The vision for your retirement could be a series of cross-country RV trips or exotic globe-trotting adventures, or perhaps you see yourself hosting holidays with a home full of grandchildren or volunteering your time in your community.
How and where you plan your retirement will include a number of financial, emotional, social and health considerations as you and your family make decisions for the future.
Longer lifespans have transformed modern retirement into an era that could span 20 or 30 years, allowing more time to enjoy yourself — but also presenting a greater need to prepare.
One of the main considerations for any retirement plan is housing. This is one of the most prominent core expenses you will face in retirement, rivaled only by the costs of health care.
An important piece of the retirement puzzle
Many Americans who are still working don't fully appreciate the complexity and potential expense associated with where they'll live as they grow older.
According to a recent Ipsos survey, conducted on behalf of RBC Wealth Management-U.S., 61 percent of respondents expect to age in place with assistance and 17 percent expect to live in an assisted living facility.
The reality, however, can be more complicated, and will reflect changing needs and desires associated with different post-career phases. For example, early retirement typically finds people healthy and engaged — a time when some choose to downsize after children have left the nest. Further along in middle retirement, slowing bodies and physical limitations may prompt retirees to reassess their housing needs, while safety, support and medical care often become paramount as seniors head into later retirement.
“There is a disconnect when it comes to factoring housing into a retirement plan in a realistic way," says Angie O'Leary, head of Wealth Planning for RBC Wealth Management-U.S. “Not only is it a large expense, for many it represents a large and often overlooked asset. To think about retirement without having a serious conversation about housing misses a large piece of the retirement puzzle."
Housing and lifestyle choices
Pre-retirees face several choices when it comes to housing and lifestyles in early retirement, notes Griffin Geisler, wealth planning consultant at RBC Wealth Management. These could include:
- Will you downsize and move into a smaller condo or townhouse? Or move to a new town?
- Will you choose an active adult community with social and recreational options, perhaps one catering to niche interests?
- Will you sell your primary residence and live year-round in a beach house or vacation cabin?
Even healthy, active, newly-retired individuals should consider their living situation later in life, as they potentially face physical limitations that require assistance.
One option is a continuing care retirement community where healthy, younger retirees can live independently. Should your needs change, the option of moving to an assisted living or full-time nursing section is available on the same property.
“You can really transition through those housing stages in one community. We're seeing more of those pop up," Geisler says.
If you choose to age in place, you may need to update your home to make it safer and more senior-friendly. This could involve remodeling bathrooms to make them more accessible, placing laundry equipment on the main floor and making sure stairways and hallways meet your needs, Geisler says.
These features may not be as important in your 60s and 70s, but are likely to become more so in your 80s, he adds.
Alternatively, downsizing from the family home into a condo or smaller dwelling may make more sense for some retirees, Geisler says. He points to the example of an RBC Wealth Management client, a recently divorced 70-year-old retiree, who qualified for a condo mortgage based on her retirement assets. Geisler says this was a more cost-effective and tax-efficient move than using cash to buy her home.
Planning versus dreaming
Whether you're just starting to think about where you'll live in retirement or have a clear idea of what you want to do, it's important to take the first step and start talking with your family.
Kim Mickelson, head of RBC Wealth Management's packaged solutions group, says it's important for families to understand each other's desires for retirement.
Once you know your goals, meeting with a wealth professional can help assess your situation—including assets, liabilities, and responsibilities — to see how your dream compares to reality.
30%less likely to be surprised by the cost of health care when a wealth plan is in place
“The further ahead they plan, the more options they have," Mickelson says, explaining that people can change their financial strategy or adjust goals if necessary. "Waiting until a year before you retire can lead to surprises."
Even a decade before leaving the workforce isn't too early to start talking with a professional. Retirement goals and wishes must be woven together with your financial plan, Mickelson adds.
Planning ahead — whether you hope to travel, move geographically closer to grandchildren or settle in a milder climate — can help put you on a path to a prosperous retirement.