As personal finance guru Jean Chatzky once observed, “Whether it’s fly-fishing, taking your camper to the Everglades or just traveling, everyone has got a little retirement dream.”
As you explore how to make that “little retirement dream” come true, you’re torn over one gut-wrenching decision: Should I sell my house when I retire, or hang onto this place I’ve called home for decades?
The most important thing to consider is, “Do I really want to live here? Is the house too big? Is it too small? Is there too much upkeep?” says Diane Grove, a top-selling agent in Fort Worth, Texas.
To help you get off the white picket fence and make a move, we picked the brain of a retired college professor who sold his house, consulted retirement and relocation specialists around the country, and sifted through heaps of retirement data.
Take their advice and follow this series of needs versus wants litmus tests to decide once and for all whether to stay put or finally let go of the family home in this next stage of life.
Try to imagine your ideal retirement life: What’s in that picture?
Before you fix up your home and put it on the market, you should contemplate what you want your post-work life to look like.
A 2017 survey commissioned by financial services company TIAA offers up some interesting food for thought. The survey of 1,000 Americans age 55 to 68 who were nearing retirement showed what they’d define as most important in terms of post-career success, including:
- Flexibility to do what I want, when I want (96%)
- Freedom from financial concern (95%)
- Time with family and friends (93%)
- Relaxation (92%)
- Travel (80%)
- Maintaining my pre-retirement lifestyle (79%)
- Hobbies (79%)
- Helping family and friends (70%)
- Volunteer work (55%)
- Taking classes or otherwise learning new things (46%)
- Donating money to causes I care about (45%)
Do any of those resonate with you? Does hanging out with your daughter, son-in-law and three grandkids hold more appeal than jetting around the world and adding stamps to your passport?
Or do you simply want to kick back on the back patio, sip on a refreshing iced tea, dig into the latest John Grisham thriller and savor a retirement relatively free from financial worries?
To dig deeper into those questions, we’re presenting two scenarios—”need to sell” and “want to sell”—along with the questions you should ask yourself for each one.
The “Need to Sell” scenario
Both fiscal health and physical health come into play in the “need to sell” scenario—here are some of the questions to ponder in this category.
Can you afford to live in your house in retirement?
First off, let’s look at how much it costs to live in retirement.
The Motley Fool, a leading source of insights and analysis on the subject of personal finance, crunched the numbers and came up with a hefty price tag for the average retirement: $828,000.
Here are the numbers behind the math: Adults in the U.S. spend almost $46,000 a year, and the typical retirement lasts 18 years, resulting in the $828,000 figure (46,000 x 18 = 828,000).
If you dig a little deeper, though, the financial picture looks bleak.
The average retiree-led household pulls in just $48,000 a year in income, according to NerdWallet. If you subtract the spending (almost $46,000) from the income ($48,000), you’re left with only about $2,000 a month in the bank.
Housing, of course, represents the biggest expense for retirees and all other Americans. The average household headed by a retiree spends $1,322 a month on housing, which includes mortgage or rent, as well as property taxes, insurance, utilities, repairs and maintenance, and household supplies.
Sadly, the financial road ahead for many future retirees looks bumpy.
An analysis published in 2017 by the National Bureau of Economic Research found that today’s older Americans appear more likely to head into retirement bogged down by debt than their counterparts in previous decades. Why?
In part, it’s because some of those folks bought pricier homes with smaller down payments than their predecessors did, according to the analysis.
After absorbing all of that data, you might feel financially vulnerable, and that would be understandable. Therefore, selling your house might be the right choice for you.
That’s the choice that Timothy Wiedman made in 2007 before he retired as a college professor in Hampton, Virginia. That year, he sold his 1,690-square-foot house and downsized to a 1,100-square-foot apartment when he relocated for a new job in Lincoln, Nebraska.
When Wiedman sold the house—a 1960s-era multilevel property—his mortgage (including real estate taxes and homeowner’s insurance) totaled $857 a month. That didn’t include expenses like maintenance, repairs and landscaping. Today, he’s paying $810 a month for his apartment, in addition to roughly $40 a month for water, sewer and trash services; the rent includes virtually all maintenance costs.
Wiedman stashed proceeds from the home sale in two short-term CDs until he gave up on finding another home. Now, that money sits in an income-oriented mutual fund. He expects to remain an apartment dweller until he’s ready to move into a nearby assisted living community that he’s already got his eye on.
“In my case, selling my home prior to retirement made a lot of sense,” Wiedman says.
Are you experiencing health issues?
Aging takes a toll on our bodies and our budgets.
In the TIAA survey, 52% of Americans planning to retire in the next five years said worries about declining health kept them up at night, and 43% fretted about draining their retirement savings to cover healthcare costs.
Those concerns are well-founded. Financial services company Fidelity estimated that the average 65-year-old retired couple in 2016 needed about $260,000 in after-tax savings to cover healthcare expenses during retirement. If you stretch that $260,000 over, say, 20 years, the annual healthcare tab totals $13,000.
And that doesn’t factor in rising costs due to inflation.
With all of that in mind, the typical retiree faces a mountain of healthcare costs that could crush the housing budget. If you’re already coping with costly or potentially costly healthcare issues, then it might be best to swap your house for a smaller, more manageable, less expensive place.
Health issues also can cause mobility issues, such as difficulty climbing the stairs from the first floor to the second floor of your house because of a condition like arthritis. Lack of mobility, it turns out, ranks as the most common disability among Americans age 65 and above, according to the U.S. Census Bureau.
Wiedman, the retired college professor, says that after developing sciatica, he’s thankful that he no longer lives in a house where he must navigate stairs.
In calculating whether selling your house would be a smart move, be sure to factor in these two aspects of healthcare—money and mobility.
Are you fed up with home maintenance?
For a homeowner, maintenance can be a pain in the neck and the budget. For a retiree, that pain can be multiplied by physical limitations due to age.
Generally speaking, a homeowner should set aside at least 1% of the home’s value each year for maintenance and repairs. For a house worth $300,000, that would work out to $3,000.
When Wiedman said goodbye to his house, he also said goodbye to maintenance, such as shoveling snow and tending to the yard (including half a dozen flower beds and a dozen shade trees).
“I haven’t missed the time-consuming and often costly chores associated with maintaining a large single-family home,” he says.
The “Want to Sell” Scenario
If you fall into the “want to sell” group, consider yourself fortunate. You have a choice in the matter. Still, you must answer some tough questions to reach the point of putting up a for-sale sign.
Are you emotionally prepared to move out?
Certainly, you should weigh financial and health issues when you’re pondering a home sale. But are you emotionally ready to leave behind a home that still has markings on the wall where you tracked the growth of your three kids?
Mark Painter, a chartered financial analyst (CFA) in Berkeley Heights, New Jersey, who’s worked with retirees for 14 years, says the first thing he discusses with clients who are mulling a home sale is the emotional component.
“Depending on how long someone has been in a house, there can be a lot of memories tied to the place that are not easy to let go of,” Painter says.
According to Dave Ramsey, a trusted voice on money, budgeting and debt, some signs that you’re 100% ready to sell include that you’ve done a gut check and feel emotionally prepared to leave this home and the memories it holds behind, negotiate with buyers over it like a business deal, and hear critiques on what needs to be fixed.
Do you want to travel more?
Are you itching to pack your bags and explore Europe? If so, a house might kill your wanderlust.
Not that long ago, Weidman and his wife headed off on long summertime road trips but had to arrange for someone to cut the grass at their house once a week, water the flowers every three days and remove newspapers that were delivered by accident.
Now, thanks to apartment life, traveling “requires much less advanced planning,” he says.
Do you want to be closer to your family?
Distance makes the heart grow fonder, but it also makes it tougher to see your kids and grandkids on a regular basis. Perhaps you live in San Diego but they live about 1,000 miles away in Denver. Selling your house in Southern California and settling in the Rocky Mountains might be the answer to bridging the family gap.
“Ideally, you will want to be close to your children and relatives in your retirement,” says Steven Millstein, a certified financial planner in San Francisco who’s worked with many clients who are approaching retirement.
How independent do you want to be?
Some retirees steadfastly refuse to relinquish their independence and rely on anyone else to assist with day-to-day living.
Meanwhile, others feel more at home in a retirement community, surrounded by professional helpers and fellow retirees. Ultimately, you need to determine your dependence-versus-independence comfort level.
Money enters the equation here, given that it costs an average of $48,000 a year to stay in an assisted living center, according to the 2018 Genworth Cost of Care Survey.
How to get a big-picture view of your finances
Whether you want or need to sell your house, you’ll still need to put pencil to paper (or fingers to calculator) to assess your financial situation. Or you can hire someone like a certified financial planner (CFP) to do the heavy lifting. To find a CFP in your area, visit the website of the Certified Financial Planner Board of Standards.
If you want to go the DIY route, several online tools could come in handy. One of the best resources comes from Rutgers Cooperative Extension, which rounded up 9 of those tools to make the process smoother.
Once you’ve gotten a clearer view of your financial picture, you’ll want to create a household budget that reflects your current situation and another one based on estimated expenses once you’ve sold your house. Bank of America assembled some helpful tips for setting up a household budget on its Better Money Habits website.
Some of the monetary questions you should ask before packing even one box:
- How much will it cost to spruce up my home before putting it on the market? By one estimate, you could be forking over at least $3,250 to make your home sale-ready (excluding repairs).
- Can I afford to move? The average state-to-state move costs $4,300.
- Can I afford the cost of living where I’m planning to move? Check out Bankrate.com’s cost-of-living calculator to find out.
Calculating your home sale proceeds
No doubt, the amount of money you’d pocket from the sale of your house will be center stage when it comes to determining whether you want to put it on the market.
A number of online tools can give you an estimate of how much your house is worth. We recommend HomeLight’s home value estimator as a great starting point.
If you’re ready to pull the trigger on a home sale, a comparative market analysis (CMA) prepared by a real estate agent will fine-tune the estimates you’ve collected from online valuation tools.
Once you’ve nailed down approximately how much money you could fetch for your house, find out how much you’ll take home by subtracting a number of costs, including the money you’ll invest for home staging; upgrades and marketing; agent commissions; attorney fees; taxes; fees and closing costs; as well as the remaining balance on your mortgage.
Work with top-notch professionals for a smooth transition
Aside from putting together your CMA, a top real estate agent in your area brings other resources to the table, such as a seller’s net sheet and a comprehensive marketing plan. More than anything else, though, a top real estate agent offers knowledge and experience, particularly regarding how to attract buyers to your home and command a higher price point.
You might even look for an agent who carries the Seniors Real Estate Specialist (SRES) designation. An SRES-designated agent is trained to meet the needs of retirement-age homeowners.
Grove, the Fort Worth agent, says another benefit of hiring a real estate agent to sell your home is their network of professional connections. If you’re ditching a colder place like Minnesota for a warmer place like Florida, your agent can refer you to an agent in your soon-to-be-new surroundings so you find the home that’s best suited for the next chapter in your life.
In the end, after sorting out your wants, needs, and financial picture relocation expert Marian White urges retirees “to carefully consider whether or not they are both emotionally and financially prepared to move before putting their home on the market.”