As retirement approaches, many individuals may be looking for ways to ensure they have enough money to fund their post-work years. According to new research published by Vanguard Group, moving to a cheaper housing market could be an effective strategy for unlocking home equity and providing a financial cushion for retirees. In fact, the typical homeowner age 60 or older who sold their home and relocated in 2019 accessed nearly $100,000 in home equity. For those at the top 10th percentile, this figure was even higher at $347,000.
While relocating may not be the right choice for everyone, it can help retirees reduce overall expenses and provide additional funds to support a retirement that could last several decades. The average homeowner age 60 and older has only $223,000 in retirement savings, which may not be sufficient to meet their needs as they age. This makes real estate an important component of overall wealth planning. However, it is important to consider other factors before making a decision about relocating in retirement. Transportation costs, taxes (property, income and estate), and home insurance costs should all be taken into account. Additionally, social relationships and personal pursuits should also factor into the decision-making process. Retirees must ask themselves if they would be happy moving farther from family and friends or living in less desirable weather conditions.
If you do decide that relocating is the right choice for you, there are certain areas where you are more likely to unlock home equity through selling your primary residence. Retirees moving from a primary residence on the West Coast (Washington state, Oregon, and California) and in the Northeast are generally in the best position to do so due to relatively high home prices in those areas. States like Nevada, Utah, Colorado, Arizona and Florida are also well-positioned, according to Vanguard's report. If you're thinking of selling your high-cost property in states like Connecticut or New York, or California, where homes can cost up to $1 million dollars then buying somewhere else can give you similar living standards with lower costs, such as real estate taxes being lower than usual along with lower utility bills, but it's always better if one rents out first before purchasing a new house.
Ultimately whether or not relocating is right for you will depend on your unique circumstances. However, if done correctly, it could unlock significant amounts of wealth, allowing retirees more freedom during their golden years.