Retire without Making These 5 Real Estate Mistakes

Retirement is a big step in life. When we decide to retire, a whole host of decisions need to be made. What will we do with our time? How will we manage our finances? And, of course, are we going to move somewhere more fitting to our means? Many retirees consider downsizing or relocating to a new community or even renovating their existing property for better accessibility as they get older. And as with any group of people, retirees are also prone to making a couple of real estate mistakes. Larry Luxenberg who is a managing partner with Lexington Avenue Capital Management said, “real estate is usually one of the biggest assets retirees have, but it’s the area with the most emotional attachment—and a place where it’s very easy to mess up.”

Don’t let these mistakes trip up your transition into retiredom.

1. Waiting to downsize

Big homes are big responsibilities, and require more work and more money. The longer it takes for you to move into a place that better fits what you need, the more time, money, and effort is wasted. Cutting down on bills and taxes are good motivators to consider when deciding whether or not you want to move once you’ve hit retirement.

2. Downsizing, but not investing the money you save

If your downsizing has left you with some extra cash — not all moves do, some smaller houses may still come with a hefty price tag — Luxenberg says that its crucial to invest it. “People have a tendency to look at that as found money,” spending it quickly, he said. What you do with it is an individual decision says Scott Bishop, director of financial planning with STA Wealth Advisors, in Houston. Some retirees use this extra money for living expenses so that they don’t have to jump right into retirement funds — this also allows them to wait to claim their Social Security, which comes with larger benefits farther down the road. Bishop also suggests considering tax implications when deciding which funds to access first.

3. Relocating without the research

Most people think of the typical beach house in Florida when they think of retirement. But don’t let stereotypes mislead you. As with any move, plenty of research is required. Ask me for connections and information about your preferred locale. Bishop also suggests checking the area for doctors that line up with your healthcare. “As you age, even if you’re healthy now, you may need to visit hospitals more frequently,” Bishop said

4. Juggling two homes

Thomas Scanlon, an adviser with Raymond James in Manchester, Connecticut, says that two homes (vacation or otherwise) is a drain on your finances. He suggests that if you insist on keeping a vacation home, that both properties are small with manageable running costs. “My own experience owning a house is that everything costs more than anticipated beforehand,” Luxenberg said in regards to deciding to buy a vacation home later in life.

5. Holding on to a mortgage in retirement

While mortgages are helpful when employed, they are an added cost to Social Security, IRA distributions, and savings and portfolios. Not carrying a mortgage can mean keeping expenses down and delaying that first dip into retirement funds. When you wait until retirement age, your Social Security distributions are larger. Lastly, Scanlon points out that taking out a mortgage on your downsized home may mean you’re paying into your late 80′s and 90′s.

To recap, retirees delay that first move into a downsized home, and when they do move, they don’t invest those saved funds wisely; they may also relocate without really looking into the new area, juggle two homes, or still have a mortgage after they’ve retired. Make sure when you start your retirement plans, you keep potential potholes like these in mind and you can always discuss them with me for helpful advise.

Article Citation: Hoak, Amy. (October 24, 2014). 5 real estate mistakes retirees make. Yahoo! Finance. Retrieved November 18, 2014 from: https://finance.yahoo.com/news/5-real-estate-mistakes-retirees-090019453.html.

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