By Peter R. Wechsler
President & Co-Founder, Franklin Retirement Solutions
[email protected]
Having been in practice for over 22 years, I’ve seen many folks move, leaving behind their big houses in the burbs. But the past few years we’ve seen few of our retirees or pre-retirees moving. They are staying put.
If folks still have mortgages, they hesitate to give up their 2.5% or 3% interest rates. They also find out quickly that the smaller house they were looking to move to is as much or more expensive than their current home. A great example is many of the newer 55+ active adult communities. They have houses selling for close to $1 million by the time you upgrade from builder grade features.
Whether moving to a retirement community, a condo, apartment or moving out of the area, the good news is that this frees up your house to go on the market. Why is this good news? Since so few of us are moving, this is raising the price of those homes that do come on the market. Yes, supply and demand still works.
When I moved back in 2021, I bought into a townhome community with a condo association. This was ideal for me as I’m not interested in anything outside the house. The condo fees handle replacement of the roof, doors, garage door along with siding and stucco issues. They handle the landscaping, snow removal, trash and they just coated my driveway a few weeks back. Easy living!
A recent column in the Wall Street Journal talks about how many older Americans are now deciding to rent, saying they no longer need to own. The column sites rising property taxes, homeowners insurance and home-repair costs as reasons people are looking to rent. Oh yes, and don’t forget the yardwork. As you age, it doesn’t get easier.
According to the recent column, the fastest-growing group of renters are those 55 and older, according to Census Bureau data compiled in 2023 by the National Investment Center for Senior Housing and Care. Another study found the share of renters 65 and over rose 30% in the last decade. I have clients who’ve sold their homes, taken the proceeds and invested that money. They then take a monthly distribution to cover the rent or at least part of the rent.
I recently had a couple who sold their home and netted $675,000. Using a withdrawal rate of 4.5% per year, these clients can pull out of this investment account around $2,500 a month towards the $4,000 monthly rent for their new digs. The old house was costing them $900 a month in property taxes, an average of $400 a month for landscaping and snow removal and $4,000 a year for homeowners insurance. And on their 60 year old home, they estimated it cost them at least $8,000 a year on average for repairs, maintenance, and appliance replacement. All told, my clients are saving money every month now that they are renting a beautiful townhome.
What’s the downside? Inflation…since you know the rent is going to increase every year. But hopefully, so will your investments and Social Security. So whether it’s a rental home, luxury apartment or condo, know that when you sell your house you will be helping the millennials and the Gen Z’s buy their first or next house.
Enjoy the weekend with Labor Day around the corner…
Peter