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Your Home and Your Retirement

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Life is like a book made up of different chapters—childhood, the teenage years, college, career building, starting a family, and so on. We’re always evolving and adapting to change, but perhaps one of the most dramatic changes in our lives is making the transition into retirement. Most of us work for the majority of our lives, from that first job selling tickets at the movie theater to managing teams and calling the shots at large corporations. So, transitioning from a steady job to no job at all is understandably a big change in more ways than one.

Finances and retirement are deeply interlinked. For most people, the top concern is whether they’ve saved up enough money to be able to live through retirement with the same lifestyle. But there are other considerations retirees must consider as well. Many adults think about the legacy they will leave. While that legacy looks different depending on the individual, there is often a financial angle to it, whether it’s funding a grandkid’s education, setting up a charitable trust, or starting an environmental non-profit. Often, a large portion of the financial liquidity of retirement is tied up in a home.

According to 2019 Census data, home equity makes up roughly two-thirds of the average American’s net worth. Yes, you read that right. And in historical terms, a home could be considered a pretty good investment, considering that the median price of a residential property sold in 1967 was $22,300, and that same home sold in the first three months of 2022 for $428,700. In other words, the median resale value of homes in the United States has risen by an average annual rate of 4.18%, while inflation during that same period averaged only 3.93%.

Of course, there’s so much more value in a home than its performance as an investment. What means the most to us about our homes often has little to do with its value and more to do with memories and emotional security. Nevertheless, for all the legacy builders on the brink of retirement, it’s important to take a good hard look at your home and the role it can play during your second act. Homeowners should think of their houses not just as investments but also as lifestyle choices that can be exchanged for other properties if and when priorities shift.

All of that said, a home is a very personal space—an extension of oneself, even. The decision to move is also very personal, and before you leap, you would be wise to consider a few specifics.

Geographic Location

According to a recent study by the Center for Retirement Research, about half of retirees stay in the home they occupied during their peak earning years. Around 20% move to a new location at the time of retirement, and the remaining 30% stay in their homes until their health forces them to relocate. Some of the reasons that the 20% relocate at retirement include being closer to grandchildren or other family members, a change in lifestyle from urban to remote living, or maybe you’re just tired of the Bay Area fog. Selecting a geographic location is of the utmost importance, as your location can play a significant role in your overall happiness and quality of life.

Type of Residence

Many retirees opt to downsize from larger family homes to smaller and more manageable houses for a variety of reasons, including cost-effectiveness and easier maintenance but your residence options extend far beyond downsizing. Consider things like community and aging in place. Retirement communities like Vi at Palo Alto or San Francisco Towers provide different lifestyle options. Continuing Care Retirement Communities (CCRC) offer individualized care as you age and have become another popular option for retirees.
On the other hand, some prefer to remain self-reliant. If you choose to downsize to an independent dwelling or to stay in your existing home, consider the cost of things like long-term care, home maintenance, and transportation. Do those costs fit with your financial plans?

Finances

Of course, your finances are a very important consideration. If you can afford to stay in your existing home, fund the legacy you desire, and cover all of the expenses that come with age, that’s great! But if you feel that some adjustments need to be made, know that you have options. Working with an experienced financial advisor is a smart approach to come up with a plan that fits your lifestyle and meets your priorities. Whether you choose to move to a less expensive part of the country, downsize to a smaller home, or something else entirely, working with a professional can help ensure that you explore all of your options and that your financial stability doesn’t come at the expense of your overall happiness and satisfaction.

At Treehouse Wealth Advisors, we know that you have worked hard to build up your financial assets, and we’re here to help protect them, as well as to help you live a fulfilling and meaningful life. Together, we’ll create an ideal path to fit your lifestyle needs and goals; a route that you and your family can live by. Reach out to our team to get started!

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Sources:

Garrison Point Advisors, LLC doing business as “Treehouse Wealth Advisors” (“TWA”) is an investment advisor in Walnut Creek, CA registered with the Securities and Exchange Commission (“SEC”). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. TWA only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of TWA’s current written disclosure brochures, Form ADV Part 1 and Part 2A, filed with the SEC which discusses among other things, TWA’s business practices, services, and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.

Certain hyperlinks or referenced websites, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top-level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with TWA with respect to any linked site or its sponsor, unless expressly stated by TWA. Any such information, products or sites have not necessarily been reviewed by TWA and are provided or maintained by third parties over whom TWA exercises no control. TWA expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.

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