A house is not only a home, it is the major financial asset for many in retirement—and it is also the biggest single expense in many cases, according to the Center for Retirement Research.
A report said that among those ages 65-74, the median amount—the point where half are above and half are below–of financial assets is about $125,000, compared to a median home value of $150,000. The difference is even greater for those in the 75-84 and 85 and above age groups, it said.
Many retirees view their house as a reserve financial asset, which could be sold in a pinch, such as to pay the costs of going to a nursing home or assisted living center, it said. It also commonly serves as a major portion of what they will be able to bequest to their children.
Meanwhile, a house accounts for about 30 percent of expenses in home expenses including utilities and upkeep, mortgage payments aside. That’s about equal to the costs of food, clothing and transportation combined.
To lessen those costs, one potential strategy is to downsize: sell the house and buy something smaller, while investing the difference and the savings of lower housing related costs. However the report warns: “Moving becomes more difficult as you age, both physically and socially. If you put it off until tomorrow, when tomorrow comes, you’ll likely put it off again.”
Another option, for those wishing to remain in their same homes, is to take out a reverse mortgage, which in effect is a loan so the proceeds are tax-free and do not affect Medicare premiums or how Social Security benefits are taxed.
However, there are various costs and restrictions involved in a reverse mortgage that might make it not the right option in many cases, the report said.
