These days, many seniors are struggling to make ends meet due to rampant inflation. But even during periods of more moderate inflation, retirement can lead to financial hardship.
One of the problems is that many seniors assume that they can largely manage on the income they receive from Social Security, only to realize that these benefits are insufficient. Additionally, some seniors assume they can handle a part-time job in retirement, only to find that health issues or other stresses get in their way, making this source of income less feasible.
If you have trouble paying your bills in retirement and don’t have a lot of nest egg to exploit, you may be feeling more and more stressed day by day. But if you’re a homeowner, you may have more options than you think.
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When it’s easy to sell for profit
These days the housing market is hot and inventory is so tight that buyers are clamoring for homes. This gives you a great opportunity to sell your home for a profit and use the sale proceeds as a source of retirement income.
Say you’re sitting on a paid-for house worth $600,000. You may have the option to downsize your living space to a smaller living space that only costs you $300,000 to purchase. From there, you can treat your remaining profit of $300,000 the same way you would a IRA or 401(k) plan. This means investing that money and drawing withdrawals from it to supplement your social security benefits, or whatever other source of income you have.
In a recent Consumer Affairs survey, one in four seniors who sold a home in the past two years did so for the express purpose of being able to afford retirement. And while it’s never nice to feel like you have to sell your house, the reality is that it could be a great source of income when you need it most.
Additionally, unloading a larger home in retirement could result in additional savings, such as lower property taxes and less expensive maintenance costs. Your utility bills could also go down if you move from a larger living space to a smaller one. Over time, the savings could add up.
Another option if you really don’t want to move
You may be attached to your home and want to maintain a larger space so you have the ability to accommodate your family and guests. If so, you might consider converting part of your home to a rental. This may be feasible if there is a separate area of your home that provides privacy, such as a finished basement.
You might also be tempted to borrow against the equity in your home and use that money to pay for your living expenses. But that may not be a good solution, as you could end up with hard-to-follow loan repayments.
It’s unfortunate that retirement often ends up being a more expensive prospect than seniors anticipate. If your current sources of income aren’t enough, it might be time to consider unloading your home. With land values at the levels they are at today, you could find yourself with a big profit in your hands.
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