Where will you live when you retire? It is a question that you — or your parents — might be thinking about. Even if you are madly in love with the home you have built your life in, there may come a time when you consider moving somewhere new.
If a retirement community is an option, you have no shortage of choices. Communities catering to people 55 and older are growing steadily. Yet that does not mean one is right for you. For starters, there are financial implications. Will a home in a particular community hold its value? Will your family be able to sell it easily? Remember: You are choosing a place where you may spend your remaining years.
How do you know you are making the right choice? Here are seven questions to consider.
1. Will you be happy living among only people your age?
An age-restricted community may feel odd if you are used to having younger people nearby. You might also find there are restrictions regarding children and grandchildren, notes John Brady, co-author of Baby Boomers Guide to Selecting a Retirement Community and founder and editor of Topretirements.com. “There may be rules about how long the grandkids or visitors under age 55 can stay with you,” he says. What if your adult children need to move home for an extended period? Find out whether the community’s rules will allow that.
2. What other restrictions could cause problems?
Closely review the covenants, conditions and restrictions of the homeowners association (HOA). There may be rules about what changes you can make to your house or even what color you can paint your front door. More crucial might be questions relating to your estate plan, says Debra Greenberg, director and product management executive, Personal Retirement Solutions, Investment Solutions Group at Bank of America. If you plan to leave your home to family members, the age restrictions could complicate their ability to live in the community. It is a good idea to discuss this with your estate attorney before you buy, Greenberg suggests.
3. What are the total costs?
Out-of-pocket expenses for these communities may go beyond the price of the house and association dues. Special assessments and other fees could be an unpleasant surprise, and you could find yourself paying extra to use amenities such as golf courses or tennis courts. Future renovations could also cause your dues to rise unexpectedly. Looking at how much costs have risen in the past can help you know what to expect.
You may find additional clues in the HOA minutes and audited financial statements. The minutes can alert you to ongoing community concerns. The financial statements will show whether the association is financially solvent. Once you estimate the total costs, consider whether you can afford them. “You do not want to be strapped for cash or forced to dig into your savings,” Greenberg says.
4. What is the potential resale value?
One important factor is whether you are buying a condominium or a single-family home — the latter tends to fetch higher prices. Also consider the health of the local housing market. If homeowners in the community you are investigating are having trouble staying current on their mortgage payments, it could lead to foreclosures and depressed prices. Look around the area to see how other nearby properties are faring.
5. How should you pay for your retirement home?
If you buy, you will need to decide whether to pay cash or finance the purchase. If you are selling another home, it may seem simplest to use the proceeds to buy the new one outright. Depending on your tax and income needs, however, it might be better to use part of the cash from the sale as a down payment and finance the balance with a mortgage. Check with your tax advisor about your options.
6. How good is local healthcare?
Make sure there is a respected community hospital or academic medical center nearby. Ask residents about their doctors and check the state and national ratings of hospitals. If you want to have easy access to care as your needs increase, a continuing-care retirement community could offer a smooth transition from independent housing to assisted living or 24-hour nursing care. Keep in mind that having medical services on the premises generally results in higher costs.
7. How will this affect other retirement goals?
As with any major financial decision, buying a home in a retirement community is not a decision to make in isolation, says Greenberg. Balance the cost of your new home against the things you most want to accomplish. It is all part of the process of reviewing potential trade-offs before you buy, rather than after, she adds. “This is where it is really helpful to be forward thinking.”
For more information, click here or contact Merrill Lynch Wealth Management Financial Advisor Jeffery D. Price of Price & Associates at [email protected] or (817)-410-4940.
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