Financial Resource Center

Retirement Planning

Pre-Retirees: Avoid These 5 Real Estate Mistakes

by Rena Crispin, CUDE, CCUFC / February 4th, 2022

When heading into retirement, many people make the decision to downsize, relocate to a different community, or renovate an existing home. The thought of moving or making major home improvements often carries a lot of emotional attachment that can make these processes overwhelming. Here are five common mistakes to avoid:

  • Waiting to downsize. You can miss out on a lot of savings by waiting for your last child to get out of college before you downsize. Lots of people wait until the kids graduate and then discover that the kids already are back, and sometimes with children of their own. It could be an 8- to 10-year extension on your time in a larger house;
  • Spending the windfall. If you're able to downsize and get cash out at the same time, don't spend it quickly. Carefully consider what you will do with it. For some people, it will be best to live on the equity and leave retirement funds alone for a while, allowing Social Security benefits to increase;
  • Moving sight unseen. Before you move, research the locale. Find out about taxes, the cost of living, access to the activities you enjoy, and health-care options for the future. Make sure the community you're considering moving to is what you have imagined it to be;
  • Maintaining two households. Maybe your plan is to live part-time in two locations. Make sure you can afford the time and cost of payments, taxes, maintenance, and so forth for two homes. Maybe you think you'll save money by buying a house at today's prices and moving when you retire. Factor in the cost of running two homes to see exactly how much you'll gain—or lose; and
  • Holding a mortgage in retirement. Weigh the advantages and disadvantages of paying off your mortgage before retirement. You might be able to use that freed-up money to delay taking Social Security. Keep in mind that your tax deduction will not be significant like it was at the start of the mortgage. If you're thinking of taking on a new mortgage just before retiring because of today's low rates, consider a short-term mortgage such as a 10-year mortgage. You probably don't want to be paying a mortgage when you're in your 80s.
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