If you are one of 450 million baby boomers worldwide (born between 1946 and 1964) who are planning to downsize your real estate to help afford retirement, best to get a move on. The plan is very popular.
By far the largest group of homeowners in the world fall into the over age 50 category. Some 70% of those over 65 in North America have paid off their mortgage. The 30% who have not cite debt taken on in the refinancing boom of the 2000’s, smaller down payments and the use of home equity lines of credit for preventing them from becoming mortgage free. (This is up from 22% over age 65 who still had a mortgage a decade ago.) Mortgage free or not, most are planning on selling their homes to free up money needed for retirement. See: Selling the family home is liberating for many retirees
“With home and home-related expenses the largest cost for every age group 50 and older, according to research from the Employee Benefit Research Institute, it’s worth considering if you will be able to afford the cost of living where you are, whether you want to stay there and what your other options are.
“They need to sit down and figure out their retirement plan — what’s coming in and what’s going out,” Ms. Canan said.
The E.B.R.I. report, based on research from 2007 through 2011, shows declines in spending on housing costs, but whether the spending patterns will continue remains to be seen. “The crash had really changed some spending patterns,” Sudipto Banerjee, a research associate with E.B.R.I, said.
Even those with considerable investment portfolios are aware of the uncertainties in the financial markets. “They say, ‘I don’t know now how the return will be. The bottom line is I need to save more.’ That’s why we’re seeing these big spending cuts,” Mr. Banerjee said.
According to a study from the Society of Actuaries, Personal Risk Management: 2013 Risks and Process of Retirement Survey Report, cutting back on spending or intending to “is not as income-sensitive as might intuitively be imagined.”
Among retirees with annual incomes below $50,000, 79 percent had already cut back on spending or planned to, while 73 percent of those with incomes greater than $100,000 were spending less as well.”
With the younger population behind the boomers under-employed, underpaid, under-saved and over-indebted, the pool of those who can buy expensive properties from all of the boomers looking to downsize is relatively shallow. Global trends remain focused on reducing debt, lowering expenses and saving more.