[From Bob's Library]

US NEWS AND WORLD REPORT

Retirement is a good time to reassess your real estate requirements. You may no longer need a large house with several bedrooms, and downsizing can add cash to your nest egg. But you also need to think carefully about the new needs that will arise as you age. Here are seven issues to consider as you contemplate where you will live in retirement.

Are you going to relocate? If you envision moving to a warm sunny clime, you need to do a lot more than just dream about it. Do your research on towns and neighborhoods, including crime rates, access to public transportation and the taxes, insurance and other expenses of carrying your new home. Be especially aware of health care options. Find out if there is a medical facility nearby with doctors who are accepting new patients and covered by your insurance network. If you intend to relocate near your children, make sure it's a place where you'd be happy even if your children weren't there, because a new job offer may come along, and then they won't be.

Do you plan to downsize? You may be tired of the maintenance that goes with owning a suburban home and want to downsize to make things more manageable. But do more homework than just counting up the square footage. If you're used to extra rooms and an eat-in kitchen, will you really be comfortable in a two-bedroom condo with a galley kitchen? And don’t forget to look closely at your expenses. Just because a place is smaller doesn't necessarily mean it's less expensive to maintain.

Will you fritter away your profit? If you downsize and walk away with a windfall, remember you've cashed out for a reason. So be careful not to let the money slip through your fingers. Maybe you want to use part of it to take a long-desired vacation. That's fine. But the rest of the funds should probably go into your savings or investment accounts to help pay for future living expenses.

Is now the time to renovate your home? The kids are gone, and many people take the opportunity to put in long-desired upgrades and special features. If you have the extra time and money, go ahead. But be careful about finishing the basement or installing a new pool to lure your grandchildren to visit. It might work, but it might not. And that's a big gamble. A better use of funds might be to get rid of all your throw rugs and either install wall-to-wall carpeting or refinish the wood floors, and then install grab bars in the bathrooms. These improvements may seem more prosaic, but will ultimately prove more useful in retirement.

Have you paid off your mortgage? A lot of people forget that once you retire you no longer receive bonuses, raises or promotions. So now is not the time to take on new debt, even if mortgage rates are low. Living in a mortgage-free home relieves you of a big chunk of your housing costs. If you want to stay in your current home for the rest of your life, a reverse mortgage can allow you to use some of your home’s equity for living expenses.

Do you really want to own two homes? Some people dream of owning a vacation home where they may someday retire. Others like the idea of owning a place in the north and a winter retreat in the sunbelt. It's a tempting dream, but as many people found out during the great recession, you do not always save money by “getting in at today's prices," especially since resort prices are more volatile than those in well-established towns. And if you do ever need to sell out, you'll discover that retirement real estate is not very liquid. So be honest: How much time are you really going to spend at your place in the sun, especially if it's so far away you need to fly there?

Do you want a real estate investment? Almost 10 percent of retirees make extra income from rental real estate. The investment can pay off handsomely, but it's fraught with plenty of pitfalls. Do you really want the responsibility of dealing with tenants, maintaining a second property and figuring out the financials? Do you have the discipline to purchase an investment that will pay off, rather than one you fall in love with? Some people hope to buy a second home and rent it out until they retire. Again, it's a gambit that can pay off, but it takes time, energy and real estate smarts to pull it off. So consider rental real estate as an option, but think long and hard before you take the leap.