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Going into retirement you could earn an extra $100,000 – or more

BusinessReal EstateGoing into retirement you could earn an extra $100,000 – or more
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Getting ahead in retirement can open up a huge pot of money to help you through your later working years.

In 2019, the typical homeowner age 60 or older who sold their home and moved to an affordable housing market tapped nearly $100,000 in home equity, according to the New York Times. research Published by Vanguard Group.

Top 10 Celebrityth Vanguard found that Percentile made even more money – $347,000 – using the “retire and relocate” strategy.

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The report estimates that a quarter of all American retirees have “the ability to grow their retirement funds” by moving to a cheaper market.

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While the maneuver isn’t right for everyone, it can provide financial support to many retirees, especially those who are running out of money in old age.

The average homeowner age 60 and older has $223,000 in retirement savings, the report said — an amount that may not be enough for a retirement that lasts three or more decades.

“It’s definitely part of the conversation when you look at overall wealth planning,” said Lauren Wyber, a certified financial planner and senior wealth advisor at Vanguard. Real estate is “one arm of their nest egg.”

Wyber said homeowners who relocate typically find that the cost of living is lower in their new area, which means they may have the added benefit of lowering their overall expenses.

However, it’s not necessarily what Americans should use as the linchpin of their retirement savings strategy.

The amount a retiree would eventually receive from selling their home and moving is impossible to gauge because of all the unknowns—among them, how the value of one’s primary residence will appreciate or depreciate, and so on for potential housing markets around the country. For.

Retirees moving from a primary residence to the West Coast (Washington state, Oregon and California) and the Northeast are generally in the best position to unlock home equity when they retire and relocate due to relatively high home prices in those areas. are in found. Those in Nevada, Utah, Colorado, Arizona and Florida are also “well positioned,” according to the report.

In contrast, states in the Midwest (such as South Dakota and Nebraska) and the South (Mississippi and Alabama) have weaker housing markets, Vanguard said. If retirees move elsewhere, they may lose rather than gain money on the transaction.

Consider other financial factors

Vitthaya Prasongsin | moments | Getty Images

Its important to measure There are also other financial factors, such as transportation costs; taxes (property, income and property); and home insurance costs.

If you sell a $1 million home in high-cost areas like Connecticut, New York and California, you can move a few states and get roughly the same home for $500,000, said Ted Jenkin, a CFP based in Atlanta. Said.

Plus, your real estate taxes are often less, as are costs for home insurance, utilities and other property maintenance, said Jenkin, CEO of Oxygen Financial and a member of CNBC’s advisory council.

,[However]If you’re looking to move from a major metro area in one state to another, and your housing costs will halve, it’s generally not going to happen,” Jenkin said.

There are also ways to tap home equity without moving – such as a reverse mortgage Or home equity line of creditFor example.

But the decision isn’t purely financial, Jenkin said.

It is important for retirees to consider their social relationships and activities in retirement. For example: would they be happy if they moved away from family and friends? Will they be happy to go somewhere if it means less desirable weather? Do they envision themselves playing golf or skiing all year round? If you get sick, who will take care of you or change the lightbulb?

Before buying a home in a new area, Jenkin advises retirees to rent one for one, two or three months to see if they’ll enjoy living there. Just because someone enjoyed visiting a place for a week doesn’t mean they’ll enjoy permanent residence there, he said.

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