Home ownership and retirement … Both take planning.

Retirement is most likely going to change your financial status.  In the event that home ownership was the long term plan to create the nest egg needed to retire, the retirement could also change your location – and along with it, your  immediate support system, your comfort zone and lifestyle.  You planned for this, right?

To some people, retirement planning might be viewed as a delightful afternoon spent organizing a golf game, relaxing under a shady tree with a magazine, traveling to those places you always wanted to go or visiting with grandchildren.  To others, it’s a time of intense anxiety.  Along with concerns over how to spend time alone and struggling with feeling like you no longer add the same “value” as you did while working your career and bringing home a pay check, are nagging questions such as;  “Do I  have the income and assets to provide for myself (and my spouse) over the next 20 years?”  “Should I downsize my house?”  “Do I want to relocate to be closer to family?”

All are relevant questions and valid concerns. Let’s address some of the things you might want to consider BEFORE retiring.  Getting your financial (and real estate) house in order, gaining a thorough understanding of your options, and having a strategy to make the most of what you have built (including home ownership) over a life time of hard work, is going to make you feel more secure.  🙂

1.  Get dental care and vision care

Medicare doesn’t pay for dental care, although some Medicare Advantage plans do include limited dental insurance. But you’ll probably get no help with dentures or potentially expensive treatments for gum disease. If you have dental insurance before you retire, that’s the time to get your teeth into the best shape possible. It’s also smart to put aside money to replace dentures because they don’t last forever, and you may find yourself needing them when you can least afford it. Vision care is also not a Medicare benefit.  If you have vision care insurance from your employer, use it before you lose it.

2.  Evaluate your life insurance

The older you get, the more expensive life insurance gets. If you are getting insurance through your employer, you may be able to roll it over into an individual policy at a lower price than you could find if you wait until you leave the company.

3.  Talk to your employer’s human resources department

Ask about your 401(k), severance, unemployment — anything that could put money in your pocket while you make the transition to retirement and afterward.

4.  Take stock of your 401(k)’s

Check with your former employers. A surprising number of people leave 401(k)s and even pension plans behind when they change jobs — then forget about them. Make sure you have taken everything that belongs to you.

Consider rolling over your 401(k).

Pack up your 401(k). Don’t cash it out — that will leave you with an enormous tax bill.  Do consider rolling it over into an IRA, so you can have more options to manage it than you’d have if you were limited to those offered by your 401(k) plan provider. You also might decide that putting part of your 401(k) in an annuity that will provide a steady check for as long as you live is a comforting idea. But before you do anything irrevocable, get some good financial advice. This chunk of retirement savings has to last you a long time.  

5.  Pension plans

Find out when and how you qualify for any pensions from current and previous employers. If you have deferred compensation coming to you, understand the payout terms. Get these details in writing, just in case there is confusion later.

If you are fortunate enough to have a pension, be sure you understand when and how you can claim benefits and how much you are entitled to. Most pension providers offer between four and 10 ways to take your pension. You’ll have to study these options and decide which is best for you. Don’t delay this review past age 65. Few pension plans offer any incentive for waiting to take the money until you are older than 65.

 6.  Social security strategies

If you aren’t yet 66 and you claim Social Security in the year you retire, the wages you earn from a job may interfere with your Social Security benefit. Someone age 62 through 65 can earn up to $15,120 in 2013 with no effect on their benefit. After that your Social Security will be reduced by $1 for every $2 you earn. Retirees who turn 66 in 2013 are limited to earning $40,080. After that, $1 of every $3 of your Social Security benefit will be withheld. Figure out the impact of these rules before you start receiving benefits, or you could have a nasty surprise when Social Security demands that you repay any over-payment!

7.   REAL ESTATE related decisions…  My favorite part!

•  Apply for a mortgage.

You may have great credit, a healthy bank account, the ability to make a large down payment, and perhaps some lucrative but irregular consulting income… But you still may not be able to satisfy a mortgage underwriter. In fact it’s a good bet you won’t in today’s banking environment, where the lack of a regular paycheck often disqualifies you. That makes the pre-retirement months the best time to get financing for a retirement home… whether that is to relocate for weather, family, ease of getting around or implement your downsizing strategy.

• Get an appraisal

For many people, their home ownership was the primary way they accumulated their nest egg. Knowing what you could sell that home for or what it might be worth if you applied for a (reverse) mortgage can give you some peace of mind and help with the next stage of planning.

• Reverse mortgages

For those who want to continue with home ownership, and plan to stay in their own home during retirement, if you have equity built up, a reverse mortgage may be just the tool to make it happen!  There are rules of course, but qualification is pretty straight forward and rather than needing a regular income to qualify, a reverse mortgage can actually offer YOU the regular income instead!  See my post about reverse mortgages for more info.

This post is NOT a substitute for professional advice from you accountant, your financial planner, your attorney and/or your lender.  However, it will give you a few things to think about and generate a boat load of questions you can take  into consultations.

Questions are a good thing. Perhaps you have already retired and feel that this post is too little, too late though?  No.  It’s never too late to plan and make the most of what you have.  🙂

 

As Ben Franklin said:

An Ounce Of Prevention Is Worth A Pound Of Cure