but another option could be to rent out your home. Keeping your home as a rental is a way to generate income on an ongoing basis, which you can use to pay for assisted living. You also continue building equity in your home.
The Costs and Care of Owning a Home
Continuing to build wealth through homeownership can benefit all seniors, even if assisted living isn’t your next move. However, before deciding to keep your home, make sure you think about all of the costs and care involved. Even if your mortgage is paid off, don’t forget about the other ongoing costs of owning a home, including maintenance, major repairs, and taxes. There’s also the question of who is going to take care of these tasks. If you can’t or don’t want to do it, you’ll need to add in the cost of hiring someone. There is also the potential for rental income. If you run the numbers and determine that rental income will cover the expenses of maintaining the home, then keeping it as a rental may be worthwhile.
Short-Term Vs. Long-Term Needs
Another essential factor to consider is whether you need the cash from selling your home now or whether you can wait to access that equity later on. As Investopedia explains, selling your home frees up a large chunk of money for the short-term, and if you’re buying a new home, you may need this money now. If you haven’t started drawing Social Security, you should also consider that the profit from selling your home may allow you to delay the withdrawal of benefits, giving you access to the highest benefit amount when you do start withdrawing.
Getting ready to downsize is a major life change for anyone. It’s also the perfect time to start thinking about your long-term needs. Your current home is a huge financial asset, and what you decide to do with it can make all the difference in how you fund this next step, as well as whatever you need on down the road.
Article by: Jim Vogel – Photo credit: Pixabay