I have seen it, and it is ugly. Good hard working people sell their home for a good profit from years of paying down the principal and then, armed with cash in hand, they head to the land of relaxation and perpetual sunshine and wind up with a McMansion.
Large homes are fine when you are raising children but when you retire, one must keep in mind that on average at least 95% of all nights spent in your home, will be by yourself or with your loved one. So for those 5% evenings, do you really need 3-4 additional bedrooms?
Build Your Home for The Two of You
When you are looking at resale homes or floor plans for new homes, keep in mind that you will not wanting to be spending time going up and down stairs when you are 75. Heck, you may not want to do stairs at 55! Therefore, consider then that at least 80% of your main living level is for YOU! The essential rooms are a Master Suite, Kitchen, Dining Area, Living Room, Screened Porch and perhaps an office. Having an additional bedroom on the main level is a plus because sometimes one of the residences becomes ill and needs their own room. Young grandchildren are also easier to keep an eye on if they are closer to the watchful eye of Grandma and Granddaddy.
If you purchase/build a home with an upstairs bonus room above the garage (in the Carolina’s we call that a F.R.O.G. – finished room over the garage), then often this room can offer multiple purposes. Many parents/grandparents like having a room out of the way and not above the main level of the home. This is where you throw the kids and noisy ones so that the old people downstairs aren’t kept awake when they head for bed at 8:30pm!!
The FROG can also be a room for crafts, pool table, man cave, Media room, extra office or storage. Many folks use it as a multi-purpose room because normally it is a good sized room, being that the average garage below is 22’ x 20’. Yes you lose some floor space due to the pitch of the ceiling however, the FROG is often one of the largest spaces in the house. Having a desk, TV and pull out couch upstairs is quite common.
A good portion of Guest bedrooms are also upstairs in homes that folks like to retire in because this way you can kind of close the upstairs off and not have to worry about cleaning and heating/cooling all year round. And remember that one of the cardinal rules of guest bedrooms is make them comfortable but, not TOO comfortable, as if they are, your kids and or guests might be tempted to visit more frequently than you care them too!
Be Sure Your House Fits Your Budget
It’s safe to say that more retired people have gone back to work from 2008 – 2012 than ever before due to the value of everyone’s portfolio dropping so drastically. And one must also add in the value of the homes dropping as using the home as a source of equity can often be a very real challenge.
When you retire, your biggest potential anvil tied to your leg is your home. Let’s look at some numbers you should budget for with regards to your home. We will use a home valued at $300,000 and take into consideration you took out a mortgage of $150,000. The following are possible monthly fees:
- Principal and Interest $1,200
- Home Insurance 200
- Yard Maintenance 100
- Homeowners Association Fee 70
- House Maintenance Fund 100
- Utilities (Gas & Electric) 200
- Water 50
- Cable & Internet 70
- Total $1,890
In order to pay $1,890/month, one must make pre taxes approximately $3,000. Keep in mind that we have not begun to add in other important monthly expenses, including:
- Health Care and Medical
- Dining Out
- Car payment
- Car insurance
- Rainy Day Fund
- Clothing Allowance
- Club Memberships – ie golf, boating, tennis, etc.
Soooo, are you depressed yet? Afraid now you can’t afford to retire? Yes you can providing you don’t overdo it on your house budget.
Purchase/Build a home that makes practical sense to you. Seriously consider giving up your Great Grandmothers dining room table that you will NEVER use when you retire. When you retire and have guests to your home, you will all be in casual wear drinking Margaritas and boiling shrimp. Use that space instead for a really nice office where you can stay in touch with all your old friends back home who wished that they had planned like you did for retirement.
Yesterday’s 4BR, 4BA 3,500’ home is today’s 3BR 2.5BA 2,400’ home. People are being forced to adjust and guess what? They lead as normal and happy, if not happier, retirement lifestyle than those living in McMansions because they have disposable income to enjoy. When you retire, take that trip to Italy. Book a flight out to Alaska and see icebergs on that cruise you’ve always dreamed of. Rent an RV and head cross country for 6 months. All things begin with and end with the cost of your home when you retire, so be smart, budget well and build/purchase a home that fits YOUR lifestyle needs, not those of your infrequent guests. After 30-40 years of hard work, the last thing you want to do is be House Poor!
Doug Terhune Author of The Retirement Handbook