When planning your retirement you need to understand that your biggest expense will always be housing plus the expenses related to maintaining a home: utilities, insurance, property taxes and repairs.
With the U.S. in the midst of an ongoing, affordable housing crisis, your retirement nest egg must be big enough to cover the growing cost of keeping a roof over your head 20 to 30 years into the future.
How The COVID-19 Pandemic Helped Fuel The Housing Crisis
According to a 2022 article published by Bloomberg.com, the Covid-19 pandemic accelerated the growing trend of working remotely. Now that professionals are no longer limited to living in hub cities and commuting to work, they can buy homes in less expensive suburbs across the country.
This means retirees seeking to downsize are now competing with young people when purchasing homes in locations like the Sun Belt that are usually popular places to retire. In Florida, a leading state for retirement, the median sale price for single-family home has increased by 15% while the median price for a condo or townhouse has increased by 20%.
How Much Should You Budget For Housing?
According to Entrepreneur Magazine, U.S. retirees nationwide spent an average of $17,454 on housing in 2021 up from $16,880 in 2020. Though these numbers represent a national average, the increase from year to year can give you a rough estimate of how much the cost of housing will increase by the time you retire. Then again, housing costs depend on your retirement lifestyle. Do you want to age in place or downsize to a less expensive location?
“The older your home may be, the more likely it will need maintenance and upgrades as the years roll on.”
Over 70% Of Adults Age 50+ Want To Age In Place
A 2021 survey conducted by AARP indicates that over 70% of adults age 50 and older want to remain in their homes in retirement and only 20% plan to relocate. Though there are a number of emotional reasons to remain in the home and community where you’ve raised a family, making the decision to stay can become expensive.
The older your home may be, the more likely it will need maintenance and upgrades as the years roll on. Replacing a roof, flooring, or purchasing new appliances can take a big bite out of your retirement nest egg.
Estimating your housing costs in retirement is crucial to developing a successful savings strategy during your working years. Connect with an FRC℠ trained advisor who can help you run the numbers and get you on track for a financially secure retirement.
