Homeowners are often advised to try to pay off their mortgages ahead of retirement. That way, they’ll have one less expense to contend with once they move over to a fixed income.
But while shedding a mortgage payment could free up room in your budget as a retiree, that doesn’t mean you won’t have other homeowner expenses to deal with, like property taxes, maintenance and insurance.
The problem is that even with a paid-off home, your costs of ownership could rise in retirement, causing financial stress and making it difficult to keep up. It’s important to understand the costs of continuing to own a house — and to take steps to protect yourself financially when possible.
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Don’t assume you can’t fight your property taxes
In August, the Federal Housing House Price Index measured a 2.9% increase in U.S. home values on a year-over-year basis. When home values rise, property tax bills tend to follow suit, which can be a huge problem for retirees on a budget.
That’s why Colton Pace, co-founder and CEO at Ownwell, a property tax appeal service, says older homeowners need to be informed about property tax relief programs.
“In most states, seniors 60 or 65 and older can lower their property taxes through homestead exemptions and property tax freeze programs,” he says.
“For example, in Texas, homeowners can combine a general homestead exemption with a senior exemption and a tax ceiling that freezes school district taxes once they reach 65,” Pace continues. “Florida, another popular state for seniors and retirees, offers a similar setup.”
If you’re older, it pays to check with your state’s Department of Revenue or Division of Taxation to see what programs you might qualify for. Your local tax assessor may also have that information.
And remember, even if you don’t qualify for a property tax freeze, you can always appeal your property taxes on the basis that your home assessment is too high.
Pace also points out that recent changes to the SALT (state and local tax) deduction could spell relief for some homeowners in high-tax states.
“Under the One Big Beautiful Bill Act, the SALT deduction cap was temporarily raised through 2029 to $40,000,” Pace explains. The previous limit was $10,000.
However, he warns, “You can only deduct property taxes if you itemize deductions on your federal tax return.” There are also income limits associated with this new rule, though they’re quite high.
Homeowners in states that include Connecticut, New York, New Jersey, Massachusetts and California may benefit the most from this change, according to the Bipartisan Policy Center.
Homeowners insurance can be a huge expense for older homeowners – especially when home insurance costs keep going up. Bankrate reports that the average U.S. homeowners policy costs $2,408 per year for a $300,000 dwelling limit.
If you live in a state where homeowners insurance costs keep rising (like Florida, where natural disasters are all too common), or if your personal costs keep going up for some reason, it’s important to shop around for a policy every year. You may be eligible for a discount based on your age or other factors.
Budget carefully for maintenance
Although property tax and insurance costs can rise from year to year, on a 12-month basis, they’re usually locked in, making it easier to budget as a retiree. It’s maintenance and repairs that often push older homeowners to their breaking point.
State Farm says a good rule of thumb is to set aside 1% to 4% of your home’s value for maintenance each year. But as your home value rises, that requires you to continuously increase your budget.
That, however, may not be a bad thing, since homes tend to need more work as they get older. And if your home is older already, you may need to start with the upper end of that 1% to 4% range.
(Image credit: Getty Images)
If you want to make sure you’ll be able to afford to stay in your home long-term, you may want to create an emergency fund for home repairs and maintenance specifically. Generally speaking, it’s a good idea for retirees to hold enough cash to cover one to two years of bills in case there’s a market event that sends portfolio values plummeting. Having dedicated funds for home-related costs takes some of the pressure off.
As Pace says, “All homes require upkeep, ranging from affordable fixes like deep cleaning to more expensive jobs like roof or foundation repairs. Ignoring urgent needs can lead to hazards and bigger bills down the road.”
Pace says you may also want to be careful when making home upgrades – something you may be inclined to do as a retiree if you’ll be spending more time at home.
“Adding a room or installing a pool will likely increase your home’s assessed value and raise your property taxes, which can further deplete your retirement savings,” he explains.
It’s a matter of priorities
As a retiree who owns a home, it’s best to expect that your costs will rise continuously from year to year. There are steps you can take to mitigate that, like looking into property tax programs, shopping for homeowners insurance annually, and having separate funds for maintenance and repairs.
But at the end of the day, if your home-related expenses are eating too heavily into your budget, there may come a point when downsizing makes sense.
Ultimately, you’ll need to ask yourself what takes priority – flexibility in your budget, or staying put. There’s no right or wrong answer, but it pays to consider a move if the stress of keeping up with your home outweighs the benefits of living in it.
