Homeowners Should Make 4 Money Moves Before Retirement

Homeowners nearing retirement should implement four critical financial strategies to ensure stability during their post-work years. The transition from regular employment income to relying on savings necessitates a re-evaluation of homeownership finances, as a property often represents a homeowner's largest asset and a significant recurring expense. Smart financial planning is essential for those anticipating a shift away from a steady paycheck.

One year before retirement, individuals should make a definitive decision regarding when to claim Social Security benefits. Given ongoing discussions about the program's funding shortfall, claiming benefits sooner rather than later may be advantageous, although the longer one waits, the larger the monthly payments will be. The latest age to claim Social Security is 70. This decision is particularly relevant for those planning to maintain their homes after retirement. The cost of homeownership has increased by 26% in the last five years. A Realtor.com analysis indicates that, currently, Social Security benefits alone are sufficient to cover living expenses in only 10 states, when compared against the Elder Economic Security Standard Index. If projected Social Security benefits are insufficient to cover baseline housing costs, a year provides an opportunity to build additional savings.

Two years before retirement, homeowners should focus on paying down their mortgage principal. Eliminating mortgage debt before retirement significantly reduces monthly expenses, providing greater financial flexibility. This can involve making extra principal payments or refinancing to a shorter loan term if feasible. The goal is to enter retirement with minimal or no mortgage obligations, thereby lowering the overall cost of living and reducing financial stress.

Three years before retirement, it's advisable to review and adjust investment portfolios. This typically involves shifting assets from higher-risk, growth-oriented investments to more conservative, income-generating assets. The aim is to preserve capital while still generating returns sufficient to supplement retirement income and cover ongoing expenses, including those associated with home maintenance and property taxes. This strategic reallocation helps mitigate the risk of significant losses as retirement approaches.

Four years before retirement, homeowners should conduct a comprehensive review of their home's condition and plan for any necessary major repairs or renovations. Addressing issues such as roof replacement, HVAC system upgrades, or essential structural repairs before retirement can prevent unexpected, large expenses during retirement. Alternatively, homeowners might consider downsizing or relocating to a less expensive property to reduce maintenance costs and free up equity. This proactive approach ensures that the home remains a comfortable and financially manageable asset throughout retirement.