Unlocking the New Retirement Challenge Boomers Must Conquer Today!

January 5, 2025

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Unlocking the New Retirement Challenge Boomers Must Conquer Today!

Attention, baby boomer homeowners! You are sitting on a staggering amount of wealth. That’s right—about $17.3 trillion in home equity, making up nearly 50% of the nation’s total. This windfall comes from the majority of you—83% of homeowners—enjoying the stability of a fixed-rate mortgage and letting your property’s value grow over time.

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But it’s not all smooth sailing. The current U.S. housing market presents a new conundrum for many boomers. As of the third quarter of 2024, the average home price has soared to over $501,000. Shockingly, nearly 30% of all “large homes” (those with three or more bedrooms) are owned by empty-nester boomers, according to a 2022 report by Redfin.

With skyrocketing home prices and limited availability of smaller, more accessible homes for downsizing, many boomers are finding themselves staying put. For those dreaming of a more manageable home or hoping to move to a less expensive area—especially crucial for retirees on a fixed income—it’s become a tough reality.

So, what can you do to tackle this new retirement challenge? How can your generation find affordable housing, and what factors should you consider before making such a significant move?

Here are a few things boomers should keep in mind when looking for affordable housing.

Finding affordable housing is no walk in the park—not just for boomers but for many Americans today.

“Right now, locating affordable housing is a daunting task—many real estate markets are still sizzling. Although inflation rates have dipped, housing prices remain elevated. Plus, property taxes are on the rise in many areas, compounded by increasing insurance costs,” warns a seasoned financial planner.

“People of all ages are grappling with soaring mortgage payments due to escalating property taxes and insurance costs,” she adds. “Homes that once felt within reach are now slipping away.” The reality is that homeowners are struggling to keep up with rising taxes and insurance as property values surge.

For those boomers on a fixed income, especially those who have paid off their mortgages, property taxes and insurance are critical financial burdens. The average annual property tax bill currently stands at approximately $1,815, while homeowners insurance averages around $1,754. Larger homes tend to come with even heftier bills.

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Despite these challenges, affordable housing options do exist; they just require a bit more effort to uncover. If you’re considering a transition to a smaller, more manageable home—or even a new state—ask yourself some crucial questions.

“When looking for a new home or contemplating a move to a potential new state, consider how different states approach taxes for retirees,” advises the financial expert. “Does your state levy a personal state income tax? Are there property tax exemptions for retirees or veterans? Does this state tax your Social Security benefits?”

Also, discover how the state taxes retirement income. Understanding the tax landscape in your potential new home is crucial, as these rates can significantly impact your budget.

“Some states are particularly friendly to retirees when it comes to taxes,” she notes. “For instance, Florida, Nevada, and Wyoming often rank as tax havens for those enjoying their golden years. Consulting a financial advisor can help you navigate these important decisions.”

While some boomers may be torn between keeping their spacious home or upsizing, the expert strongly recommends considering a smaller residence for several solid reasons.

“First off, your family doesn’t care whether your house is big or small; they’ll come to visit regardless. You can always find a temporary solution like renting a larger space for family gatherings, which is far less of a commitment compared to maintaining a larger home,” she explains.

“Secondly, a bigger home doesn’t just come with a higher price tag, but it also demands more upkeep—more cleaning, more repairs, and stairs can become a challenge as you age,” she adds.

Inflation is a reality that must also be considered. It can take a toll on retirees’ finances, and here’s why.

“While inflation rates have decreased, that just means growth has slowed rather than prices falling. It’s vital to work with a financial planner to create a housing budget that accounts for inflation’s impact on your future expenses,” she advises.

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This article is designed to equip you with the insights you need to navigate the evolving housing landscape, empowering you to make informed decisions during your retirement journey.