Unlocking Housing Wealth for Retirement: Pros and Cons of the Retire-and-Relocate Strategy
By Retiring and Relocating: Unlocking Housing Wealth for Retirement[0]
08 March 20[1]
March 6, 2023, 8:06 AM PST[2]
When approaching retirement, many seniors find themselves in a precarious financial situation. With housing wealth accounting for almost 48% of the cohort’s median net worth, many are looking to utilize this resource to shore up their retirement funds.[3] According to a new study from Vanguard Group, retirees who use a retire-and-relocate strategy can unlock a median figure of $99,019 from their homes in 2019, with the top 10th percentile unlocking a median of $347,000.[3]
In 2019, the median homeowner aged 60 or above who used this technique was able to access approximately $99,000 in home equity.[4] Those in the top 10th percentile attained a median of $337,000.[3] According to a study done by Vanguard, retirees in areas with high home value appreciation, such as on the West Coast, in the Northeast and in states like Arizona, Colorado, Florida, Nevada and Utah, are in the greatest position to benefit. Relocating to a more affordable area and putting up homes for sale in the current region could result in a significant financial benefit.[5]
However, there are a few caveats to the retire-and-relocate strategy.[6] Retirees need to account for other costs, such as property taxes and homeowner’s insurance.[7] Location is also a factor.[7] Homeowners in states on the Pacific Coast and in the Northeast are generally the best positioned to get the most out of the retire-and-relocate strategy. Conversely, if you own a home in Midwestern or Southeastern states like Alabama, Mississippi, Nebraska and South Dakota, you might end up losing money on the transaction.[5] In many of these states, home values have not increased nearly as quickly as in other parts of the nation.[5]
With the proper investment decisions and reliable long-term income plans, most pre-retirees and retirees alike can effectively manage their current situation.[8] It is essential that individuals approaching retirement and those who are already retired create a plan that addresses both wealth and health matters over the course of their retirement.[8] Working with a financial advisor can help you make a retirement plan and create income streams for your golden years.[8]
Before making any decisions, it’s important to understand both sides of the retire-and-relocate strategy.[3]
0. “Report shows HECM for Purchase product is misunderstood” ReverseMortgageDaily, 8 Mar. 2023, https://reversemortgagedaily.com/articles/report-shows-hecm-for-purchase-product-is-misunderstood/
1. “On finance, expert says spend less than you make, invest now, save for retirement” Healio, 8 Mar. 2023, https://www.healio.com/news/hematology-oncology/20230308/on-finance-expert-says-spend-less-than-you-make-invest-now-save-for-retirement
2. “Survey shows people plan more for their financial health than physical health” ABC10.com KXTV, 6 Mar. 2023, https://www.abc10.com/article/news/health/survey-financial-health-physical-health-tips/103-f294756b-8166-47b9-9cb4-3200f34c64a4
3. “Vanguard Says Retirees Can Add At Least $100K To Retirement …” MENAFN.COM, 11 Mar. 2023, https://menafn.com/1105752910/Vanguard-Says-Retirees-Can-Add-At-Least-100K-To-Retirement-Savings-By-Doing-This
4. “Why moving in retirement can earn you an extra $100,000 — or more” CNBC, 7 Mar. 2023, https://www.cnbc.com/2023/03/07/why-moving-in-retirement-can-earn-you-an-extra-100000-or-more.html
5. “It’s Possible To Make $100K or More in Retirement — How Social Security Factors In” AOL, 8 Mar. 2023, https://www.aol.com/finance/study-shows-possible-100k-more-125235625.html
6. “Retire-and-Relocate Strategy Can Pay Off for Some Retiree Homeowners | PLANSPONSOR” PLANSPONSOR, 7 Mar. 2023, https://www.plansponsor.com/retire-and-relocate-strategy-can-pay-off-for-some-retiree-homeowners
7. “Moving In Retirement Can Bolster Your Finances. Here's How Much.” Barron's, 8 Mar. 2023, https://www.barrons.com/articles/moving-in-retirement-finances-strategy-vanguard-a653a07
8. “52% of retirees expect to pick up a part-time job to make ends meet” Financial Planning, 6 Mar. 2023, https://www.financial-planning.com/advisers/news/retirees-expect-to-pick-up-a-part-time-job-to-make-ends-meet
