8 Ways to Cut Housing Costs for Retirement

8 Ways to Cut Housing Costs for Retirement

It’s not unusual for people to want to cut housing costs, and it’s especially true of older adults who may be looking for ways to retire early or make living on a fixed income more comfortable.

From the traditional approach of downsizing to the more adventurous option of retiring abroad, there are many ways for you to cut housing costs in retirement.

Read on for eight ways to lower your housing expenses:

1. Plan for Multiple Phases of Your Retirement

You will likely live a long time in retirement. And, the home that is right for you at 50 or 60, might not be right for you at 70 or 80, let alone when you are 90.

You can do a better job of predicting and perhaps lowering your housing costs by planning ahead. You may want to stay in your family home now, but downsize when you hit a certain milestone. Or, conversely, perhaps you want to sell your current home — cash in on your home equity now — and live an adventurous life abroad for a few years before returning to a downsized location later on.

Because housing is such a massive retirement expense, planning for these types of changes can have a significant impact on your overall retirement wealth and security. The NewRetirement Planner is a comprehensive and highly personalized planning platform that enables you to model these types of scenarios and see the impact of your housing costs on your current and future finances.

2. Homeshare

If you’re single — or even if you’re not — homesharing is one way to lower housing expenses by splitting them with others.

For older people with large homes that are being under-utilized, it could make sense to have someone else move in, whether it’s someone of a similar age or a college student attending a nearby university. The National Shared Housing Resource Center offers more information.

Explore why this is the golden age of golden girl style living.

3. Downsize

Downsizing is another option to consider if you don’t like the idea of sharing your home but recognize that you don’t really need those extra bedrooms.

By selling your current home and buying a smaller one, you may even end up with no mortgage, or extra cash left over after buying your new home. Additional benefits of downsizing can include lower property taxes and fewer home maintenance needs.

Here are 14 tips for downsizing for retirement. Want to really downsize? Explore tiny homes for retirement.

4. Get a Reverse Mortgage

If you’re still making monthly payments on your “forward” mortgage, here’s a way to cut your housing costs: get a reverse mortgage.

The federally-insured Home Equity Conversion Mortgage (HECM) program allows homeowners aged 62 and older to borrow against the value they’ve built up in their homes. Borrowers can use their proceeds to pay off the remainder of their existing mortgage, which is also one of the loan’s requirements.

Any remaining funds can then be used at the borrower’s discretion. Use our reverse mortgage calculator to estimate how much you could qualify for with a reverse mortgage.

5. Move to a Retiree-Tax-Friendly Location

Many times, families move into areas with high property tax rates to make sure their kids can get the best education. If your kids are grown and you’re no longer utilizing the public school system, it could make sense to move to another district with lower property taxes.

Some states are known for being retiree friendly, with low or even no sales or income tax. Others have a lower cost of living that can benefit people living on a fixed income.

Here are the most tax-friendly states for retirement.

6. Sell Your House and Travel or Retire Abroad

Another option is retiring abroad, as other countries can offer lower costs of living and temperate climates often favored by retirees.

Panama, Mexico, Costa Rica and Columbia are the top four countries in 2021, primarily because of low monthly costs of living thanks to affordable housing and inexpensive food along with warm weather and cultural attractions.

Portugal came in at number 5 because of its top notch public health system and old world European charm. Asia is another popular destination with Malaysia and Vietnam being top choices.

Here are 24 tips, lists, and quizzes for the best places to retire.

7. Refinance Your Mortgage

While they may be rising, interest rates are low right now.

If you have a mortgage, it may be incredibly profitable for you to refinance into a lower interest rate.

Always consider closing costs.

8. Be Sure to Consider Your Potential Need for Long Term Care

No one wants to think they’ll need long term care in the future, but not planning for it can be devastating to your finances. Long term care is not covered by Medicare. It is covered by Medicaid, but you have to be pretty much totally out of money to qualify.

And, while you don’t want to need it, the odds are that you will. About 70% of of people who turn age 65 will need some type of long term care in their lifetime, according to the U.S. Department of Health and Human Services.

Having a plan is important for both your financial, emotional, and physical well-being. Explore some alternatives to long term care insurance. And, here are three creative solutions to long term care — hotels, cruises, and communes.

No Matter Where You Live, Build and Maintain a Personalized Retirement Plan

Housing is usually your most costly expense and also your biggest asset. It is also a big factor in your quality of life. As such, you may want to consider housing as one of the most important components of your overall retirement plan — probably even more important than your savings.

Housing is one of hundreds of overlooked levers that people have to create a secure and happy future for themselves.

Use the NewRetirement Planner to explore over 250 different inputs and discover your path to a secure and happy future.

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