With the retirement planning much turns around the finances – thoughts and considerations to the optimal housing situation in the age are often forgotten thereby.
Ernst and Maya Regattieri have almost completed their retirement planning. The income situation after retirement has been clarified, the investment strategy has been adapted, and the pension plan, living will and inheritance contract are in place. At a dinner with friends, they talk about living arrangements in old age. The couple realizes that they have not yet given any thought to their housing situation after retirement. The two of them live in the country and bought a house there many years ago with a lot of surrounding land. The Regattieris' friends moved into a two-room apartment after retirement because they spend most of the year traveling with their camper. They want to save on housing costs and prefer to spend a little more on traveling. Of course, the move was not a piece of cake, especially to a smaller apartment, since the big house has accumulated quite a bit over the years. After the aforementioned dinner, Maya and Ernst Regattieri have a lot on their minds: they will probably have to think about their current and future housing situation.
In the course of our lives, our wishes and needs change. What we wanted when we were 20 was certainly not the same as what we wanted when we were 30 or 40. It is the same after retirement: young retirees have different needs than 90-year-olds. Today you can already draw a pension from the pension fund at the age of 58. Thus, more and more employees retire early. Most young pensioners feel vital and are regularly active. They pursue hobbies, travel around the world or are busy with work around the house and in the garden. Many find it difficult to part with their own home. But if our health changes or our entrepreneurial spirit wanes, new solutions are needed quickly. Suddenly other issues become important: living must become more practical. The three-story house is suddenly no longer ideal when climbing stairs becomes difficult. And one day, mowing the lawn robs you of the last of your energy. At this stage of life, change is sensible and necessary. With a move
a single-story apartment with an elevator can significantly improve their quality of life. Proximity to shopping facilities, the doctor and public transport is also becoming increasingly important. Maya Regattieri can also imagine setting up a senior living community. Gradually, she and her husband come to the conclusion that they should stay in their home for the time being, but that they should look for a suitable apartment in the medium term. In any case, they do not want to move only when the work in the house becomes a burden.
As a homeowner, you do not think about a rental relationship in the first place. Depending on the desired residential location, however, renting makes more sense. In central locations, there is often a larger supply of rental apartments than of condominiums. In addition, the condominiums offered today are usually very expensive. Selling the house frees up tied-up capital – funds that can be used to consume assets in the retiree's budget.
Check the affordability
At their next bank appointment, Ernst and Maya Regattieri want to talk to their bank advisor about the affordability of their property. The lower income after retirement limits the affordability from the bank's point of view, sometimes considerably. The couple has compiled their expected retirement income and assets, and fortunately the bank still sees no problems with financing. It's best to talk to the bank three to five years before retirement. In this way, it becomes clear whether amortizations have to be made in view of retirement and whether the mortgage can be increased in the case of upcoming renovations.
Invest or amortize
For homeowners, retirement also raises the question of paying off a mortgage. It is important to keep an eye on liquidity, taxes and investment returns. With the repayment of mortgages, savings are tied up in the property at the expense of the available liquidity. Consider this: as a retiree, resuming a mortgage for renovations or conversions, for example, becomes increasingly difficult due to the strict affordability requirements. The imputed rental value represents taxable income, from which you can deduct the interest on the debt. You actually decide to pay the government more taxes, on the one hand, or pay the bank an interest on debt, on the other hand. An objective criterion for or against amortization is, in addition to liquidity, whether one can earn more return than the debt interest with safe investments. In addition, there are emotional motivations that speak for amortization: Namely, to own a debt-free residential property that you can pass on to your heirs unencumbered. But having to tighten your belt for that in old age is not really enjoyable for anyone.