Life is a series of transitions. Your first home was likely an apartment or small condo. As time passed, your housing needs changed as your family and income grew. By the time the kids move out and start their own lives you will have lived in several homes, with the last being the largest.
"Now what do we do?" is a common question facing our clients as they struggle through this next stage of life. In helping them work through the process, we've noticed they fall into two groups.
The first group includes people who view their homes as partial investments. They start planning early to maximize their returns. They are realistic about the practicality of aging in the places they are currently living. In theory, being able to age in place works as long as you are healthy, can climb stairs and don't have major medical issues or other life-crisis events. However, these empty nesters plan for the transition early by mentally downsizing and cutting emotional ties to homes too large to maintain, but filled with memories.
Maintenance is a deciding factor. They realize that if they can't maintain their homes, its value decreases. To maximize their return on investment, they need to sell their homes in prime condition.
But if they sell, where do they go? Some will downsize locally. With Alaska as their primary residence, they can continue to enjoy the current absence of state or local income tax and have summer outdoor benefits. They can find relief from cold winters while good health allows travel to hot and humid locales.
A 2014 NPR program titled "Here's why it might be a good idea to retire in Alaska" referred to a National Institute on Retirement Security report that put Alaska near the top. The report, titled "Financial Security Scorecard: A State-by-State Analysis of Economic Pressures Facing Future Retirees," went over the potential economic pressures facing retirees. Eight financial security variables were scored. Even with a colder climate, Alaska scored an 8 out of 10, with 10 being the best.
Other clients in this first group will relocate south to areas with warmer climates they became familiar with during vacations — or they may move back to regions from childhood. The biggest reason to move away from Alaska is to be nearer to aging family who need them now. They may envision a seasonal vacation return to Alaska — at least for a time.
By planning their downsizing, this group accomplishes a number of goals: 1. It allows them to declutter by giving items to the kids, donating or repurposing through a garage sale; 2. It frees up extra cash and time, which will hopefully allow for more vacations with family and friends while they are still active enough to do so; and 3. It gives them a say in events while alleviating some of the stress when family members have to step in to manage an eventual health crisis.
The second group thinks of their home not as an investment, but as a living expense. They likely have paid down their mortgage and have refinanced to a low interest rate. Their concern is finding something smaller, but comparable with similar amenities and just as affordable — which is difficult. It is a Goldilocks puzzle — nothing seems a just-right fit and excuses fuel the decision to stay put. The decision is emotional, not one based on financial or anticipated health concerns. It seems so much easier to maintain the status quo and age in place.
To age in place, the home may require a few modifications such as stair lifts, wheelchair ramps, and bathroom modifications. These types of upgrades could be cheaper than trying to find a newer home with those amenities.
However, staying in a larger home than needed does present a few problems. First, retirement brings budgeting, yet home maintenance still continues, although perhaps not with the same quantity or quality as previously. Estate sales are the perfect examples of homeowners waiting so long that deferred maintenance eats away at the equity.
Second, the downsizing of personal belongings isn't necessary when staying in the larger home — until a crisis occurs. At that point, when a fall, a slip, broken bones or an increase in dementia requires relocation, other people may need to decide what personal belongings are kept. Whatever the reason, the crisis creates a need for more care than family can provide at home.
Crisis downsizing is what we are currently going through with my father. He stayed in a ranch-style home, and the doctor took away his driver's license years ago as his dementia increased. Now, after a series of falls and mini-strokes, his care requires more of an assisted living environment than what he can get at home. The family must now make those important decisions of where, what and how for him. Fortunately, he did do some preplanning by having a will, power of attorney, health directive and Comfort One in place.
As you adjust to life as an empty nester, think about your next steps and which group you identify with, so you and your family can plan accordingly.