As people approach the age of retirement, they begin to reconsider the lifestyle they want to lead in their golden years. Some people may look forward to spending their savings on a round-the-world trip or cruise. Others may see the benefit of downsizing their current home to save money on property taxes and instead invest in a smaller retirement apartment where they won’t have to worry about home maintenance.
Many people anticipate getting a good price for their family home, which they might use to purchase a retirement condo. However, there are financial and emotional costs to consider when making this decision. Here are some of the things you should expect and the costs associated with downsizing to a retirement apartment in Corrales, NM.
Unexpected Costs
Selling a home is not always as simple as it appears. You may incur some additional costs before your home sells. This is especially true in a hot housing market, where you must consider potential renovation and home staging costs for selling a house. This could significantly reduce your total home sale profit.
Although home sale tax laws are favorable and include tax exemptions on capital gains, you may still have to pay a significant portion of your sale proceeds if it exceeds the exclusion limit. Then there are closing costs, which could amount to at least 8 to 10% of the home’s selling price. If your downsizing plans are solid and selling the house is a final decision, ensure you are financially prepared for such contingencies and deductions.
Be Prepared
A quick sale of a home is great, but you could be in trouble if it sold sooner than expected and you weren’t well-prepared. Many homeowners who do not expect their homes to sell quickly are often forced to consider short-term renting until they find a suitable retirement apartment. Not only does this result in unanticipated additional rental costs, but also a great deal of distress.
Management Fees
The benefit of moving into a retirement apartment is not having to maintain a home. Retirement communities typically take care of cleaning, repairs and regular upkeep. While all of this gives you plenty of free time, it comes at a cost. Monthly fees for independent living communities average around $3000 and may be higher if your loved one is part of a Senior Assisted Living or Memory Care community.
Bills, Care Costs and Exit Fees
Downsizing to a retirement apartment means eliminating unnecessary maintenance costs. However, there are still monthly bills to pay for utilities. If you require additional care at some point, assisted living communities and in-person care may cost significantly more per month. Finally, some retirement communities charge an ‘exit fee,’ which must be paid if you or a loved one moves on or passes away.
This is not to say that downsizing is a mistake. For most people, it marks the beginning of a new and hopeful chapter in their lives. Before making a decision, talk to a few retirement communities to get a detailed breakdown of the costs associated with living there. Ultimately, downsizing to a retirement apartment could be a wise move if combined with prudent real estate decisions and a well-researched plan.
