Retirement is an important stage in our lives. It is also a stage that can last roughly 30 years or even longer. Since it is such a big stage in our lives it is super important that we take control of our retirement and learn from current and past generations. If you belong to a generation younger than the baby boomers you can learn a lot about retirement by learning from what the baby boomers are doing that is good and bad and following or not following certain trends.
The following are some of the trends for baby boomers when arriving at retirement and in retirement:
First, roughly 63% of those surveyed by The Demand Institute plan to stay in their current home once they retire. That is great news! Why is that great news? It is good news because it means that many Baby Boomers realize that it isn't always in their best interest to buy a new home and take on another mortgage when they jump into retirement.
Even those 63% don't plan to move there are still plenty of Baby Boomers buying homes when arriving at retirement? For many of those buying homes they are fulfilling a delayed aspiration of home ownership or possibly pursuing their "dream home." Again, for most the reality is that they need to take on debt in order to do this.
There are so many variables when in retirement, especially during the first 10 years or so of retirement. While you may be fairly certain that you have enough for your needs during retirement and just enough extra to be able to pay for a mortgage you can't be sure. It won't be until each year passes that you will begin to truly know where you lie with being able to provide for everything you need in retirement. Not to mention the variable of another market fall off that can really hurt your nest egg. Because of these variables, it isn't always the wisest decision to jump right into a new mortgage in retirement.
With that in mind there is still a very big portion, 76%, that own homes and of those that own homes, more than half have a mortgage. To make it sound even more daunting the median outstanding mortgage balance for those 50 to 69 years old has grown 142% over the past 20 years. Again, of those buying homes while in retirement, more than half are doing so by taking on debt through mortgage financing.
We can learn from these Baby Boomers! The main thing I want you to learn from this article is that unless you have so much money you don't know what to do with yourself, it is wise to not carry a mortgage while in retirement. Do whatever you can now to payoff your mortgage before you get to retirement. If you are stuck on getting into a different place when you retire there still is a better way if you start early enough.
If you know that you are going to want to downsize then find a home now that you would like for when you retire and use it like a rental property until you get to retirement.
Where are you going to get the money for the down payment for this rental property? From your retirement account!!! You can use the money in your retirement account as the down payment for your rental property which you eventually you'll take the home as a distribution when in retirement. There are things to be aware of when taking the home as a distribution and so when getting ready to take the home as a distribution make sure you talk to a tax attorney or tax accountant so that you can expect everything that will happen.
In order to use your retirement money to invest in real estate you need to work with a custodian that allows self-directed IRAs. A self-directed IRA will allow you to purchase the property and get all the tax benefits that come with an IRA retirement account. There are so many benefits to doing this and honestly if you want to purchase other things with your retirement money like gold or other investments you can do it all through a self-directed IRA.
Also, if you are trying to figure out how this is done or how to set this up please contact us. We are self-directed IRA professionals that have been in the business for a very long time. We are here to help you get the most of your retirement.
Author: Nick Barker