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3 Smart Strategies to Finance Your Home in Retirement

A financial adviser's tips for cutting housing costs

By Marilyn Timbers, Voya Retirement Coach

As you approach retirement, building a holistic financial plan that also considers your future housing expenses should be at the top of your list.

For many people, a sizeable portion of their retirement-income dollars will go toward funding their home and its associated costs. According to 2014 research from the Employee Benefit Research Institute, annual home-related expenses represent 43 percent of total spending for those age 75 and older. It’s important to understand how these costs might affect preparing for retirement, so you can better address your future housing needs.

Here are three strategies to consider to help you plan for your “home sweet home” in retirement:

Managing Your Mortgage

One popular option to cover housing costs in retirement is to refinance your mortgage and benefit from lower interest rates.

According to a recent survey from Voya, where I’m a financial adviser, 95 percent of those who are currently working and plan to own their home in retirement have an outstanding mortgage of $100,000 or more. Often, as people advance in their careers and see their household incomes increase, their credit also improves. If you are nearing the end of days working full-time and still have an outstanding mortgage balance, this could be a good opportunity to use an improved credit score to secure financing at a better interest rate.

In doing so, if you are able to lower your payments, you can also look to apply those savings to the principal in anticipation of paying down your mortgage by the time you retire.

Online tools such as a mortgage calculator can help you identify just how much you could save by refinancing your mortgage. Additionally, if you find you are able to save money in your budget elsewhere, you can look to apply those funds to your principal whenever possible.

Another option to pay off your mortgage before you retire, if you are still working, is to consider a bi-weekly mortgage plan. Here’s how it works: Because there are 52 weeks in a year, there are 26 bi-weekly periods. If you make 26 half payments on your mortgage, that’s equivalent to making 13 payments per year instead of the usual 12, which in turn accelerates the loan's payoff schedule by an extra payment a year.

That can really add up. Say you have a 30-year, $160,000 mortgage. By making an extra payment once per year, you could pay off your mortgage almost four years faster than scheduled, in a little over 26 years. This could also reduce your total interest payments over the life of a mortgage by almost $14,000.


Downsizing to a smaller, less expensive home is a very effective option to help control housing costs. It’s also a pretty popular strategy for retirement. According to Voya’s survey, 78 percent of individuals who plan to own their home in retirement also expect to financially scale down in some manner.

There are a variety of reasons to consider downsizing. For example, if you raised a family and your kids are now out of the house, you may want to consider downsizing to reduce your property taxes and lower your utility costs.

Downsizing can also provide financial flexibility in a variety of ways. For instance, the money you save from scaling back can be used to design a home that better fits your ideal retirement lifestyle. The funds saved can also create a cushion for any unexpected maintenance and home repairs that may arise during retirement.


Consider Where You Want to Live in Retirement

Planning where to retire is essential for identifying, and achieving, future retirement goals. If you’re married or have a partner, frank conversations about where and how you want to live in retirement are especially important.

You may want to consider relocating to a new state or just a less expensive ZIP code in the state you’re in. Many of my clients have considered moving to states with lower property taxes once they retire. This can be a great strategy to stretch your retirement dollars.

Let’s say you are thinking about moving to a state where the average state property tax rate is 0.96 percent, as opposed to your current state where the average tax rate is 1.5 percent. If you purchased a home for $165,000 in the lower-property-tax state, you would save almost $1,000 each year.

Try using online resources such as this SmartAsset tax calculator to compare which states might offer the most bang for your buck in terms of property taxes. Additionally, tools like Voya’s myOrangeMoney® Retirement Calculator let you see how the cost of health care might change depending on the state you live in during retirement.

Some people feel that location is more important than the size or amenities of a home in retirement. I find that many of my clients move to states with low or no state income tax. But, it’s important to look at the emotional and social aspects of your decision, too. When you find an area you like, be sure to spend time there in the years prior to retirement. You will get a real sense of what it is like to live there, and what the unexpected costs might be.

Identifying a housing plan for retirement is no easy task. But if you take the time to explore your options sooner rather than later, the process can become much more rewarding. Working with a financial professional can also help provide you with a holistic plan to help you get there with less hassle and stress.

With the right strategy in place, you can certainly live out your retirement in the home of your dreams.


Securities and Investment advisory services offered through Voya Financial Advisors, Inc., member SIPC. Neither Voya Financial Advisors nor its representatives offer tax advice.

Marilyn Timbers, Voya Retirement Coach Marilyn Timbers is a financial adviser with Voya Financial Advisors. A Certified Financial Planner, she serves on the Women Advisors Network Board at Voya Financial Advisors. Read More
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