What to consider when buying a retirement home

It’s hard to buy a home when you’re young, working, and raising a family that meets both your current needs and the needs of your future, retired self. 

In other words, it’s okay to say goodbye to what you thought would be your forever home and to buy a home that better suits your needs in retirement.

Keep reading to learn what the advantages of buying a retirement home are and what you need to keep in mind while you plan for this transition.  

The advantages of buying a retirement home

After you spend decades in the same place, it’s hard to imagine jumping ship for a new home. Oftentimes retirees downsize and sell their original family-sized home for a smaller and more manageable property. 

These are a few advantages associated with buying a retirement home. 

• You can downsize to a smaller and more accessible home (such as a one-story house).
• You can take the profits from the sale of your original home and use that money to travel or to invest in your new home.
• You can start a new adventure somewhere more retirement-friendly (hello, Florida) or can move to be near children who relocated in their adult years.
• You can spend less time taking care of a large home and more time enjoying your retirement.
• You can move to a more affordable retirement community with neighbors in the same stage of life as you.

Related: Buying a lake house? 9 reasons you might regret it

When and how to start planning for your retirement home

If you’re set on buying a retirement home, you have two options to plan for. You can wait until you retire and then buy a new house or you can plan on buying a retirement home before you retire. 

If you buy a retirement home before you retire, but aren’t ready to sell your current house, then you will need to pull together a down payment and manage two mortgages at once. It is hard to juggle two mortgages, but you can rent the house out and generate extra income to help cover the costs. Then, when you retire, you have the option to keep your original home and rent it out once you move into your retirement home. 

Whichever path you take, here’s some things to keep in mind as you move through the planning stage. 

• Plan with your partner: If you’re married or living with a long-term partner, you need to both be on the same page about your retirement plans. Have these conversations early so you both have plenty of time to think about what you want and where you want to live when you retire.
• Do a trial run: If you plan to move to a new area or to move to a retirement community, do a trial run if possible. Visit any new areas you think you might enjoy living in and tour plenty of retirement communities to learn more about what it would be like to live in one. The last thing you want is to realize that you’re not happy with your living situation during your golden years. 
• Consider accessibility and mobility: Even if you feel physically fit right now, it’s a good idea to plan for any future health and mobility issues that may arise. You may want to choose a house without stairs, live in a community with good public transportation options or a high Walk Score, or be near family so they can lend you a helping hand.
• Take your friends and family into account: As tempting as it may be to move far away to a tropical locale, being away from your support network is hard. Think long and hard  about how important being near friends and family is to you. 

How buying a retirement home differs from the normal home buying process

If you already own a home, you may think that you know everything you need to know about homeownership. While you do know a lot more than a first-time buyer, it’s important to remember that buying a retirement home looks a lot different than buying a home when you’re young and working. In particular, your financial situation when you don’t have a job looks a lot different. 

Here’s a few things to keep in mind when you make a plan to buy a retirement home. 

• Your post-retirement budget: Chances are your budget is going to look a lot different after you retire and transition to a fixed income. Even if your retirement income will match your current one, plan for expenses that will change over time. For example, your monthly house payment may remain the same and within budget, but you need to leave room in your budget for expenses that will rise with inflation, like the cost of home maintenance. 
• Your taxes: If you want to buy a retirement home in a new state or country, do the math on how much taxes will cost you. For example, if you choose to move to a state with a higher state income tax than you currently pay, you might need to spend less on monthly housing expenses to balance that higher tax rate out. 
• Your down payment: It’s understandable why you may want to make a large down payment so you will have lower monthly payments to manage. If you do this, make sure you don’t overextend so that you don’t have savings left over to use for things like travel or enjoying hobbies. A smaller down payment may help you spread out the cost of homeownership so you can enjoy your retirement more. 
• Your retirement savings: You may want to use some of your retirement savings to buy a retirement home. You may need professional help understanding whether using your 401(k) to buy a home is a good idea, however.

Here's what to know about getting a mortgage during retirement

Questions to ask yourself before buying a retirement home

Are you on the fence about whether or not buying a retirement home is the right move for you? Ask yourself these questions to gain more clarity on what you want your post-work living situation to look like. 

• Should I buy a retirement home now or after I retire?
• Is it better to rent in retirement instead?
• Can I afford to buy a retirement home while working or do I need to sell my first home?
• Where do I want to live when I retire?
• Will I be using retirement funds to buy a second home or do I have enough cash saved to buy it?
• Do I have a support network where I plan to move?
• Will I buy in a retirement community or a normal community?
• How will I get around if I can’t drive one day?
• How much of a down payment do I want to make?
• If I move will I pay more, less, or the same amount of taxes?

You may decide that you’re happy staying put in your home or you might be ready for a new adventure. Either way, make sure you enjoy your retirement, and savor every moment that you worked so hard for.

FAQs

Here's more information about buying a home when you're retired.

Q: What is a retirement home?‍

A retirement home is a housing option specifically designed for older adults who are retired or approaching retirement. These homes typically offer amenities, services, and a supportive community tailored to the needs and preferences of seniors.

Q: Should I pay cash for a retirement home?‍

The decision to pay cash for a retirement home depends on individual circumstances and financial considerations. While paying cash can provide peace of mind and eliminate mortgage payments, it's important to evaluate the impact on your overall financial situation, including potential investment opportunities and liquidity needs. Consulting with a financial advisor can help determine the best approach for you.

Q: Is it better to buy a house before or after retirement?‍

The decision of whether to buy a house before or after retirement depends on individual circumstances and preferences. Buying a house before retirement allows for potential equity growth and the ability to establish a stable home environment. On the other hand, buying after retirement provides the opportunity to evaluate retirement income and lifestyle needs more accurately, potentially avoiding the financial burden and responsibilities of homeownership during retirement. Consider factors such as financial stability, future plans, and desired lifestyle to determine the best timing for purchasing a house.

Q: is it wise to buy a house in your 50s?

You should also keep in mind that most people aren't retired by the time they reach 50, so buying a house in your 50s can be a wise decision depending on your circumstances. It allows you to establish long-term stability, build equity, and potentially benefit from tax advantages. If it's your first home that you're buying at this age, consider factors such as your financial situation, retirement plans, and desired lifestyle. Assessing your ability to afford homeownership, evaluating the impact on retirement savings, and considering your long-term housing needs are crucial in making an informed decision.