Planning to Retire Right Where You Are

By Linda Stern, Reuters, 3/11/2011

Most boomers say they don’t want to retire and move to Florida or Arizona or even Belize. They want to stay where they are, near family and friends and in the home that they already know and love.

That may not work out for the whole generation: Their kids might move away, or the expensive suburban neighborhoods that served them well when they were working might prove too taxing once they start cashing in their 401(k) accounts. Some may change their plans. But anyone giving serious thought to retiring – and ultimately aging – in place, can make that outcome more likely if they start planning in advance.

“Don’t just leave it to chance,” says Peter Bell, a reverse mortgage advocate and also head of the National Aging In Place Council, a coalition of businesses that sell to seniors. “Waiting until you’re in your 80s is a mistake.”

So lay that groundwork now. You could always move later. Here are some pointers.

• Draw a line between retiring in place and aging in place. Early retirement is a time of much activity; travel, hobbies and often, good health. You may not need your home or your community to be very different during the early stages of retirement, but by the time you hit your late 70s, you may need an easier environment. Think about both early and late retirement when you’re planning to stay put.

• Get your house in order. If you’re already remodeling, consider the kinds of improvements, like wider hallways, first-floor bathrooms and walk-in showers, that you’ll want when you’re older. The National Association of Home Builders has a certification program for remodelers that understand all of those enhancements. You can find one, and more information about home remodeling, at (www.nahb.org/caps.)

• Get your neighborhood in order, too. Your town might have had a great school system for the kids but you won’t love living there as an older person unless it feels safe, has good sidewalks or easy walking paths, good nearby health care and recreation centers and activities for older people. It’s a bonus if you already have many friends there. Some neighborhoods start out as kid-dominated places but turn into what’s known in the business as “NORCs” or “naturally occurring retirement communities.”

• Save aggressively. Retiring in place requires more cash than moving does. If you don’t downsize, you can’t live on the cash you’d make by selling your house. And your property and income tax burdens might be higher than they would be if you moved to a less expensive area.

• Pay off the mortgage, or don’t. In many cases, it makes sense to burn the mortgage early. If you have to liquidate tax-deferred IRA or 401(k) savings to make your monthly mortgage payment when you are retired, that can bump up your marginal tax bracket and possibly subject some or more or your Social Security benefits to income taxes. So you can retire easier with a paid-off mortgage. If you find yourself needing cash many years later, for household help or healthcare when you’re older, you can get a reverse mortgage to cover expenses.But on the other hand, reverse mortgages are costly and right now, traditional mortgages are cheap. If you’ve got one with a good interest rate, like 5 percent or lower, and you expect to need more money down the road, you might be better off if you invest additional money for yourself instead of making extra mortgage payments. That could build a nest egg that you could use instead of a reverse mortgage down the road.

• Get the kids ready. Often there is some push/pull between elderly stay-at-homes and their kids. The kids want the comfort of knowing their parents are safe and looked after. The parents want their privacy and freedom. It’s almost impossible to weigh freedom and safety against each other but families have to do that all the time. Parents who are willing to give up some care for their own peace and privacy should let their kids know that, early and often.

• Learn what’s out there. Bell’s Aging in Place Council (www.ageinplace.org) is a consortium of businesses that support older people living on their own. Most communities have services like reduced fare taxicabs and meals on wheels. Try to learn what your community offers well before you need it.