4 housing trends driving retirement living

Many people start their retirement planning with a vision of where they will live and what they’ll do in retirement. However, you may find that those goals change over time.
As you look down the road of your retirement, what does your ideal home look like? Where is it located? Your answers may depend on a variety of factors, including your budget, your health, or your ties to a certain community, including the presence of family members. For example, relocating to a more tax-friendly state could help you increase your retirement income, but would moving away from family mean paying for more help around the house?
The emergence of the baby boomers into retirement will create a greater need for housing that fits the lifestyle of older adults—more than one-third of all households will have a member aged 65 or older by 2038.1
Here are some of the top trends that are driving the way retirees are approaching housing. You’ll also see some of the financial implications associated with them. Read on after the trend information for more about how you can work with your advisor to achieve your housing goals—whether that’s a secluded beach bungalow, a suburban home with room for the grandkids, or a chic high-rise apartment in an overseas metropolis.
1. Most preretirees want to stay put, but retirees are still moving.
One of the most important decisions you’ll make is where you want to spend your retirement. For many, this may change over time.
Financial considerations: taxes, cost of living
2. Single-family homes in the suburbs prove most popular.
As retirees began to live more-active lifestyles, many experts predicted that they would flock to city centers where there were more activities available. Instead, an increasing number have chosen to live in lower-density suburban neighborhoods, with the majority of homeowners over age 65 choosing to reside in detached single-family units.1 This trend may continue in response to the coronavirus pandemic, with high-density areas having shown particular vulnerability to infection rates.  
Financial considerations: transportation costs, cost of living, owning versus renting

Where retirees are living

Retired homeonwners and renters are increasingly living in low-density locations. 

Most retirees choose to own rather than rent

3. Home improvements help retirees age in place.
Many retirees are hoping to spend as many years as possible in their own homes rather than living in an assisted living or other type of long-term care facility. That often means making changes to their homes. Some improvements, such as installing technology to help monitor for falls, are relatively inexpensive. Others, such as a full remodel of a room to make a home more accessible, can be costly. For example, the average cost of a bathroom remodel that includes accessibility upgrades is around $35,000.2 Other accessibility improvements can include stair lifts, grab bars and rails, improved shelving and storage, curbless showers or walk-in tubs, and fall-proof steps and stairs.
For retirees considering expensive upgrades to their homes, refinancing your mortgage loan to get a lower monthly payment may be a way of freeing up discretionary income needed for home-improvement projects. Periods of low interest rates, as we’ve seen during the coronavirus pandemic, can be good times to explore your refinancing options. 
Financial considerations: cost of improvements, financial assistance available for health-based improvements, cost of a professional facility, cost of in-home care
4. Retirees are carrying more debt, including mortgage debt.
An increasing percentage of retirees are bringing debt with them into retirement. Whether due to lingering student debt or the purchase or refinance of a home to take advantage of low interest rates, taking on too much debt may make it challenging to pursue retirement goals such as travel or giving to a favorite charity.
Financial considerations: housing budget, discretionary expenses, investment strategy

46% of homeowners ages 65-79 had mortgage debt in 2016, with a median balance of $77,000

Average debt of older households, by category:
When it comes to owning a home in retirement, there are several factors to consider. Work with your advisor to set a plan, taking into account whether you will have a mortgage or not. Keep in mind that your plans may change around new circumstances, such as the addition of a grandchild, moving to a state with lower taxes or needing more healthcare options.
It’s also important to think about the financial pieces of your life that connect to your home, such as the cost of aging. For example, if you plan to stay in your home as you age, will you need to bring in care, or will a family member help you with your everyday activities? If it’s the former, that’s a cost you’ll want to have covered. If it’s the latter, will you provide financial assistance to your family member to cover any lost wages they incur while taking care of you?
Your financial advisor can help you consider all of these options and develop a plan that can help you pursue your goals, while also accounting for any changes along the way.
1 “Housing America’s Older Adults 2019,” Joint Center for Housing Studies of Harvard University, 2019.
2 “2020 Cost vs Value Report,” Remodeling, as of June 2020.
Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.