Yahoo Finance Our HOA is charging us thousands of dollars to fix a broken elevator — how retired Americans can make it work
Older Americans are often advised to swap standalone homes for condos in retirement. Condos can be easier to maintain, since an HOA fee commonly manages common areas. And they tend to be more affordable, too, which can help free up some cash in retirement.
The problem, though, is that HOA dues aren’t set in stone. And these communities can be subject to special assessments for projects like replacing a roof, tennis court, or pool that result in significantly higher costs from one year to the next.
Don't miss
Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says
Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
Increases like that can be hard enough for anyone to absorb. But they can be especially tough for retired folks living on a fixed income. Here are a few strategies for tackling these unplanned expenses.
1. Anticipate extra expenses and factor them into your budget
Unless you plan to rent a home in retirement, you have to assume that you’ll face unexpected housing costs. With a standalone home, you might need to pay to replace the heating system. In a condo, you and your fellow HOA members might have to fork over money to put in new elevators.
In setting up your retirement plan, create a line item in your budget for extra housing expenses so you’re allocating money for those surprises every month. Money you don’t end up using in a given month can continue to sit in your savings until you need it.
2. Keep two years’ worth of expenses in cash
The average American aged 65 to 74 has about $609,000 in retirement savings accounts, according to the Federal Reserve. But you shouldn’t allow your entire nest egg to sit in stocks and other investments whose value can change from one day to the next.
In retirement, you’re living off of your savings, which means some of that money needs to be accessible to you in cash form. Financial experts generally recommend leaving yourself with one to two years’ worth of living expenses in cash in case the stock market experiences a prolonged slump, or your other investments lose value for an extended period of time.
Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
3. Keep a separate emergency fund for emergency repairs
While we typically think of emergency funds as a means to replace income in case you get laid off — which you typically wouldn’t be too worried about when you’re retired — it might be a good idea to maintain a separate account for unexpected housing costs specifically. Especially if you’re the type who appreciates added peace of mind.
As many homeowners know, expensive repairs can pop up at the most inconvenient times. Having a separate fund for these unexpected expenses can prevent you from scrambling to adjust your budget when something comes up — as it is likely to do.
In 2022, the latest year for which this data is available, Americans 65 and older spent 35.2% of their income on housing, according to the Bureau of Labor Statistics. That’s more than health care (13%), transportation (14.1%), and food (12.6%).
4. Avoid borrowing money to cover expenses
If you don’t have the cash set aside, a surprise home repair or expense might tempt you to tap your home equity. But while borrowing against your home might seem like a reasonable option, there are serious drawbacks to consider.
First, whether you’re taking out a home equity loan, a HELOC, or a reverse mortgage, you’re borrowing money in one shape or form. That means you’re liable for repaying that money. In the case of a home equity loan or HELOC, you’re looking at ongoing monthly payments that might eat into your budget.
With a reverse mortgage, you may not have to pay back your loan in your lifetime. But if you die, your heirs might have to sell your home to repay that loan. They’ll have a set time to either come up with the cash or sell the property. That might be a disappointing outcome if you’d hoped for them to inherit the home originally.
If you don’t have cash savings to tap and it’s a bad time to sell off investments, borrowing against your home equity may be your best option. But if you’re able to access the money elsewhere, that’s usually preferable.
What to read next
Berkshire icon Charlie Munger believed homeownership is for families who want to live in them — not single people. Here’s how to invest in real estate no matter your marital status
Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month
Don’t leave your family unprotected — find life insurance coverage up to $2 million with no medical exam or blood test
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
