Working After Retirement

Many people seek to work part time after retirement.  But be careful.  Unless you have reached you full retirement age when you can earn as much money as you want and not be penalized, if you retire earlier, you will be penalized.  If you earn too much, you will be forced to give back some of your monthly Social Security payments.  And, if you earn too much, you could end up in a higher tax bracket related to monies owed for Medicare, which is means tested and specific to 401K and other pension distributions.   

So before you take a job after retiring, check with your accountant to see if it makes sense.  Obviously, if you are going to net less money overall by making a few bucks, better to volunteer your time at non profits that you support if you are just looking for something meaningful to do.  

Maybe a better strategy related to money management after you retire is cutting your living expenses to achieve the same end result.  Downsize your home.  Move to a lower cost of living and preferably no income tax state to reduce any tax burden you may have.  Consider your options.  At Paragon Home Resources, we work with many people every year moving to retire usually from a cold place to a warm place.  However, proximity to family and tax considerations are also big factors in choosing where to retire. 

The Right Time To Downsize

Moving from a larger home to a smaller home can happen at various stages in life.  Certainly, once the kids are gone and the couple are now officially empty nesters, it could be a good time to downsize.  It might also be the time to determine what floor plan makes the most sense for that stage in life.  One story living is always better as we get older.  It might be that fewer bedrooms make sense in favor of a home office or exercise room. 

Downsizing once the kids are gone is actually a pretty easy decision to make.  What is harder is downsizing as we grow even older.  If we are lucky enough to be married for many years into our 70's and beyond, sadly the day will come when a spouse will die.  Aside from the trauma of losing a life partner, all of a sudden the remaining person must face many decisions.  If the spouse that died used to take care of all the day to day finances, bill paying etc., it may be that the remaining spouse knows little or even nothing about what it takes to run the household.  Hopefully, there is a good will or estate plan in place to deal with financial matters; but it can still get very complicated related to just daily living.

This Blogger's mother outlived my father by 17 years.  She was 75 years old when my father died and in pretty good physical and mental shape.  They lived in a 55 or older secure, gated community in a low maintenance patio home with one story living.  We had moved them there many years before.  And fortunately, it was my mother who handled their finances, so there were no gaps in day to day management of her finances or home.  There was no reason for her to move until she was 87 years old when she decided to move into a senior community.  

Even so, as soon as my father died, I took over my mother's finances really to make things easier for her.  So, I took over the check book, which she really did not need to deal with anymore.  All bills went on auto debit.  I gave her whatever cash she wanted monthly since it was her money and or she just used her bank debit card to access cash.  She had a credit card that she used when buying things that was automatically paid every month out of her checking account. 

The point is that we thought ahead.  When my father died, while my mother dealt with her grief, since we had moved them into a brand new home in a very safe community from a home they had owned for 31 years,  my mother experienced no disruption to her life.  If they had still been in their old home, given that they lived many miles from family, we would have had to deal with a move then, or even sooner during the 2 years my father was very sick before he died, which would have been much more difficult. 

As we hit our 70's, we need to start having the "what if" discussions with family.  What if a spouse dies, which is inevitable.  It is best to plan ahead and make a move when both husband and wife are healthy.  The home should work for the remaining spouse when the other spouse dies.  Dealing with grief is more than enough to face, without the need for a move too.  At Paragon Home Resources we assist families with downsizing for a variety of reasons.  We understand the stress of moving; but we make it as easy as possible as we assist with both selling and buying homes, as well as, dealing with household goods.  We get the job done to make life decisions as easy as possible.  

Your Home Is An Important Investment

Many people do not see their homes as an investment; but the reality is that your home may be your most important investment.  Over the years, we have often learned the hard way that having too much money in the stock market is not the best idea.  Yes, the stock market today is at a record high; but it seems that every ten years or so, we see a major downturn in the stock market.   Certainly, anyone 60 and older should be in conservative investments to prevent major losses should the stock market take a tumble.  There are age adjusted mutual funds that get more conservative as someone grows older, which may make the most sense in order to protect assets if the market does fall dramatically.  

Just maybe your home should represent 50% of your overall portfolio to create balance.   As it happens right now both the stock and real estate markets are strong.  But it does not always happen that way.  The reason both are strong is because interest rates are so low.  When interest rates go up many will switch from stocks to bonds to secure a guaranteed return on investment of 3% or more.  When that happens stocks prices will go down.  However, real estate works a little differently.  Real estate is very much predicated on interest rates as well.  So as mortgage interest rates go up, home prices are moderated.  But, real estate is also dependent on both supply and demand and what is happening in the local economy.  

If there are more buyers than sellers, real estate prices go up.  If there are more sellers than buyers, real estate prices go down.  So states or areas with strong economies that are growing will see increases in real estate values.   States that are not growing usually because of high taxes and regulations generally will see less real estate value appreciation.

Most important, every time you make a mortgage payment you are growing equity in your home.  Over the years, if you have not used your home as a piggy bank to make purchases by refinancing and taking equity out of your home, you will pay off your home.  Once that happens, you will have options related to downsizing or moving to a lower cost area.  And, since you can deduct mortgage interest on your home with a mortgage up to $750,000, it will cut your income tax liability so the cost of owning a home is diminished.  You need to look at your home as an investment and important part of your portfolio.  It is just another place to put money; but in this case, you can live in it too.  

Buying A Home In A Seller's Market

Real Estate markets are hot all over the country.  In many places there are just weeks of inventory rather than the usual months.  This often means two things; fewer homes to choose from and at higher prices.  However, the good news is that if you are also selling a home particularly if moving from a higher cost area to a lower cost area, you will get top dollar for your home.  Yes, you will pay top dollar to buy another home in many cases, but if you have the equity to do it from the sale of your existing home, it is probably ok. 

Some might think, it could be smart to sell a home now and wait to buy another one until it is a buyer's market.  The problem with that scenario is mortgage interest rates.  There is no way interest rates can remain at these historically low rates forever.  The ability to lock in a 30 year mortgage at a 3% interest rate is incredible.  Historically, rates have averaged about 8%.  So while higher interest rates would moderate the prices of homes, the payments on a lower priced home when rates go back up could actually be more than the payments on a higher priced home with a 3% mortgage.  So waiting might not be a good strategy.  

The real issue today is finding a home that works for your family when there is so little inventory. Brand new homes are likely to sell for 20% more than an older home with the same square footage.  And, in many cases it is taking months to actually close on a new home because construction times are usually about 6 - 10 months, since most likely there are few desirable homes ready for immediate move in.  

Whatever the market, a buyer should always consider location, location, location.  Always remember there are no bargains in real estate.  If you buy crap, you will own crap that will be hard to sell when the day comes that you want to move.  So, take your time.  At Paragon Home Resources, we work with customers in all phases of life to assist with life decisions.  We can help you sell your home for the best price possible and buy another for the best price.  We have worked in good markets and bad markets for years.  We know how to maximize opportunities to make the right decisions that will stand the test of time.  

Having The Right Home Insurance Coverage

Many people know little about their home insurance coverage until disaster strikes and then they learn the hard way that they may not have sufficient coverage to rebuild their home in the event of a fire or other disaster.  The best advice I have ever gotten related to home insurance came from a few questions from the insurance broker in reference to buying insurance for my parent's home.  He asked me if my parent's home was paid off.  The answer was Yes.  He then asked if my parent's had the savings to rebuild their home in the event of a total loss.  The answer to that question was No.  He then said that my parents needed the maximum coverage so that if their home burned to the ground, they would have full replacement value, which was just common sense.  

If you have a mortgage on your home, the mortgage company will require that they be named as a co-insured on your policy so that in the event of total destruction, they will get their loan repaid.  The three mistakes people make are 1. Not Having Enough Coverage.  2. Not Having the Right Coverage and 3. Not Having Coverage for Natural Disasters.  

Home insurance must be reviewed annually to make sure the coverage is sufficient to rebuild your home in the event of a total loss.  That means having an understanding of local building costs, which could change.   You will want to have replacement value insurance so that your home will be rebuilt if needed.  Insurance on your personal items like furniture is a separate rider to the policy.  If you live in areas that have floods, tornadoes, hurricanes and earthquakes, unless you have insurance coverage for natural disasters, which can be very expensive you may not have coverage at all if you don't purchase it.  You also need to be aware of deductibles that you may have to pay out of pocket before the insurance company will pay.  A flat dollar amount is better than a percentage of value. 

It makes sense every year to review your home insurance coverage with your insurance broker to make sure you have the coverage you need.  You certainly can shop your policy with various firms to get the lowest price and deductibles.  Most important, it is better to be safe than sorry.  Any kind of insurance only matters when it matters.  The last thing you want to experience are hassles to deal with rebuilding your home in the event of a total loss.    

Choosing A Place To Retire - Think Ahead

It is very common for people ready to retire to move from cold places to warm places.  That is the reason states like North and South Carolina, Florida, Arizona, Nevada and even Texas are high on the list in addition to lower or no income taxes and cost of living considerations.  But there are other things to consider as well.  Having family near by should be a consideration because the day will come when a Senior may need help to deal with daily issues. 

However, even before then if moving to a second or third tier city,  one of the most important things to consider is good medical care within 30 minutes driving time.   That means full service hospitals.  While you can leave town for a planned surgery if needed to get to a better hospital, if what occurs is a medical emergency, that local hospital will be critical.  And, for people with chronic ailments, many second and third tier cities have a shortage of doctors and especially specialists.  So before you make a move, make sure there are doctors available that can take you and that will accept your medical insurance coverage.  Many have practices that are full.  Don't move where you can't get good medical care.  

Next, are amenities like shopping, restaurants, sports, live theater if that is important to you and continuing education.  Can you get your car serviced nearby.  Believe it or not, there are some smaller towns that do not have all brand dealerships.  My rule in retirement is that I like everything within 10 miles of where I live so if I have to drive further, I am not interested in living there.  Sometimes people choose to live in very rural areas in retirement far away from medical care and other amenities.  That is not likely to be a good long term decision.   Don't do it because it will result in another move in the future.  

At Paragon Home Resources, we often work with Seniors both moving to retire and also Seniors moving into Senior Care Communities.   We are in a position to assist with life decisions as people consider their options.  It is important to think about life today and life tomorrow to make the right decision when choosing a place to retire.  

The Importance of a Home Office

With so many people working from home as a result of Covid and even before, most people seem to want a home office.  Whether it is just a dedicated space somewhere in the home, a bedroom, a den, or an actual designated office that is separated from other living spaces, this has occurred with the advent of the computer along with other equipment to support document preparation and storage. The good news is that computers and printers are relatively cheap.  The companies that make printers basically give them away to get the long term ink business.  

If you are setting up a home office, you should think ergonomics to some degree.  Having a comfortable chair that is adjustable as to height and other settings is a good idea.  And, there is no reason to use a small screen or lap top key board, even if you use a lap top.  You can connect to a big screen monitor and regular key board both of which making using the computer easier.  You may have to hire a computer nerd to set up your home office to get it all right.  

Further, for those of us that wear glasses, it might be that a special pair designed for computer use makes good sense to prevent neck strain.  Home offices need plenty of over head and or natural light so canned lighting in the ceiling is beneficial.  And, then there is storage.  I like a walk in closet that will house a large 4 drawer fire proof file cabinet for important documents.  They are expensive and very heavy; but most people have critical documents that are hard to replace in the event of a fire or other disaster.  

Home offices, or a home office space should be away from family space.  The whole point is that you are using the space to do work whether personal or for business.  Floor plans matter.  At Paragon Home Resources, we work with people to sell and buy homes.  More often than not when discussing needs and wants, a home office is at the top of the list.