Retirement 2019

Real Estate should Play a Role in Your Plans.

The days of collecting a pension and counting on 6% interest income from safe investments are gone. We Baby Boomers are watching the balances of IRAs and 401-K accounts go up and down with the stock market. Before we even calculate what the Tax Man will take with each draw, we wonder what's a retired lifestyle in today's world.

As these decisions loom, include a major asset, your home and the equity built up, in the analysis. Tamer inflation has muted the real estate gains realized at the end of the twentieth century, and new tax law limits on the tax deductions previously associated with homeownership may marginally reduce the appeal of property ownership.  Regardless, equity naturally rises as mortgage balances fall. You know your house and the community in which you live. Values are likely to remain stable, unlike the volatility of your stock holdings.

Ask questions like these to assess how well you manage this asset:

• Does the house suit my needs? Owning a home that is larger than what you need is like keeping a long-held stock because you like the company, regardless of dividend or growth prospects. Understand why you make this choice.
• Can I maintain it? In most markets, agents say buyers want "ready to move in" condition, and deferred repairs impair value beyond their cost. If you are not able to keep up with the demands of an aging property, be open to the option of moving to a newer home before yours becomes a "fixer-upper".
• Could it be a source of income? While you can't rely on interest income with rates so low, rental income from a house that no longer suits your needs may be the best way to enhance a budget. Include the expense of professional management in your projections, and review tax issues with a professional.
• Are there family issues to consider? Many Boomers hope their children will benefit from their real estate. If this factor influences decisions, include parents AND children in real estate decisions.

These comments are the tip of an iceberg of an issue -- but I hope they provoke some thinking.