#Trend - Small Homes For Retirees!
Tiny homes are all abuzz these days! Adult retreats from the world, to contemplate and reminisce, read and relax. While you might not be ready for such an extreme, downsizing in your golden years is a smart move, literally and for your money. Roughly 12.5% of the population in the US is over 65. The birds have flown the coup, and more than likely lots of “things” that have accumulated in your home over the years. Downsizing is a good way to unburden yourself from all that “stuff” that no longer has a use, but financially put you in the black. If you’re considering this option, the happy outcome would be to walk away with more money, simplify your living and reduce costs in home-maitenance and utilities. Here are some pitfalls to avoid to make the most of your experience.
Don’t overestimate the cost of your home. Just because you heard that the house down the street sold for an exorbitant amount, doesn’t mean yours will. You don’t actually know what the seller is walking away with, what the condition of the real estate market was at that point, or how the condition of that home compares to yours. What you want to do is get in contact with a few real estate agents that can give you a proper valuation of your home, or hire an independent appraiser. You want an unbiased assessment at current market values. A realtor who gives you the rosiest sounding number however, may just really want your listing. Contacting multiple sources can give you a ballpark estimate that you can be comfortable with. You can also do some internet research on sites like zillow.com or realtor.com that tell you what homes in your area have sold for recently.
In the same optimism as hoping your home sells for the highest price, buyers think that they’ll get a steal on their next home. Don’t underestimate the cost of your downsized home. Again, you can use the same online tools as above for houses and areas you’re potentially interested in. Make sure you spend time in any new areas you’re considering. If it's a different location altogether, visit there in different seasons to make sure you’d be happy there all year round. A two bedroom home with all the latest appliances and conveniences may approach the price of a four bedroom home without the latest amenities.
Consider the tax implications of selling your home. Unless you make a fortune on selling your home (Here’s to hoping!) you most likely won’t owe income taxes on your earnings. The IRS excludes up to $500,000 and singles $250,000 in taxable gains. If you don’t end up owing on your gains, other tax considerations include high property or income tax in popular retirement destinations. The tax laws for selling your home are laid out in IRS Publication 523.
Make sure you do your research and crunch the numbers before making the jump to downsizing. It can be a smart move to add to your finances for retirement, however, if you don’t calculate the financial possibilities you could break even, or worse, lose money. Move into retirement comfortably knowing you made the best decision with your money.