{"id":2767,"date":"2016-03-04T18:28:56","date_gmt":"2016-03-04T18:28:56","guid":{"rendered":"http:\/\/healthyaging.net\/magazine\/?p=2767"},"modified":"2016-03-06T16:37:42","modified_gmt":"2016-03-06T16:37:42","slug":"finance-2","status":"publish","type":"post","link":"https:\/\/healthyaging.net\/magazine\/winter-2016\/finance-2\/","title":{"rendered":"Finance"},"content":{"rendered":"

By Joe Hearn<\/em><\/p>\n

L<\/span>et\u2019s take a poll. What do you think will be your biggest retirement expense? Travel? Healthcare? Plaid pants? Mai Tais?<\/p>\n

Actually, according to a recent report by the Employee Benefit Research Institute (EBRI), you\u2019ll likely spend the most (40 to 45 percent of your budget!) on housing. That\u2019s right. The Casa. Good old home, sweet home. Nearly half of your income will likely go to cover things like your mortgage, taxes, utilities and maintenance.<\/p>\n

For some reason, this doesn\u2019t sit well with me. Just like the argument for life insurance becomes less compelling as we age, it would seem to me that the argument for spending the lion\u2019s share of your budget on housing becomes less compelling, as well.<\/p>\n

Yes, there was a life stage where it made sense to spend heavily on housing. You hadn\u2019t saved much and needed to borrow. You needed space for a growing family. You wanted to be near good schools. A nice house was comfortable and conveyed a certain amount of status. But are those reasons as compelling in retirement?<\/p>\n

After the EBRI report came out, most articles I read on the subject focused on how retirees could cover such a large expense. But what if you reframed the debate from \u201cHow?\u201d to \u201cWhy?\u201d WHY spend such a large portion of your income on shelter? Especially during retirement. Every dollar you spend on shelter is a dollar that you\u2019re not spending on travel, hobbies and other pursuits that provide meaning, purpose, fulfillment and enjoyment.<\/p>\n

Quick Note<\/em><\/strong>: I am not saying that having a nice house in retirement is bad. Some have their house paid for and it\u2019s a low-cost option. Some can totally afford a nice house without it affecting their other plans. For some, the house is their plan (e.g. a place for kids and grand kids to gather, a neighborhood close to friends, a place to entertain, etc.). The only time where an expensive house might become a problem is when the costs associated with it prevent you from being able to afford the things you really want to do in retirement. If that\u2019s the case, I think it\u2019s worth considering alternatives.<\/p>\n

With that said, I\u2019d like to ask you three questions that will hopefully challenge your thinking on your house and just might lead you to pare back your spending on shelter, so you can maximize spending in other areas that matter to you more.<\/p>\n

Question #1: What would it take to pay off your house before retirement?<\/h4>\n

One way to reduce your housing expense would be to outline a plan to have your house paid off by the time you retire. You\u2019ll still have expenses like taxes, insurance and maintenance, but you\u2019ll no longer be paying principal and interest on a loan.<\/p>\n

Question #2: Would your retirement be better if you made a conscious effort to downsize and simplify?<\/h4>\n

A few months ago I interviewed Joshua Becker of Becoming Minimalist<\/em>. We talked about ways that you can simplify life, minimize stress and focus on what you really want out of retirement.<\/p>\n

One of those ways is to declutter your house and possibly even downsize to something smaller. This frees up time and money to focus on other priorities. If simplifying sounds appealing, check out the Intentional Retirement Pinterest<\/a> page where we have boards for things like cooking for two, tiny houses and the art of simplification.<\/p>\n

If you want to go one step further, I personally think it\u2019s worth asking if home ownership still makes sense for you during retirement. Taking care of a house is more difficult as you age. You don\u2019t have the same space needs. It ties up a huge chunk of your nest egg. If you compare owning vs renting, you might find that owning is not the \u201cno-brainer\u201d that it was during your working years.<\/p>\n

Question #3: What if you redefined status in retirement?<\/h4>\n

Let\u2019s be honest. Our culture confers a great deal of status based on things like homes and cars. It\u2019s easy to get sucked into that game. Especially when banks are more than willing to put you in debt up to your eyeballs so you can make a good showing for the neighbors.<\/p>\n

What would happen if we started to buck that trend? What if, instead of the currency of status being \u201cstuff,\u201d we started to make it travel, purpose, time with family, happiness and freedom.<\/p>\n

A year or so ago, I read about a couple living in California who spent about $7,000 per month on housing, cars, groceries, eating out, entertainment and vacations. They wanted a bit more adventure during retirement, so they sold the house and cars and hit the road with the goal of extended stays in interesting places for the same or less than what they were spending in California. They stayed several months in London for $6,800 per month. Florence and Paris were a bit less at $6,050 and $6,550, respectively. Buenos Aires was a comparatively modest $4,400 per month and Mexico was practically a bargain at $3,450 per month.<\/p>\n

Is this for everyone? No. Should we do those things simply for the status associated with them? Definitely not. Climb the mountain so you can see the world, not so the world can see you. But if we\u2019re going to admire people for something, we could pick worse criteria than looking up to those who live a full life.<\/p>\n

Bottom line\u2014think through what\u2019s important to you during retirement. What do you really want to do? Once you have that list, invest heavily in those things. If your house is on the list, great. If not, don\u2019t allow it to consume most of your resources at the expense of everything else on your list.<\/p>\n

Joe Hearn is an author\u00a0and financial planner who specializes in helping people prepare for retirement. You can connect with him at www.intentionalretirement.com<\/a><\/span><\/em><\/h6>\n

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Your Biggest Retirement Expense (and How to Get Rid of It)<\/p>\n","protected":false},"author":3,"featured_media":240,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[47,48],"tags":[],"class_list":["post-2767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-winter-2016","category-winter-2016-columns"],"acf":[],"_links":{"self":[{"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/posts\/2767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/comments?post=2767"}],"version-history":[{"count":8,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/posts\/2767\/revisions"}],"predecessor-version":[{"id":3360,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/posts\/2767\/revisions\/3360"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/media\/240"}],"wp:attachment":[{"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/media?parent=2767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/categories?post=2767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/healthyaging.net\/magazine\/wp-json\/wp\/v2\/tags?post=2767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}