Financial Planning and The Role Your House Will Play

For most people, their home will be the most valuable asset they own during their lifetime so it’s no surprise that we get a lot of questions about how a home (or homes) fits into retirement plans.

When you look through all the decisions that come along with owning property, it’s pretty clear that your house will have a big impact on your retirement. That’s why you’ll have quite a few conversations with an advisor when it comes to where you live so let’s look through some of the decisions that often come up in retirement.

The first option many retirees have to decide on is whether they should pay off their mortgage or keep making payments through the life of the loan. Shedding your debt is never a bad goal, but this decision requires you to consider a few different factors. Maybe the most important of those is what makes you the most comfortable. If you have the means to pay off your mortgage and it will help you sleep at night, then it’s probably best to take that course of action. But with interest rates at historically low levels, you might do well to keep making payments and look to earn better returns on that money elsewhere.

Another move retirees often make is downsizing to a smaller home. When children move out of the house and you get tired of maintaining more space than you use, this ends up being a common outcome. Not only does it make life a little easier, but it can also be a great way to supplement your savings by pocketing the difference in value.

Along those same lines, some people sell their home and decide to become renters. It’s another way to downsize, but it also means saving money in upkeep and maintenance that comes along with being a homeowner. This choice has become more popular in recent years and might be something you’ll want to consider.

Another big area of discussion with clients is whether they should leverage real estate to create income in retirement. The idea of becoming a real estate investor has been made to look straightforward, simple, and lucrative by so many reality television shows. But the truth is being a landlord is not for everyone. Much more work goes into overseeing a property and managing tenants than most people are aware of. And in many cases, the returns from a rental don’t make it worth it after taxes, repairs, and time.

No matter what you decide to do in retirement, your home will be a big part of your financial success so make sure it’s aligned with your overall planning strategy.

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