Housing is one of the largest expenses for retirees, according to a 2019 report from the Employee Benefit Research Institute (EBRI). The report found that people ages 65-74 had a median housing cost of $21,000 annually. The median annual housing expense cost for people 75 and older was around $18,000.
If you’re trying to make your retirement savings last or haven’t yet saved enough to retire comfortably, the key to saving more or making the funds you have last longer could be choosing an alternative option for how or where you live in retirement.
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1. Downsize to a smaller house or condo
You may have needed four bedrooms and 3,000+ square feet in the past, but now that your kids have moved out, do you really need that much house – and all the costs that come with a larger property?
The bigger the house, the more you’ll pay for major appliances, repairs, lawncare and other maintenance and upgrades. You’ll also pay more in property taxes and homeowner’s insurance. By downsizing to a smaller house or an affordable condo, you can easily save thousands of dollars a year – freeing up more money to enjoy your retirement.
2. Move to a more affordable neighborhood
If you bought a house in a trendy part of town years ago, there’s a good chance the value of your home has increased significantly. Meanwhile, you’ve paid down – or maybe even paid off – your mortgage, increasing your equity.
If that’s the case, selling your current home and buying another in a nice but less pricey neighborhood could reduce your mortgage payment or possibly even allow you to buy the new house outright, without taking out a loan. You could also make a tidy profit on the sale, allowing you to add to your retirement savings.
3. Get a roommate
Still haunted by the memory of that bad roommate in college who partied all hours, brought strangers home overnight and paid the rent late? Well, you’re older and probably know the red flags of a deadbeat by now, so having a housemate to split monthly expenses with doesn’t have to be an annoying experience.
With a housemate, you’ll save a ton on utilities, rent or mortgage payments and other monthly costs. And maybe you’ll enjoy having someone around to go to dinner or a movie (someday), join in as you yell at TV political pundits and help you cook or clean. If you have pets and like to travel, you won’t have to hire a pet sitter or boarding costs, which is another savings.
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4. Rent out part of our home
Not ready to give up privacy for a full-time roommate? Consider renting out a room in your home occasionally on a sharing platform such as Airbnb. You don’t have to live in a vacation destination to draw renters, either.
People rent Airbnbs for work all the time, especially if you live near a university or teaching hospital. Sometimes, people need a temporary place to live while buying a home or searching for an apartment. Renting out a room here and there can help pay the bills and keep you from depleting your retirement savings too quickly.
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5. Relocate for a lower cost of living
If you currently live in a city with high housing prices and an overall high cost-of-living index, maybe you’d fare better in retirement by moving to a city or town that’s more affordable. Many southern states such as North Carolina, South Carolina, Georgia and Alabama offer milder winters and a lower cost of living.
To get an idea of a state’s cost-of-living, search the Missouri Economic Research and Information Center (MERC) cost-of-living index. To find out cost-of-living and other pros and cons of certain cities and towns, search sites such as Sperling’s Best Places, AreaVibes or Livability.
6. Rent an apartment or a house
If you own a home but are tired of the stress and expense of property taxes, homeowner’s insurance, repairs, lawn care and other upkeep costs, renting an apartment or house may be less expensive. Even if you pay the same or more in rent than your current mortgage payment, you’ll probably pay thousands of dollars less annually.
Another benefit of renting is that without the pressures of house upkeep, you will likely have more time and money to devote to pursuing other interests in retirement. But renting has its downside, too. Your rent could increase or the owner could sell, forcing you to move at a more advanced age.