We’re all pretty attached to our homes.
By the time we retire, our homes don’t just provide comfort and shelter, they also provide physical proximity to our friends and community, as well as being the place we associate with memories.
Homes are also a major source of wealth for retirees. The value of many retirees’ homes is often as much, or more than their combined pension and investment portfolios. This can be a double-edged sword, as the values of our homes are often the reason that our children end up with an inheritance tax liability.
Expenditure related to your home (council tax, utility bills, insurance, maintenance, etc.) also usually makes up a significant portion of the overall household budget. According to the Office for National Statistics, housing costs (including household goods) is one of the biggest items in the budgets of newly retired households (alongside entertainment, transport and food & drink).
So, there can be quite a strong argument for moving in early retirement. After all, there should be no need to live in a place which is convenient for work anymore. Children may have moved to other parts of the country, and retirees may wish to be closer to their grandchildren. Large homes come with larger bills, and come with higher council tax bills, so a house move can make a lot of sense from a financial perspective. Added to that, moving to a less expensive property can provide an additional source of funds to spend in retirement, and that can result in lower inheritance tax bills (particularly when combined with good planning).
Despite all of this, most retirees still decide to stay put in retirement. In fact, the propensity to move peaks in an individual’s 20s and then declines until about 50, where it subsequently stays put at the lowest relative levels. Older individuals are not more likely to move and there is no increase in the rate of moving at typical retirement ages.
Joseph Coughlin, of the MIT Agelab, has identified how our housing needs change as our bodies slow down and health issues or other aspects of ageing make us less mobile. He states that, when considering where we live in retirement, we should be asking ourselves:
- whether we can continue to live in and properly maintain our current home
- whether we can continue to enjoy basic conveniences, even if we stop driving our own cars, and
- what will happen to our social lives and our opportunities to remain active as old friends also become less mobile or move away.
My anecdotal experience tells me that the family home can be a helpful anchor in the years immediately after you stop work. There’s enough change going on, without moving house as well, so staying put can make a lot of sense. And there are plenty of other things to be doing during the “Go Go” years, without adding a house move to the to-do list.
However, as the “Slow Go” years approach, a house move can make a lot of sense. It’s not a bad project to have as you approach the second phase of your retirement. As the “Slow Go” years progress, our old friends are more likely to become less mobile or to move away. The relentless march of technology may help, with self-driving cars, food and other deliveries, and robotic home and garden help, but it seems more likely that this technology will simply delay the time when we may want to move home, rather than avoiding the need to move at all. By the time we reach the “No Go” years, we might not have the energy for a house move.
It is important for your home to be included as part of your retirement plan. The choice of where you might live and when you might move should be part of your financial plan.
Philip Wise | firstname.lastname@example.org
Managing Director and Chartered Financial Planner