One of the most complicated aspects of retirement is planning how and where to live. In the past, many people simply focused on building as much equity in their home as possible so that the home could be sold to finance a move in retirement. However, in today’s real estate market, this traditional plan is often no longer viable. With about a quarter of the country’s mortgaged homes currently underwater (this means that more is owed on the property than the home is worth) and property values still falling in many areas of the country, counting on equity in a home – or on your ability to sell at will – is a very uncertain and unpredictable mode of housing retirement planning. Instead, most retirement planners are recommending additional savings in order to insure that you can live in a property that fits your needs and your budget during retirement.

In order to get a clear idea of what your housing budget will be during retirement and how much it will cost you to get there, you need to go ahead and do some homework. For starters, determine whether or not you wish to move during retirement. This decision process should not only include whether you will want to move when you retire, but also whether the location of your home or its construction could make it necessary for you to move. For example, if you live in a three-story townhome and already have knee problems, you need to consider that a ranch-style home might be a better retirement option. Also, if the climate in your area is extremely cold in the winter, this could create a problem as you age. Also, many people simply wish to live in smaller homes once they are retired, so you will need to factor this in as well. Once you have evaluated these issues, try to establish what type of initial moving outlay you will have (if you plan to move) and what type of payments you will likely be making once you have made your move.

Next, evaluate the housing market in your target area. If retirement is still 10 or 20 years down the road for you, this is certainly an exercise in speculation. Do the best you can, though, to get an idea of how much you might be paying in rent or on a mortgage and what type of down payment you should expect to make. If you plan to rent, look at rental rate predictions nationally and for your specific area. These will help you determine what rates will be when you do make the move and help you plan for the monthly expenditure. If you are planning to buy, look at current housing prices and appreciation trends in the area. Also, remember that many federal entities are recommending that lenders require 20 percent down payments on new property purchases. While this suggestion is unpopular, many analysts do predict that sometime in the next decade these types of regulations are likely to go into effect. You may need substantially more for a down payment when you retire than you would for an identical property in today’s market.

Finally, consider when you plan to retire and your other retirement plans that may already be in place. If you plan to retire in the next five years, for example, you may need to plan more aggressively than if you have 15 or 25 years to work on your options. Talk to a financial planner and to your family – particularly your spouse – about how you want to live during retirement, then identify options that are clearly compatible with your desires. Once you have a firm destination in place when it comes to retirement and housing planning, you will be better able to make those goals a reality in time for a happy, productive retirement.

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