HOW TO MAKE A RETIREMENT BUDGET A key factor in how to retire is
making a budget. Be brutally honest about the income you have to live on. Fooling yourself into thinking you have more income
than you actually do will make the process more difficult, and once you do make the plunge, you may find yourself
looking for a job to supplement your income. It's time to Make a Budget
PLACES TO RETIRE FOR ANY BUDGET When you get to the where should I retire portion of the exercise, make a list of the most important activities
you plan on continuing, or ones you would like to start. Most everything has a cost. Include those costs in your budget
too.
Are there a few, or more cities or towns you would like to consider? List them in order of preference on your
top five faves. Now, evaluate each city's attributes, and liabilities that you are considering. Most experts
that write about the best places to retire consider things like cost of living, tax rates, climate, shopping, dining
and other amenities, cultural opportunities (including professional sports) and other activities in the area to determine
their choices.
Maybe you always wanted to take to the open road instead of planting yourself in a single location?
It sounds great, but sometimes the reality of living in cramped quarters is quite different than your idealized version
of and nothing like you expected. Rent an R.V. and live in it for two weeks before you take the leap and buy a motor
home or travel trailer. And remember, an RV won't appreciate in value, it will depreciate. If you put a large part
of your retirement nest egg into a recreational vehicle, it will be worth considerably less within a few years.
This is a huge decision you're going to make. It isn't just about sports and shopping so take it seriously.
Make a Budget
RETIREMENT AND SOCIAL SECURITY LONG TERM HEALTHCARE Now that the hard work is done, you can concentrate
on where you want to retire. Where are the Best States to Retire for 2012-2013 according to the latest findings? Love to experience new cultures, new food? You might want be one of those adventurous spirits that could Retire Abroad and fit right in with the locals Is there a place in the mountains or on a beach where you vacationed over the years and loved it so much you thought
about the possibility of retiring there when the kids were grown? Then you might be a candidate for Vacation Retirement
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DOWNSIZING for RETIREMENTOften when people over 50 retire we want to simplify our lives and get rid of the clutter. Downsizing
to a condo or a 700 square foot home may seem like a good idea however these small digs may be too small to accommodate an
enjoyable retirement life.
Are you a guy that likes to tinker in the garage? If you
move to small home with a one car garage, or a condo with only a parking space it will be impossible to continue to work on
projects. The same will occur for women who enjoy crafts etc.
Downsizing is fine, but
be practical. Even if it is just you and your spouse, consider moving to a house, condo or apartment that has at least three
bedrooms. If you have friends, children and grandchildren you will need a bedroom for them when they come to visit.
If you have a hobby like making crafts, you will want a hobby room. Or, you may need an office to take care of bills etc.
Don’t forget a garage. You not only need it for parking your car, you might need it for tinkering and stashing tools
etc .
Don’t ignore climate. As you consider your new retirement location, ask
yourself if the year-round weather is going to be acceptable? If it is a temperate region such as California or Arizona,
will you miss the change of seasons? (Although there are mountain communities in Arizona that do offer four seasons. They
offer climates that are very pleasant in summers, with short winter seasons and some snow). If you are thinking of where
to retire in the north or on the east coast ask yourself if you can handle heat with high humidity and severe cold? Many nice
towns in northern states never make best places to retire lists because of their severe winter climates.
RENT VS BUY Deciding between keeping your home, selling and downsizing to a smaller home or condo, or chucking
it all and renting can be a difficult decision.
Three key points:
It always
comes down to expenses. What is your budget for renting or ownership?
Do you view the place you will live during retirement as
an investment or simply a cost of living expense?
Have you considered home repairs
if you are a home owner, or rising rental costs if you are thinking about renting a home instead?
PROS
AND CONS
First, mortgage interest and property taxes on a primary residence
are still tax deductible at this writing. But rental expenses are not. Contact your accountant or CPA to find out which scenario
is best for you.
Obviously, home ownership has a tremendous advantage over being a
renter. First, it is usually more expensive to pay rent than a mortgage. Owning will also increase your net
worth as your property increases in value. However, issues such as real estate value fluctuations, maintenance expenses
and insurance need to be added into the equation.
While renters don't have to worry about maintenance costs, renters'
insurance is an additional expense and many landlords require the tenant pay HOA and other fees.
INVESTMENT?
Is your home an investment to you? Housing will
be the biggest part of your retirement budget. Even though owning your home can be a good investment, it shouldn't be
examined solely from that perspective. In your retirement budgeting terms, any payment you make towards housing goes
under cost of living whether you own or rent.
In some ways, renting can be considered
the economic equivalent of shorting a stock. What does that mean? You short a stock if you believe it will go
lower. Using that analogy, if you think housing prices are headed lower, you might want to rent a home, wait for prices to
fall and buy a home later. Today, in 2012, prices are already low. And in most areas the price of renting a home
is higher than a mortgage payment.
By selling your home when you retire, you
take the chance of becoming priced out of the market as prices increase unless you purchase a new home again immediately.
This should be a huge concern if you are on a fixed budget and want to continue to enjoy owning your own home as opposed to
dealing with a landlord.
Maintenance Expenses
Renters
have no liability for regular maintenance, appliance failures etc. If you are an owner, you can purchase a home
warranty to cover many of those issues. All you will pay is the deductible.
However, if you are
a renter monthly rental amounts can be raised by the landlord any time if you rent a month to month. Signing a lease
for a year will ensure the landlord can’t raise your rent until the next lease is signed.
The bottom line: Deciding whether to own a home in retirement can be made by examining these key points:
Can you afford financial bumps in the road that can occur maintaining a property you own?
Do you consider owning your home an investment?
How much do you want to spend? Do the math to determine your budget for renting vs. ownership after taxes.
Keep in mind your financial situation and only undertake costs and risks that will allow you to sleep well
at night.
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