Retirement planning: The home is Americans' number one asset
By Steve Savant
Ash Brokerage Corporation
Retirement is the most critical time in life. The home people choose to live in is a major component in retirement planning, and may have significant tax advantaged features.
For most Americans, their home is their largest asset. For years, the equity in the family home was used as part of retirement income after downsizing. But when the housing market went upside down, most home owners could no longer bank on their home equity.
Owning a home has always been the American dream and banking on the equity in your home has always been part of retirement planning. But after the housing bubble, the dream turned into a nightmare. Many lost their home equity; some lost their homes and a few poor souls owed money even after repossession by the bank.
But the housing recovery is underway. The economy has fought off a second recession. Unemployment is leveling off. Housing startups are steadily increasing. The inventory of homes for sale is still relatively small, so values are on the rise.
The next big wave in housing is retirement home sales. The baby boomers have begun looking for their last home. Some of the specifications for their retirement home are a one level house with low maintenance in a neighborhood kid-free zone. And keep in mind, most boomers are purchasing existing homes, so retrofitting those homes will become a cottage industry in itself.
But a new brand of home retrofitting is under way beyond the cosmetic: going energy efficient. It’s going green. It’s “greenovation.”And it’s not just lowering your monthly utility and water bills. Many utilities now offer energy related refunds for the installation of new HVAC units, hot water heaters, refrigerators, window treatments and irrigation systems. And add to that manufacturing and appliance rebates. The real bonus may be the federal and state tax credits for “greenovation,” all immediate pocket book items to consider. But it doesn’t stop with the here and now. There’s future financial impact.
In Arizona, the impact of “greenovation” goes beyond monthly utility savings, rebates, refunds and tax credits. For every $1,000 of energy efficient upgrades installed, the average home appreciates $10,000 to $12,000.
The majority of baby boomers are preparing for retirement. They may elect to wait until age 70½ to maximize their Social Security Benefits and take their required minimum distributions from their 401(k)s. Preparing the home for retirement is once again a critical component of golden year planning. It may very well need to be tapped later during retirement by using a reverse mortgage to increase monthly income or sold with appreciation for nursing home care.
The vast majority of mortgage lenders are wrapping the cost of “greenovations” into their mortgages, with some FHA loans excluding the cost in the down payment calculation.
Retirement is the most critical time in life. The home people choose to live in is a major component in retirement planning, and may have significant tax advantaged features. By integrating these tax advantages with other tax advantaged investments like annuities or life insurance, seniors can keep more of their retirement money in their golden years.