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Perhaps you’ve always had a vision of your ultimate retirement dream home. Is it somewhere warm? Is it a spacious home in a maintenance-free community? Or perhaps you’d like to purchase some land on or near a golf course so you can play to your heart’s desire.

As you near retirement, it’s important to realize that while it’s great to dream, in order to make your dreams actually become a reality you need a solid plan to back them up. Being able to calculate your approximate future cost of living is one of the most important aspects of your overall retirement.

Since cost of living will require a significant chunk of your retirement fund, following are a few questions that may be helpful as you’re crafting a plan for the retirement home of your dreams:

1. Factor health care costs into your planning

I’m sure you’re already aware that health insurance isn’t cheap. In retirement, that cost is definitely something to take into account when planning what type of home you’ll reside in during your golden years. While you’ll qualify for some free benefits through Medicare when you reach full retirement age, there may be other major expenses involved in supplemental programs to boost potential gaps in your coverage (see my previous Medicare blog).

A financial expert can help you look at the current costs of health care for retirees and take into account the anticipated effects of inflation during your retirement years. Other healthcare-related expenses include life insurance and whether your policy could run out before your mortgage is paid off; and how your significant other would make up for the loss of Social Security income should something happen to you.

2. Consider the geography of your retirement

Will your dream retirement home require you to relocate? If you want to move to a location that offers both your preferred lifestyle and affordability on a retirement budget, then relocating could work in your favor. But remember the cost of living in certain parts of the country and around major cities varies dramatically. Check out this US News post on 50 Affordable Places to Buy a Retirement Home.

Other considerations for where to settle during your golden years could include proximity to family and friends, as well as quality healthcare. Also consider how important a particular climate and accessible amenities will be to you in retirement. To find out if you could see yourself calling a particular location “home,” spend some time renting or vacation in that area so you can try it out before making a commitment and investment. Make sure you also do research on housing costs for owning and renting, as well as taxes in a particular state.

3. Will you still have a mortgage in retirement?

If your retirement dream home is the one in which you’re currently living, how close are you to paying off the mortgage? If you still have years of payments ahead of you as you enter retirement, that’s an important factor to keep in mind as you lay out your overall financial plan. In this case, you might consider how refinancing your mortgage could help lower your payments. Meet with a financial professional that can help you identify how much you could save in order to figure out if it’s the best choice for your situation.

If you’re not attached to your current home and would rather downsize in order to cut costs, figure out what the equity in your current house could afford you in the area where you would like to retire.

It’s also essential to understand any future mortgage obligations as they will likely influence your decision to sell an existing home and relocate, or to downsize to a more cost-effective lifestyle. If you downsize, what would the equity in your current house buy in the area where you would want to retire?

The bottom line: Forming a clear plan for the details of your dream retirement home and location is an extremely important task that should be done well before you enter your golden years. By meeting with a financial expert and diligently doing research to discover what best fits your needs, you’ll feel much more prepared to invest in the retirement home you’ve always dreamed of having.

Author Ron L. Brown, CFP®

Ron is a CERTIFIED FINANCIAL PLANNER™ and President of R.L. Brown Wealth Management. He specializes in retirement, estate, and business planning for professionals and entrepreneurs. Ron assists his clients with creating a financial plan to ensure they are able to live their ideal lifestyle during retirement and leave a strong legacy for their family. Ron has been featured in The Wall Street Journal, US News, Yahoo Finance, Investopedia, and numerous other high profile financial publications.

More posts by Ron L. Brown, CFP®
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