A new report released by the Employee Benefit Research Institute (ebri) notes that of all the expenses that come with retirement, housing is the most significant, representing more than 40% of the total cost. However, many retirees don’t live in a home that suits their long term needs. Planning ahead can help to save a substantial amount of money down the line.
“Home and home-related expenses remain the single largest spending category for older Americans, followed by health care expenses. However, health care spending is the only component which steadily increases with age: It captures around 10 percent of the budget for those between 50–64, but increases to about 20 percent for those age 85 and over,” said Sudipto Banerjee, author of the new report.
Part of the reason health care costs rise with age is the increase in disabilities. Often times when a home is purchased, little thought is put far enough into the future to see if the home will be compatible should a disability develop down the line.
According to AARP, only 20% of people have features in their home that well help them life comfortably and stay safe in the later years of their retirement.
To help ease the potential financial stress associated with housing costs in retirement, retirees can plan ahead and make sure their house is suitable for the future. Making sure there is a bedroom downstairs and that everything in the home is easily accessible is crucial.
If necessary, downsizing a home and relocating within the area can help to save money. Or, if one lives in an expensive area, it is a potentially wise financial decision to move to a city with a lower cost of living. Evaluating these potential needs sooner rather than later can help determine what steps need to be taken to ensure a home is right for long term retirement.