Housing accounts for more than a third of an average senior’s spending, according to government data. Specifically, households led by someone age 65 or older spent an average of 35.7% on housing in 2023, the Bureau of Labor Statistics says.
Future retirees may need to budget even more. “Housing costs continue to escalate,” says Matthew Locke, national mortgage sales manager at UMB Bank in Kansas City, Missouri. “Lately, we’ve seen taxes and insurance go up.”
That means even those without a mortgage could see housing costs take a larger bite out of their budget.
To combat rising costs, consider these 10 strategies to save money on housing:
Downsize to a Smaller Home
Moving to a smaller home is one way to save money on housing in retirement. Smaller homes are generally less expensive and have lower tax assessments and reduced heating and cooling costs.
However, it is not free to pack up your belongings and relocate to a new property.
“On average, it costs about 7% to move,” says Jeff Lichtenstein, CEO and broker with Echo Fine Properties in Palm Beach Gardens, Florida. There are costs associated with closing the sale and physically transferring personal possessions to a new location.
What’s more, some states – including Florida and Michigan – cap annual property tax increases for existing homeowners and then adjust tax assessments to reflect the market price after a sale. That means moving out of a long-term residence may not result in significant, or any, tax savings in some situations.
While older Americans may lower expenses by downsizing, they should carefully consider all costs before moving.
Move to a More Affordable Region or Neighborhood
Retirement means the freedom to live anywhere, and seniors may save money by moving away from high-cost states and urban areas.
For instance, they can move from a disaster-prone state, where home insurance costs are surging, to a less expensive part of the country. Or without a daily commute to work, it may make sense to move to an outlying community or neighborhood where homes are farther away from a city core but also less expensive.
As with downsizing, retirees should consider all their costs before committing to a move. For instance, moving into a community with a homeowners association means paying additional fees on top of property tax, insurance and any mortgage payment.
“We try to advise (seniors) that HOA expenses can go up every year,” Locke says.
Refinance Your Mortgage
You may be able to save on housing expenses without moving by refinancing an existing mortgage. Given current rates, this probably wouldn’t result in savings for someone who purchased a home during the 2010s, when mortgage rates were extremely low. But it could be an option for homeowners still paying off an older mortgage.
Those with balances on high-interest credit cards or other loans could also save money by consolidating their debt at a lower rate through a cash-out refinance. However, this only makes sense financially if homeowners are committed to not accumulating new debt.
Tap Into Your Equity
Many retirees have significant equity in their homes, which they can use to create a steady stream of income, access cash to consolidate debt or make home upgrades that will allow them to age in place.
“Reverse mortgages got a really bad rap years ago, but they are much more government-regulated nowadays,” Lichtenstein says.
Homeowners age 62 or older may be eligible for a reverse mortgage, which is commonly set up to provide the owner with monthly payments based on the equity in their home. The catch is that once the homeowner moves out of the property or passes away, the house must be sold to pay off the loan.
A home equity loan or line of credit are two other ways to tap into a home's equity. According to Locke, retirees may qualify for loans based on their retirement income or assets.
Rent Out a Room
Retirees can use their home as a money maker by renting out an unused room. This could be done by finding a permanent roommate or offering your home as a short-term rental through sites such as Airbnb and VRBO. The latter might be an especially good option for those who split their time between two homes and have a property that is unused for several months of the year.
“The extra money you earn can offset home costs and bills to supplement your fixed retirement income,” said personal finance expert and former U.S. News contributor Andrea Woroch in an email.
If having overnight visitors in your home doesn’t sound appealing, Woroch offers these other options that retirees could use to make money with their home.
Rent space in your home or property for special events and photo shoots through Peerspace.
Rent parking spaces via SpotHero, an option that is best for those who live in a popular part of town or near an attraction.
Rent use of your swimming pool or private sports courts through Swimply.
Pet sit in your home using the service Rover.
Become a Renter
Taking into account utilities, lawn care and house repairs, home maintenance can cost thousands of dollars each month. Major components such as the roof, furnace or siding will need to be replaced at some point. However, apartment dwellers can avoid those costs.
“We’ve seen a lot of people who think it’s an easier scenario to sell and move to an apartment,” Locke says.
Depending on what is included with the unit, apartment living can eliminate many ongoing expenses. Apartments may also come with access to pools, gyms or other amenities. There is a monthly payment to rent, though.
“We’ve seen rents go up in most major markets,” Locke cautions.
However, if the price becomes unaffordable, it’s easier to move from an apartment than to sell a house.
Consider a Retirement Community
A retirement community can be another avenue to save on housing expenses. These can be set up in myriad ways, such as with condos, traditional houses or apartments. The community maintains common areas and typically offers some level of amenities. In some cases, meals and transportation may be provided.
Some communities require a hefty upfront entry fee, but in exchange the community may offer amenities that lower a retiree’s ongoing cost of living. Life plan communities, also known as continuing care retirement communities, include various levels of care, and residents may not need to pay much extra to access assisted living or nursing home facilities in the future.
“I think what seniors need to do is talk to other seniors in a community,” Lichtenstein says. “Not just one person – many people.” That can be the best way to determine the true cost of living there and whether a community offers the type of lifestyle that appeals to you.
Pare Down Ongoing Costs
Of course, you don’t need to move to reduce some monthly housing expenses, such as those for utilities, cable TV and phone service. Companies may offer discounts for receiving bills via email or setting up automatic payments.
“Call providers every year to inquire about new promotions that can be applied to your account,” Woroch says. “Otherwise, run a comparison with competitors to see if there are better deals without lowering your services, and be ready to switch if it means saving.”
With homeowner insurance premiums rising rapidly in many areas, bundling home with auto coverage may result in some savings. Increasing the deductible on your policy could also reduce premiums by up to 20%, according to Woroch.
Look for Property Tax Breaks
In Alabama, property owners 65 and older are exempt from paying the state portion of property taxes. Other states, such as Louisiana and New York, will exempt a portion of a home’s value from property tax for income-eligible seniors.
Elsewhere, in states such as Michigan, there is no senior property tax exemption, but older residents can claim an enhanced property tax credit and a home heating credit, among other tax breaks.
Combine Households
Combining households with another family can dramatically reduce housing expenses in retirement. Sharing a home with adult children may be the most common way to achieve this, but you could also live with a sibling, relative or friend.
The key to making these arrangements work is to ensure that each party has a private space within a home and there are clear expectations as to how chores and bills will be split.
Read more at U.S News
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