If you’re thinking of selling your home and taking up residence somewhere else for retirement, should you rent or buy again? Anthony Okolie speaks with Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, about what to consider as you make your decision.
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[00:00:00.00] [MUSIC PLAYING]
[00:00:03.36] * If you're thinking of selling your current home as retirement nears, should you buy again or rent? Perhaps you want to move to a smaller place, want to move closer to your children, or move to a dream destination. Nicole Ewing, director of tax and estate planning with TD Wealth, joins me now with some of the things you'll want to consider before making your decision. Nicole, thank you very much for joining us.
[00:00:25.99] * Oh, my pleasure. Thanks for having me.
[00:00:28.06] * So I think everyone thinks about this question at some point in their lives. When you're heading into retirement, what are the pros and cons of selling your current home and buying another house?
[00:00:37.66] * There are some not necessarily cons but things to be aware of before making that move. So we have costs. There are going to be moving costs that might be higher than you've experienced in the past. We don't have a pickup truck and a pizza to get our friends over to help us. So we're probably going to be out of pocket for having some professional help with that.
[00:00:58.84] We also have closing costs, of course, realtor fees. But we also have potentially costs that we're not aware of at the new residence. So we all know the things that are going to hit us, hit our pocketbooks in our current home. I know what my heating bill is going to be, but in a new place maybe not so much. So certainly, there are some costs.
[00:01:20.26] Now, if you're moving into a more expensive home, then potentially you're taking on some additional financing as well that needs to be considered. All of these costs will be dependent on how long you're planning on staying in your home. So if you are planning to stay for the duration of your life, then those costs are going to be amortized over a number of years and might not hit so big. But if you're thinking, for example, that you might be moving into a residence, a long term care residence at some point, then really having an understanding of what your timeline is on that and what the fees are going to be might be something to be thinking about.
[00:02:00.04] But obviously, the pros can be spending more time with your family, moving closer to those who may be able to provide some of those support systems for you and having an opportunity to choose a place that's more suitable to your lifestyle.
[00:02:15.40] * And I like the fact that you mentioned suitability. What about buying a condo? What are some of the advantages and disadvantages here?
[00:02:22.71] * Well, we often hear people talking about moving into a condo as essentially downsizing and easing the lifestyle. So we don't have to pay-- we don't have to worry about maintenance. We have the flexibility, of course, of having other people take care of some of those things for us. But there are fees and special assessments that could catch you off guard. And unless you're involved in the condo board and making some of those decisions, you might be responsible for paying things that you might not have wanted to.
[00:02:56.22] So you don't have the control in a condo situation as you might have in a standalone home that you are used to. You might not have neighbors that you like. You might have just different considerations than when you have a home that you control what goes on within the four walls, which is a bit different with a condo.
[00:03:17.49] * So let's say you've made the decision to sell your current home. You decide to rent instead. What are some of the pros and cons of that decision?
[00:03:26.04] * Well, certainly from your executor's perspective, the person who might be responsible for administering your estate, if you don't own at the time of death, then we're not going to have that administrative issue to deal with. So that certainly makes the administration of your estate much more straightforward. We also want to think about if we're renting, we're probably renting a smaller place. And that would mean some downsizing, which is a really great exercise to do and, frankly, better that you do it now when you have the wherewithal to know who you want to give things to, where you might want to transfer things, what the value of things are, and not leave that to somebody else to be digging through your boxes.
[00:04:10.08] So that's certainly a pro in my view. Less commitment, of course, we have the opportunity to maybe be a snowbird. Maybe you want to spend some time in other parts of the world. And this is going to-- renting is going to allow you to do that with much more flexibility. Now, when we're thinking of this from a financial perspective, if we are putting our money back into-- the proceeds of our sale of our home back into another home, we will likely be able to use the principal residence exemption to, again, offset any of the gains that you might have on that property.
[00:04:43.23] So there's likely not going to be any tax. If instead you put those funds into an investment portfolio, if it's a non-registered account, there are going to be some tax considerations to think about. And so we want to think about that from a-- whether that makes sense for you and what your investment, what your portfolio strategy might look like and whether or not you need to do some adjustments to the type of spending that you're going to be doing. Because as you're withdrawing money from your accounts and earning additional income, that could impact things like your OAS entitlement, your Old Age Security entitlement, for example. So we would want to be doing a full assessment of what it means if you're now renting versus living in a principal residence that any gains are tax free.
[00:05:29.79] * I mean, it's a big decision owning versus renting. How do you actually make that decision because you're actually can be living in this new place while you're retired, after all.
[00:05:38.32] * Yeah, I mean, it's a difficult decision to make and not one that I would make in a vacuum. So I wouldn't necessarily think that the question is, do I want to move? It's what do I want my retirement years to look like? What do I want my lifestyle to look like, and what help do I need to be able to do that? So depending on where I live, I might have more or less options to have family being able to provide some support.
[00:06:02.70] I might be able to choose a home that has some accommodations for some physical disabilities as I'm aging. But really I would be thinking here of your full overall plan. So we want to be working with our investment advisors, financial planners, perhaps your accountant to really get a grasp on what your budget is, what you can afford. If you are going to be doing financing, what that's going to mean for your overall strategy.
[00:06:28.47] But I would encourage folks to reach out to those in their life who are going to be impacted by that decision as well, so family members and friends. You might find that your friends aren't willing to travel to the new place to visit you, or it might be more difficult for your children to reach you in your new residence. So those are things that you'll want to be thinking about besides the financial side of things. There's, of course, the emotional side and the lifestyle and social side as well.
[00:06:54.16] * Nicole, great information, as always, Thank you very much for joining us today.
[00:06:57.61] * Oh, my pleasure, Anthony.
[00:06:58.71] [MUSIC PLAYING]
[00:00:03.36] * If you're thinking of selling your current home as retirement nears, should you buy again or rent? Perhaps you want to move to a smaller place, want to move closer to your children, or move to a dream destination. Nicole Ewing, director of tax and estate planning with TD Wealth, joins me now with some of the things you'll want to consider before making your decision. Nicole, thank you very much for joining us.
[00:00:25.99] * Oh, my pleasure. Thanks for having me.
[00:00:28.06] * So I think everyone thinks about this question at some point in their lives. When you're heading into retirement, what are the pros and cons of selling your current home and buying another house?
[00:00:37.66] * There are some not necessarily cons but things to be aware of before making that move. So we have costs. There are going to be moving costs that might be higher than you've experienced in the past. We don't have a pickup truck and a pizza to get our friends over to help us. So we're probably going to be out of pocket for having some professional help with that.
[00:00:58.84] We also have closing costs, of course, realtor fees. But we also have potentially costs that we're not aware of at the new residence. So we all know the things that are going to hit us, hit our pocketbooks in our current home. I know what my heating bill is going to be, but in a new place maybe not so much. So certainly, there are some costs.
[00:01:20.26] Now, if you're moving into a more expensive home, then potentially you're taking on some additional financing as well that needs to be considered. All of these costs will be dependent on how long you're planning on staying in your home. So if you are planning to stay for the duration of your life, then those costs are going to be amortized over a number of years and might not hit so big. But if you're thinking, for example, that you might be moving into a residence, a long term care residence at some point, then really having an understanding of what your timeline is on that and what the fees are going to be might be something to be thinking about.
[00:02:00.04] But obviously, the pros can be spending more time with your family, moving closer to those who may be able to provide some of those support systems for you and having an opportunity to choose a place that's more suitable to your lifestyle.
[00:02:15.40] * And I like the fact that you mentioned suitability. What about buying a condo? What are some of the advantages and disadvantages here?
[00:02:22.71] * Well, we often hear people talking about moving into a condo as essentially downsizing and easing the lifestyle. So we don't have to pay-- we don't have to worry about maintenance. We have the flexibility, of course, of having other people take care of some of those things for us. But there are fees and special assessments that could catch you off guard. And unless you're involved in the condo board and making some of those decisions, you might be responsible for paying things that you might not have wanted to.
[00:02:56.22] So you don't have the control in a condo situation as you might have in a standalone home that you are used to. You might not have neighbors that you like. You might have just different considerations than when you have a home that you control what goes on within the four walls, which is a bit different with a condo.
[00:03:17.49] * So let's say you've made the decision to sell your current home. You decide to rent instead. What are some of the pros and cons of that decision?
[00:03:26.04] * Well, certainly from your executor's perspective, the person who might be responsible for administering your estate, if you don't own at the time of death, then we're not going to have that administrative issue to deal with. So that certainly makes the administration of your estate much more straightforward. We also want to think about if we're renting, we're probably renting a smaller place. And that would mean some downsizing, which is a really great exercise to do and, frankly, better that you do it now when you have the wherewithal to know who you want to give things to, where you might want to transfer things, what the value of things are, and not leave that to somebody else to be digging through your boxes.
[00:04:10.08] So that's certainly a pro in my view. Less commitment, of course, we have the opportunity to maybe be a snowbird. Maybe you want to spend some time in other parts of the world. And this is going to-- renting is going to allow you to do that with much more flexibility. Now, when we're thinking of this from a financial perspective, if we are putting our money back into-- the proceeds of our sale of our home back into another home, we will likely be able to use the principal residence exemption to, again, offset any of the gains that you might have on that property.
[00:04:43.23] So there's likely not going to be any tax. If instead you put those funds into an investment portfolio, if it's a non-registered account, there are going to be some tax considerations to think about. And so we want to think about that from a-- whether that makes sense for you and what your investment, what your portfolio strategy might look like and whether or not you need to do some adjustments to the type of spending that you're going to be doing. Because as you're withdrawing money from your accounts and earning additional income, that could impact things like your OAS entitlement, your Old Age Security entitlement, for example. So we would want to be doing a full assessment of what it means if you're now renting versus living in a principal residence that any gains are tax free.
[00:05:29.79] * I mean, it's a big decision owning versus renting. How do you actually make that decision because you're actually can be living in this new place while you're retired, after all.
[00:05:38.32] * Yeah, I mean, it's a difficult decision to make and not one that I would make in a vacuum. So I wouldn't necessarily think that the question is, do I want to move? It's what do I want my retirement years to look like? What do I want my lifestyle to look like, and what help do I need to be able to do that? So depending on where I live, I might have more or less options to have family being able to provide some support.
[00:06:02.70] I might be able to choose a home that has some accommodations for some physical disabilities as I'm aging. But really I would be thinking here of your full overall plan. So we want to be working with our investment advisors, financial planners, perhaps your accountant to really get a grasp on what your budget is, what you can afford. If you are going to be doing financing, what that's going to mean for your overall strategy.
[00:06:28.47] But I would encourage folks to reach out to those in their life who are going to be impacted by that decision as well, so family members and friends. You might find that your friends aren't willing to travel to the new place to visit you, or it might be more difficult for your children to reach you in your new residence. So those are things that you'll want to be thinking about besides the financial side of things. There's, of course, the emotional side and the lifestyle and social side as well.
[00:06:54.16] * Nicole, great information, as always, Thank you very much for joining us today.
[00:06:57.61] * Oh, my pleasure, Anthony.
[00:06:58.71] [MUSIC PLAYING]