There's a reason so many seniors aim to be mortgage-free by the time retirement rolls around. That way, there's one less debt payment hanging over their heads. And also, if you enter retirement without a mortgage, your monthly bills will be lower on a whole, thereby allowing you to stretch your senior income further.
But unfortunately, the high cost of owning a home mortgage-free has the potential to upend your retirement finances. And the sooner you realize that, the sooner you can think about adjusting your homeownership plans for retirement.
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It's not just a mortgage that costs money
Many people point to their mortgage payment as the single largest expense related to homeownership. But there may be a couple of other expenses that trail closely behind -- property taxes and upkeep.
In some parts of the country, property taxes on a modest home can be upward of $10,000. And property taxes also have the potential to rise over time. Now some states have programs in place to protect senior homeowners from property tax hikes. But even so, there's no guarantee you'll be eligible for relief.
Then there's upkeep to consider. The older your home gets, the more expensive it might be to maintain. And as different components age, you may find yourself raiding your retirement account more often than you're comfortable with to cover the cost of replacing them.
That's why you'll need to think carefully about the costs of homeownership in retirement. And you may want to make some adjustments to your homeownership plans.
Consider downsizing or finding ways to defray your costs
It's hard to give up the home you've lived in for decades and worked hard to pay off. But if you're nearing retirement with a home that's larger than what you need, downsizing is a move that might seriously pay off.
Downsizing to a smaller home could mean spending a lot less on property taxes and maintenance. It could also mean having lower utility costs to cover.
If downsizing isn't an option -- or it isn't a desirable one for logistical or sentimental reasons -- then another thing to look at is finding ways to offset your homeownership costs via your home. That could mean renting out a room or portion of your home and using that monthly income to cover your expenses. Or, it could mean letting guests pay to use your pool during the summer or rent a parking space in your driveway.
If your home is comfortable, you own it outright, and you love the neighborhood you're in, then it's easy to see why you may want to hang onto that property as a retiree. Just make sure to budget carefully for the various expenses outside of a mortgage that come with owning a home. And if the numbers don't bode well for your retirement income, then you may need to face the reality that some sort of change is necessary to avoid a scenario where hanging onto your home leads to years of financial struggles.
