Key Takeaways
- Today’s retirees are increasingly pursuing a non-traditional approach to housing in retirement, including senior apartments, retirement communities and sometimes even living in more than one location.
- If you’re considering a change in housing, it’s important to understand how your decision may affect your retirement income, Social Security strategy and long-term housing costs.
- An experienced wealth manager can help ensure your new approach to “home” is aligned with your retirement goals and overall financial plan.
In past generations, retirees typically followed a predictable housing pattern: pay off the family home, downsize if necessary and spend retirement in the same community where they raised their kids. Today’s retirees, however, are flipping the script by redefining what “home” means. Housing trends are shifting in favor of warmer climates, smaller or more accessible homes and, in some cases, multiple locations throughout the year.
At the same time, there are more senior housing options than ever before, including independent living communities, assisted living facilities and other senior living arrangements designed specifically for older adults. Understanding these housing options in retirement — and how they fit into your broader retirement planning — can help you find the right place to call home.
The Forces Driving Change
There are several factors contributing to today’s retirees’ housing decisions, as described below.
Longer, more active retirements
Retirees today are living longer, healthier lives. It’s not uncommon for a 65-year-old to live for 20 to 30 years in retirement. That’s a lot of time to travel, explore new hobbies, see family and experience a new location. With a finite amount of retirement resources, many retirees are prioritizing these experiences over paying to maintain a large home that no longer suits their lifestyle.
For some, this means aging in place in a smaller, more accessible home. For others, it involves relocating to a retirement community, senior apartment or independent living community that offers amenities and a built-in social network.
Shifting lifestyle priorities
Retirees’ lifestyle priorities are also shifting. Instead of remaining in the family home, many retirees are prioritizing:
- Climate – Moving to warmer or milder climates once they’re no longer tied to their jobs
- Accessibility – Choosing single-story homes, walkable areas and proximity to quality medical facilities and community amenities
- Social connection – Moving closer to family or joining 55+ independent living or senior living communities
If you’re weighing whether to stay in your current home or move, Creative Planning’s article Should You Downsize, Rightsize or Stay Put? can help you think through which housing option best fits your needs.
Rising housing costs
Housing often represents the largest expense in retirement. Rising home prices and property taxes have prompted many retirees to consider downsizing or relocating to more affordable locations. For example, selling a home in a high-cost state and moving to a more affordable area can free up significant equity that can then be used to support travel, healthcare or estate planning goals.
Some retirees choose to rent instead of own in retirement, especially if they expect their income to be more variable or prefer not to tie up as much capital in real estate. Others explore senior housing options, such as age-restricted senior apartments or more affordable senior housing programs, particularly if they’re living on a fixed income or have limited retirement savings.
If you’re thinking about combining a move with a broader change in lifestyle, our articles Deciding Where to Retire and Where You Retire May Be as Important as When provide helpful frameworks for comparing climates, tax structures and access to senior living options across different locations.
Financial Considerations of Redefining “Home”
If you’re contemplating a change in housing, it’s important to consider how your decision may impact your finances in retirement, including your retirement income, Social Security benefits and long-term housing costs.
Tax implications
Selling your current home could result in capital gains tax exposure if the gain exceeds the available exclusion amount ($250,000 for single filers or $500,000 for those married filing jointly). There may also be state tax implications as well as an impact on your Social Security and Medicare premiums.
If you’re purchasing a second home, buying rental property or considering real estate in another country, additional tax and reporting rules may apply. A coordinated plan can help you understand how different housing options in retirement may affect your overall tax situation.
Healthcare access
If you’re contemplating a move to a new state or country, be sure to consider healthcare access and coverage. This includes Medicare enrollment and portability, health insurance options, the potential need for supplemental insurance, and your new home’s proximity to specialists and quality medical care. Many retirees also factor in the availability of nearby assisted living facilities, nursing homes and other senior care options when deciding where to retire.
Some continuing care retirement communities combine independent living, assisted living and nursing care on one campus, allowing residents to stay within the same senior living community as their needs change over time.
Estate planning
Owning homes in multiple states or countries can lead to estate planning complexities. Different jurisdictions may have their own rules around probate, property transfer, and estate or inheritance taxes.
If you plan to leave real estate to children or other heirs, it’s important to consider how your housing decisions fit into your broader estate plan, including titling, beneficiary designations and the potential use of trusts.
Cash flow planning and retirement income
Be sure to consider how a real estate purchase or sale may impact your cash flow and monthly retirement income. Housing expenses are often the largest line item in a retiree’s budget. Because of this, planning for how to pay for these expenses can play a role in choosing an appropriate Social Security filing strategy and/or choosing how to withdraw from retirement accounts.
Your wealth manager can help you answer questions such as:
- How much of my retirement income should realistically go toward housing costs?
- Does it make sense to carry a mortgage into retirement, or should I aim to be debt-free?
- Would a reverse mortgage or other home equity strategy play a role in my plan?
- When should I file for Social Security?
- What’s the best strategy for making retirement withdrawals?
For additional context, Creative Planning’s Social Security resources — such as When to Take Social Security: 6 Factors to Consider — can help you understand how your Social Security and retirement income strategies support your housing decisions.
Long-term care and senior care considerations
Even if you’re healthy now, it’s important to consider how housing in retirement might need to evolve if you or your spouse eventually need long-term care or other senior care services.
Assisted living communities and nursing homes provide different levels of care and support, often at significant cost. Long-term care insurance is one tool some retirees use to help cover these expenses, while others plan to self-fund care costs using retirement savings, home equity or a combination of resources.
Creative Planning Insight
“Housing is more than a roof over your head in retirement — it’s the foundation of your financial and emotional well-being. The earlier you align your living arrangement with your long-term plan, the more flexibility you’ll have if life throws you a curveball.” — Dee Tomasetti, CFP®, Wealth Manager
By considering senior living options and long-term care planning as part of your overall retirement planning, you can reduce the likelihood of having to make rushed housing decisions later, when choices may be more limited. It’s always best to make a decision before you’re forced to make it.
The Bottom Line
When it comes to retirement housing, the most successful retirees view “home” as just one aspect of their overall financial plan. If you’re considering a flexible approach to housing — whether that’s aging in place, downsizing, renting, exploring senior housing options or even splitting time between locations — it’s important to balance your emotional and lifestyle needs with any potential financial constraints, healthcare needs and lifestyle challenges.
Your wealth manager can help you:
- Evaluate different housing options in retirement, including senior living communities and affordable senior housing programs
- Understand how housing costs will impact your long-term care planning
- Coordinate real estate decisions with tax, estate and investment planning
