As published in the Savannah Morning News - 21 April 2013
Plan for your next home before you sell.
The road map to a secure financial future, and knowing what you can afford to buy or rent after you sell your home, is all about planning. Meeting with a financial planner is an important step in the process of knowing how long your retirement money will last and what you can afford to spend on your next home.
Too often I meet with senior customers who want to list and sell their home, but don’t have a clear picture as to what comes next. They have no idea how much money they will need in order to live out their life, and they don’t know whether they should buy or rent, or what they can afford. My next question is always, “have you met with a financial planner?” These folks are trained to review your financials and give you advice. They can estimate, based on your assets and investments, what your projected monthly income will be for the rest of your life. You will then be able to see what your income can support in a home or retirement community over the long haul.
Additionally, it is important that both spouses know the full extent of their financial picture. Depression era babies are often of the traditional mindset: the husband takes care of the bills and everything financial; the wife takes care of the cooking, laundry and the house. That’s fine, but I believe in cross-training, because if you lose a spouse due to death or divorce, the other is left without a clue. With seniors, occasionally I see the roles reversed, but not often. And let’s face it, a good number of women outlive their spouses. Regardless, it’s always wise for both spouses to know all about their assets, the name of a key advisor to call in case they need to suddenly step into their spouse’s role, where the files are kept, etc. Read on…
We have all heard about shocking revelations where one spouse spends all the money and the other has no knowledge? Recently, a neighbor had a heart attack and died unexpectedly. His wife thought the finances were in order because her husband took care of everything. In the midst of her grieving and dealing with estate issues, she discovered the husband had tapped their retirement and mortgaged the house to the max. Their assets were depleted. It was not long before the lender foreclosed on the house and this shattered woman was forced to leave her home.
Another scenario which happens all too often: A newly widowed woman has been “taken care of” all her life and now finds herself alone. She has never managed the money nor lived on a budget, and since they have always lived well, she thinks there must be enough money to last. All too soon, the nest egg dwindles, and when it comes time to sell the house and move to a retirement community or assisted living facility, she cannot afford it.
I am told that Savannah’s average annual cost for assisted living is about $45K a year. A good long term care policy should be in your plan, but you still must have the monthly income to support yourself above and beyond that coverage. And, if you plan to move into a buy-in continuing care retirement community, they often require that you qualify based on your total assets, plus your monthly income. If either falls short, you will not meet their qualifications to buy-in. Financial planners can assist in this assessment and guide you accordingly.
Planning while both spouses are still alive is the solution to making sure you can live out the rest of your lives in comfort and with the proper finances in place. Establishing an accurate budget will be an essential piece of the puzzle and your financial planner can provide you with forms to help you establish your budget. You will be able to see if your income can support the new lifestyle you desire, and if not, how much of a draw from your capital you must take each month to meet your expenses. That subsequent decrease in assets will be factored into your projections. Your family longevity will also be a factor. Your planner can then estimate how much you can spend on a home and project your monthly income for the rest of your life.
After your financial plan is mapped out, you can move forward to find your next home with confidence. Your peace of mind is worth it and you will be ready for the next step.
Next week in Moving Mom…Sellers get cold feet too! Stay tuned!