SHOW NOTES: 2019-06-27 MiM

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Last Week’s Question of the Week: Name the website where you can check your social security benefit at?


HOST: I’m sure as your clients look at retirement, or once they settle into retirement they are probably wondering if they should or should not sell the family home?

KLAAS FINANCIAL: Yes, so for many of our clients they are perhaps not questioning that immediately when they retire, but probably as they approach 70 years old, they are taking a closer look at next steps for their housing. Many retirees have lived in their current homes for 25-40 years and the thought of relocating or actually downsizing either scares them or simply exhausts them mentally.

Should they sell their house, move to a warmer climate, perhaps downsize to a condo for a few years, and then eventually move into an active retirement community? All are valid questions that we will all have as we enter into our next seasons of life.

The fact is that people tend to get attached to their homes, but you will need to begin to look OBJECTIVELY at YOUR SITUATION.

Investigating your future housing needs and alternatives should be among your highest priorities done well in advance of your actual need so that you can plan the lifestyle that you want to maintain. Also asking yourself, how many moves do they have left in you?

Some considerations:

  1. First of all, remember that everyone (perhaps your adult children) have their own ideas about where a perfect place for YOU or YOU and YOUR PARTNER might be to retire, but ultimately you need to do your due diligence. Many people have children and grandchildren that perhaps have set roots in a different part of the country and you may wish to be closer to them, or perhaps equidistant between two or more children. Going to little league games for the grandchildren may be high on the list. We have clients that have moved in retirement to Idaho and Montana to live right down the street from their kids and grandkids.
  2. TAXATION: Looking at the future taxation for your retirement accounts and pensions is important. Remember that some states are more favorable with their taxation than others. You must remember that low tax for retirees isn’t always the same for working-age people.
  3. There are currently nine U.S. states with no income tax:  Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no income tax — an important consideration for retirees. But remember, these states often make up for that with other, higher, taxes, most notably, higher sales and real estate levies, which can hit seniors harder.
  4. COST OF LIVING: Review the true cost of living comparisons. Moving to a place where the cost of living is better for you so that it can actually give a boost to your nest egg may be important.

HOST: What about weather? Should that be a consideration? And where are retirees actually moving?

KLAAS FINANCIAL: Yes, weather is a consideration. Especially for those of us in the Midwest who feel like we just finished winter a few short weeks ago. Perhaps we loved the seasons in our working years, but as we look forward to being more active into our retirement years, weather might help us decide a new locale.

Health conditions may also actually help dictate this for you. People with arthritis or asthma find that they often do better where the weather is perhaps warmer and dryer. Other considerations of weather may be fear of slipping on ice which is a real concern as we age.

The ideal retirement spot should also have all the recreational activities you’ve been longing for…perhaps a few lakes for fishing, outdoor trails for biking, hiking and walking or being close to more golfing. We find that many of our retirees are looking at more three-season climates such as Tennessee, Texas or the Carolinas as being nice options.

Or, if you have been active most of your life, you may wish to consider being a snowbird, keeping your current home, and perhaps renting in a more climate friendly location during the winters.

Where are people moving? For the third straight year SmartAsset has analyzed migration data from the U.S. Census Bureau to find the top places where retirees are moving, specifically comparing the number of retirees immigrating into a city and compared it to the number of retirees emigrating from a city.

The top four states where retirees are moving remains unchanged from last year’s study: Florida, Arizona, North Carolina and South Carolina. In 2018, 84,600 more retirees moved to Florida than left. Arizona which took second had about 28,600, North Carolina received about 15,600 and South Carolina received a net influx of about 8,500 retirees.

HOST: Do many retirees really downsize?

KLAAS FINANCIAL: According to data from TD Ameritrade in 2018, an estimated 42% of Americans plan to downsize in retirement, which can allow your money to last longer which many people express as a concern.

Why downsize in retirement?

  • SAVING $$: Even if you own your home outright by the time you retire, downsizing to a smaller space can still save quite a bit. Remember, other than healthcare, housing will likely be your single greatest monthly expense as a senior, so reducing it as much as possible could help your monthly budget.
  • For one thing, it costs less money to heat and cool a smaller space than a larger one. If you’re used to spending $250 a month on utilizes for a 2,000-square-foot home, downsizing to 1,000 square feet won’t necessarily cut that bill in half — but you might reduce it by a third, which will help.
  • It stands to reason that maintaining a smaller space is easier and more cost-effective than maintaining a larger one. The typical homeowner spends 1% to 4% of his or her property’s value on upkeep per year, but if you downsize from a $300,000 home to a $150,000 home, you might see your maintenance costs shrink as a result.

HOST: So how do we actually go about making the decision to change our housing? How can we be sure that it is the right decision?

KLAAS FINANCIAL: This really IS a process. Before you can make a good decision, you really need to evaluate your current situation and compare it to what you think you will need in the future. The following are some real questions that you can begin with to help you begin to assess your current situation and begin to explore your future needs.

  • First, how many bedrooms do you have now? (you raised your family with 4) but how many do you WANT, or really NEED?
  • Same question for bathrooms? What do I have now? What will I need?
  • How many floors are in my house? Do I want or need this in the future?
  • Do I have a basement? Do I NEED one? I store a lot in there…where would all that STUFF go?
  • Do I have a 3-car garage? Will I still need a garage for 3 cars?
  • Do I have a big yard that takes a day to mow? Do I WANT or need that in the future?
  • Do I have a pet? Will I need a place for a pet in the future?

HOST: What about that network of professional services you have likely established like doctors?

KLAAS FINANCIAL: Great question. Again, you need to ask:

  • Am I near doctors now and health care facilities? Do I want to be? You have likely become accustomed to your own network of doctors, hairdresser, financial advisor etc? Are you able and willing to re-establish a new network of these people or still use their services from afar?
  • Am I near shopping facilities now? Do I want to be?
  • Are there social and cultural activities easily accessible? Is this important to me? Making sure that your new location is conducive to the hobbies you enjoy, or offerings for mental stimulation, or places to volunteering is important for your mental and physical health.
  • Is transportation accessible to me?
  • Am I close to family? Do I want to be?
  • What are your current responsibilities in your present home…such as yard work etc? Which responsibilities do you want to be relieved from?
  • Finally, financial considerations on your current home? Is it paid off or is it too expensive to maintain? Or do I need or want to free up equity from my house?

  • HOST: What are some other alternatives I should consider if I am thinking of moving?

    KLAAS FINANCIAL: Move to a smaller home or condo, just watch out on HOA costs. Share living space/move in with a relative. Rent an apartment. Consider a retirement community. Or ultimately, at the end of the day you may decide that you don’t need or wish to move at all!

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    Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.