After years of hard work, you can finally see the light at the end of the tunnel. Retirement a time of nothing but relaxation, traveling, and trying new activities. However, if you have not planned ahead you could be headed for some stressful times. One of the major stress factors is real estate. A lot of questions come up when you start to think about your future retirement home, like should you downsize? Maybe you should buy another home and fly south for the winter and north for the summer? Perhaps keeping the home where all your families memories were made is the best option? Now there may not be a “one-size-fits-all” solution but there are general pitfalls to look out for and avoid.
Audit the Situation
Take a step back and look at your current real estate situation to make sure it meets your future needs. The 
problem is most people are on autopilot when it comes to their home. Meaning it has worked for them this far so it should continue to work. The mistake retirees make is that they do not realize that their future selves are very different from their current selves.
As we age, our ability to do all sorts of physical things get worse. So it makes sense to assess your housing situation at regular intervals. Even if you plan on keeping your home, be sure to ask yourself these questions:
- Should you make some alterations to your home so you can age in your current home?
- Should you refinance to a 15- year mortgage so you can pay off your home quicker with a lower interest rate?
- Should you get your current home’s equity to put towards a retirement home?
All of these options have pros and cons, so it is important to talk through them and come up with a plan that fits your situation best.
Waiting Too Long To Move
Do not wait until you officially retire to buy or sell a home, especially if you are going to buy a second house. We recommend buying a second home in your 30’s or 40’s if possible. We know that is a bit ambitious since many 
people are struggling to buy their first home, but if you can make it happen you will definitely benefit in the long run.
Honestly, it all comes down to equity. You could use the second home as a vacation home or rent it out and get that extra income. The renter pays down the principal each month and any profit builds up the equity in the home. You will also get tax breaks on the mortgage interest, property tax, and rental property manager fees to offset any rental income. Once you are ready to retire you can sell either your current home or the rented home.
Making Snap Judgements
Florida has a ton of retirement communities and picking the right one is very important. The last thing you want to do is not think about where in Florida you want to live. Our agents are ready to spend entire days touring specific communities, visit restaurants, review commuting times, and travel routes. So take your time deliberating where you want to live.
Using Retirement Money for Your Mortgage
In a perfect world, you will reach retirement age and you won’t have to worry about a mortgage. However, speeding up that process at the expense of your retirement account is not the way to go.
This can be troublesome if people are using pretaxed money, like an IRA, to pay a monthly mortgage bill. This means they pay tax on every dollar coming from these accounts and use the net amount to pay the mortgage. This can be a significant amount of someone’s monthly cash flow. If you are going to be carrying your mortgage into your retirement years, don’t panic, just consider refinancing to get a lower interest rate.
Deeding Property to Children
If you are downsizing in retirement, but your kids want to hang onto their childhood home you might be tempted to 
deed the property to your children. By doing this you could miss out on a massive tax break and saddle your children with an unnecessary tax bill.
If you decide to not sell your home to your kids (or anyone else) you will miss out on the potential profits. You will also miss out on $250,000 capital gains exclusion on your property or $500,000 for married couples filing jointly. So you could be missing out on up to $500,000 of profit that would be tax-free.
Also if you deed your property to your kids, they inherit the “basis” or original price. That is what is used as the starting point to calculate capital gains. When they sell the home, they will be taxed on the difference between the current value of the home and the basis. If it appreciated in value, your children will likely face a massive tax bill. So if you are considering deeding your house to one of your children it would be in everyone’s best interest to consult a tax specialist.
