Housing is most people's largest expense at every stage of their lives, accounting for roughly one-third of their expenditures, according to the latest Bureau of Labor Statistics Consumer Expenditure Survey. You probably can't get rid of it entirely in retirement unless you move in with a generous family member, but there are a few things you can try to cut your housing costs and make your savings last a little longer. Here are five ideas.
1. Pay off your home before retirement
Paying off your home before you enter retirement can significantly reduce your living expenses, but not everyone can afford to do this. There are also times it might not make sense. If you don't plan to remain in that area in retirement, you might be better off trying to sell the home to get out of the mortgage instead.
You might also want to stick to your regular mortgage payment schedule if paying your mortgage off early would mean skipping your retirement account contributions. Mortgage interest rates usually aren't that high, and you could potentially earn a lot more by investing in your retirement savings than what you're losing by paying interest on your mortgage.
You'll still have some home expenses in retirement, even if you pay off your mortgage. Chances are, an appliance or two will break, your roof might need replacing, or you might decide to do a little remodeling. Budget for all these things in your retirement plan so you're prepared for these expenses.
2. Move to a more affordable home or area
Moving is another option for those hoping to slash their housing costs, if they aren't attached to their current home. You can seek out a smaller home in your existing neighborhood, or for an even bigger price cut, seek out a smaller home in a more affordable state or neighborhood.
Always do the math before making this move, though. If housing costs have risen a lot in your area since you bought your current home, you could end up paying just as much (if not more) for a new, smaller home. In that case, you're better off staying where you are.
There are other factors to take into account when you move, like whether you like the area and other expenses, like transportation, food, and healthcare.
3. Renting out space
Those with extra properties or a large home with extra space could consider renting out their property so they aren't responsible for paying the mortgage all on their own. This works best for homes that have two separate entrances, but it can work in any space.
Note that as the landlord, you'll still be responsible for repairs, and you could be forced to shoulder the whole cost of your property once again if your renter moves out.
4. Renting a home or apartment
You may be able to find an apartment that's more affordable than the homes in your area. This could save you money, and it'll lower your insurance costs because renters' insurance policies are much cheaper than homeowner policies. Plus, you'll be off the hook for any maintenance required.
The downside of renting is that your rates are only locked in for a short time. They could rise year after year, and that could get expensive for you. But you also have the freedom to move if you are no longer happy in your current rental.
5. Moving in with family
About the only way to get rid of your housing costs completely is to move in with a family member. This is something you must talk over with your relatives. You should discuss how much space they have for you and whether they expect you to contribute financially to the running of the home, among other assumptions. Make sure everyone is agreeable to the terms and keep an open line of communication to ensure everyone stays happy.
There are drawbacks to all of these options, but hopefully one or two of the suggestions stand out. If money is tight, you might buy yourself a little more breathing room in your retirement budget.