By Tom Sedoric and Casey Snyder

Homeownership is one of life’s most significant and exciting financial decisions. Unfortunately, it is a decision that’s often made without proper context or financial awareness. Contrary to popular belief, homeownership isn’t always an asset. As we previously stated:

“The reality is that the true cost and value of homeownership is often complicated, misleading, and has a dramatic impact on most other financial goals and obligations, particularly one’s retirement.” 

As we all age, it’s important to analyze whether our house is an asset, and—more critically—understand the costs of renovating that house to age up comfortably, safely, and within our means. Factors such as floor plan, accessibility, manageability, and location should all be considered in relation to aging in place at home. These renovations come at a cost that must be planned for accordingly before retirement age is reached. 

Is Your House an Asset? 

An asset, in simple terms, represents value that can be converted into cash. To help you determine whether your house is an asset, look at two main factors: 

  1. If your mortgage isn’t paid off, or your home costs you more than it’s worth, then it’s an expense.
  2. If your mortgage is nearly or entirely paid off, or you’re making money off your house via renters, it’s an asset.

Determining whether your house is an asset or an affordable expense is an important first step in forging your retirement path to: renovate, downsize, or rent. 

Renovate, Downsize, or Rent? 

As you approach retirement age, it’s important to discuss your future housing plans in relation to your finances and financial goals, among other things. Some of our clients are surprised to learn that renting can be the most economical option, depending on property taxes, insurance premiums, unexpected annual expenditures, etc. To determine whether renting or homeownership is right for you, ask yourself: 

  • Does your current and future financial situation afford annual maintenance and carrying costs, especially as property taxes and insurance premiums rise faster than the general cost of living?
  • Have you planned for unexpected annual expenditures, such as replacing appliances, energy-efficient upgrades, and various necessities (such as septic, furnace, etc.)? 
  • Will a job loss or unexpected life event (such as the illness of a loved one) disrupt your financial security?
  • Are you able to responsibly save in pursuit of your other life goals? 

Some homeowners opt to downsize as they age—moving closer to family and having a smaller house to maintain can be an appealing notion in retirement. One word of warning we’ll leave you with is to be cautious not to fall into the trap of “upsizing” in your efforts to downsize. These types of moves can seriously jeopardize your financial security and we have seen a supposed downsize turn into a painful upsize time and time again. 

The final option we’ll discuss today is a home renovation for retirement. The houses we live in and buy in our 30s, 40s, 50s, and 60s may not be able to support our needs in our 70s and beyond. 

Here’s what you’ll need to keep in mind if you’re planning to age in place: 

Home Renovation Costs to Consider 

Aging in place is very attainable, but does require adequate planning. The physical layout of your home may be one issue you’ll need to consider. For example, if your house is multiple floors, a chair lift or residential elevator can increase mobility and reduce the chances of a fall. Think about other ways you can make your home more accessible: the National Institute on Aging writes, “Would a few changes make your home easier and safer to live in? Think about things like a ramp at the front door, grab bars in the tub or shower, non-skid floors, more comfortable handles on doors or faucets, and better insulation.” 

There are many other simple—and more complex—home renovations you can make to ensure your house is safe and manageable as you age. Aging in Place is an excellent resource to explore these in detail. 

Location is another important factor to consider when you’re considering aging in place. Is your home located in a remote area? If family and friends are important to you, what is your proximately to loved ones for pleasures and in times of need? Can you easily access services (such as grocery stores, pharmacies, health care facilities, etc.) from your current home? Also, bear in mind you may need to outsource help with cleaning, grocery deliveries, or even at-home health care in your later years. Is the labor pool adequate to support your efforts to age in place? We recommend taking these considerations seriously as you evaluate aging at home. 

Proper planning in your 50s and 60s makes it simpler and more financially feasible to age at home throughout your golden years and beyond. For more insight into how to plan accordingly, download our free white paper: Housing Transitions: Planning for Life's Next Big Event here