Building a Home for Retirement? Steer Clear of These Finance Pitfalls

Many people dream about financing their retirement by purchasing a new home, investing the difference for income, and enjoying their golden years. However, those dreams often turn into retirement mistakes without proper planning.

Over a fifth of the United States population will be 65 years or older by 2050 and 15 percent of people would prefer to move to popular destinations like Florida, California, and Ohio upon retirement. With an aging population, upcoming retirees need to inform and educate themselves on their home financing options.

Are you interested in building a home for retirement that’s designed for your golden years? To achieve that goal, you need to avoid retirement home finance pitfalls.

Avoid These 5 Pitfalls When Building a Home for Retirement

Without the proper home financial planning, committing to building a home can come with serious long-term implications that will affect your retirement. Here are some mistakes you’ll need to watch out for when building a home:

1. Overestimating Your Current Home’s Worth

It’s easy to fantasize about selling your current home for a high price. However, it’s important to see the full picture — what homes are closing for in your neighborhood, the state of the real estate market, and the value of your home’s equity. It’s recommended to talk with local real estate agents to receive an estimate of your home’s market value and tips for anything you can do to improve your selling price.

Just as you may be optimistic about your home’s selling price, you’ll also want a realistic estimate of what your dream retirement home will cost. Since you may be relying on social security, investments, or even a part-time job, you want to make sure your new build isn’t putting a colossal dent in your nest egg.

2. Building a Home That Isn’t Built for Aging

When building a new home, you want to consider what features will be a good fit as you age. After all, this is the home you plan on living in for the rest of your life. If you build a multi-level house with too many stairs, you might end up needing to sell again or get wrapped up in costly renovations. To avoid future home costs, consider building the following features:

  • Open floorplan
  • Wide doorways and hallways
  • No-step entrance
  • Reinforced bathroom walls
  • Bright lighting
  • Accessible storage spaces

3. Tying Up All Your Cash in the House

You’ve worked hard to reach retirement and build a dream home. It’s generally advised to not pay for your retirement home in all cash because you might not get it back. While you may want to enjoy retirement without any debt or mortgage, using all your cash means you won’t be able to use it for more necessary things in the future. Instead, consider using cash for a larger down payment and locking in a lower mortgage rate.

4. Not Considering Long-Term Housing Costs

When you build a retirement home, it’s important to understand the costs after you move in. While building a home is a larger expense, you’ll also need to consider taxes, utilities, and maintenance fees. If you move into a community in the Dayton and Miami Valley surrounding areas, you may also need to pay HOA fees. Make sure you work with your builder and financial advisor to build a home within your financial means for the future.

5. Forgetting About Taxes and Closing Costs

If you haven’t purchased a home in years, it’s easy to forget all about closing costs. Including underwriting fees, title insurance, and more, you’ll need to pay an estimated 10 percent closing costs when you close on your home. So you’re not caught off-guard, your builder can provide you closing costs estimates along with the price of your home.

Similarly, when you move to a new location, you’ll need to consider real estate, sales, and retirement taxes. Taxes vary state by state and can have larger implications on your retirement nest egg. Before you move, compare the property and income taxes of where you plan to build and if there are any special tax breaks for your age bracket.

Planning Finances for Your Retirement Dream Home

Building a new home for retirement is a well-deserved and exciting endeavor as you move into your next chapter of life. However, it’s more important than ever to arm yourself with the right financial strategy so you avoid crucial pitfalls that could crush your retirement dreams. Instead, set yourself up for success by avoiding key retirement home finance issues by working with a credible home builder in the Dayton, Ohio surrounding areas.

Discover your dream retirement home with Oberer Homes.

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