Some people dream of moving to an exotic location such as Panama or Belize in their golden years, but the majority of Americans end up retiring in their own homes.
Three out of five current retirees have remained in their homes, according to a survey last year from TransAmerica Center for Retirement Studies, and almost the same proportion of workers over 50 expect to stay put when they retire.
While it may seem like the easiest way to retire — you don’t have to sell your house or purge belongings as you downsize — it does require advanced planning. Here are five – to consider as you create your plan to retirement at home.
1. Make the necessary changes to your home. “For aging in place, you need the right floor plan. The ability to live on all one level and get in and out without too many stairs is critical,” says Kristin Sullivan, a certified financial planner in Denver, Colorado. “Do this before you need it.”
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That means relocating a master bedroom to the main floor and making sure laundry is no longer in the basement. If everything can’t be moved to one floor, then seniors may want to consider a motorized chair lift ($3,000 to $4,000) or an elevator installation ($20,000), according to HomeAdvisor.com.
That’s not all, says June Schroeder, a financial planner with Liberty Financial Group in Elm Grove, Wisconsin, and who is also making similar plans for herself. “I started a special savings plan for it,” she says.
Schroeder replaced a tub with a walk-in shower with grab bars. She knocked out walls so the shower opening could accommodate a walker or wheel chair. In the kitchen and bathroom, she added slide-out shelves to cabinets for easier access.
Other considerations include widening doorways and hallways to accommodate a wheelchair, putting in ramps, replacing flooring with slip-resistant materials and installing an alarm system.
2. Consider the cost of home care. “The majority of seniors desire to stay in their homes throughout retirement,” says Cheryl Sherrard, a senior financial advisor at Clearview Wealth Management in Charlotte, N.C. “However, most of them don't take this desire and understand what would really be involved if this played out in a situation where care is needed.”
Sherrard says pre-retirees need to understand the potential costs for assistance in the home, especially for around-the-clock care. The median cost for a home health aide is $3,861 a month, or $46,332 a year. The cost for homemaker services — a person who helps with household tasks — is about the same at $3,813 per month.
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Aside from saving up to pay for significant care for several years, Sherrard also has clients “test drive” having a home care assistant in the house after a knee or hip replacement, so they can understand what it’s like to have another person in their home.
“There also needs to be a backup plan if a situation arises where one spouse is helping another, but then has a health event of their own,” Sherrard says. “Family may suddenly need to place two spouses quickly and could result in separate locations depending on care.”
3. Think about tapping home equity. “If the [retiree] has a significant amount of their net worth in the equity of their home then this can be problematic when projecting the success of their retirement plan spending,” says Daniel Lash, a certified financial planner with VLP Financial Advisors in Vienna, Virginia.
In fact, home equity is the largest source of wealth for most Americans over 65, according to a study from the Center for Retirement Research at Boston College. Typically, seniors tap a portion of this equity when they sell their current home and downsize to one that’s less expensive, pocketing the difference. But staying in your current home negates this strategy.
Instead, seniors will need to consider taking out a home equity line of credit to use for emergency expenses, such as an unexpected medical event or house repair. But if they need a steady stream of income in addition to Social Security and retirement savings, then seniors should consider a reverse mortgage, says Lash.
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These products pay out a lump sum, line of credit or monthly payment using a portion of the home’s equity. When the homeowner moves or passes away, the house goes to the reverse mortgage lender. These loans had a bad reputation several years ago, but recent government regulation has largely cleaned up the industry.
4. Plan for home maintenance costs. Retirees need to consider that they may not be able to do certain upkeep tasks as they age, such as mowing the lawn or shoveling snow. That means “lining up a bunch of what my hubby calls my ‘little guys’ to do all kinds of things around the house and yard,” says Schroeder.
But that can add up. Housing costs including utilities, taxes and maintenance make up 30 percent of all expenses for couples between ages 65 and 74, according to a study from Boston College.
That means you should work those expenses into your retirement budget, adjusting for inflation as time goes by.
5. Have a plan for transportation and health care access. Your home may have been perfect for raising a family, but it may be in the wrong place for a senior. Retirees need to consider whether their family home is close to high-quality health care, says James Atkinson, managing director of Columbus Capital in New Albany, Ohio.
“Aging generally involves a team of medical and dental professionals to manage vitality throughout the aging process,” he says.
Also important is access to affordable transportation alternatives, Atkinson notes. There may come a time when you can’t drive or don’t feel comfortable behind the wheel. That means you need a community that has a good public transportation system or an abundance of taxis, Uber or Lyft drivers.
“Transportation is essential to enjoy every stage of retirement,” Atkinson says. “Communities without easy and affordable transportation lead to reduced access to health care and periods of isolation.”