Income usually drops in retirement, and expenses may decline somewhat – but they rarely fall as much as retirees would like them to. Housing expenses are one of those costs that may not decline by much. Utility expenses will not drop just because your income fell, and in fact they may actually increase because you will be home more and may need to run the air conditioning or heat more often.
How to keep retirement expenses in check: downsize
A smaller home could help lower costs. Utilities are generally more expensive for larger homes. Downsizing is a strategy that could make retirement less stressful from a financial perspective. There is also less maintenance required for a smaller home, so you may find you have more time to enjoy retirement if you downsize.
While downsizing may have been part of retirement planning for many, that may seem impractical now given the state of the housing market. Prices have declined significantly in many parts of the country and many home owners may not want to sell at the lower prices. While that means more time to enjoy retirement in the home you love filled with memories of raising families, it also means greater expenses for home maintenance and utilities.
A reverse mortgage could offer a solution to home owners in this situation. You can access the value of the equity in your home, sell when prices recover and participate in the real estate rebound, and be able to meet the expenses of your current home. Or, if you would like to downsize regardless of the real estate market, you could use a reverse mortgage as part of the financing strategy for a new, smaller home.
MSN Real Estate recently highlighted the story of a family of four who took downsizing to an extreme. They built a 168 square foot home, about seven percent the size of an average home in the country. In the rural mountains of Virginia, the family was able to build their very small home with about $13,000 worth of materials they purchased on Craigslist.
The happy new home owners said in the report that they are saving $3,000 a month in housing expenses.
You may not want to downsize to a home that small, but if you would like to downsize, a reverse mortgage could help you do so. If you’d rather stay in your home and wait out the real estate downturn, a reverse mortgage could also be helpful.