Is a ‘tree’ or ’sea’ change the right retirement option?
It amazes me how often I have heard clients say they are going to move north or south to a quieter area when they retire. Whilst a ’sea’ or ‘tree’ change may be desirable in some ways, it may not necessarily be the wisest move for all people. It is a great result for those who are able to realise their dreams … for others much heartache and distress.
It is worthwhile considering the following issues:
- A tree or sea change may mean that retirees could move away from the resources and facilities provided by a larger town or city when they are probably going to utilise and need them the most eg airports, entertainment venues, airports, doctors, hospitals and libraries;
- They will most likely move away from their children and grandchildren. Many people who take a sea or tree change do so expecting their family and friends to visit regularly. Howver, the reality is that most are busy running their own lives and will visit with less frequency than originally thought;
- They will be moving away from their established network of friends and will have to create new friendships and relationships. More friends are no doubt a positive thing, however establishing these new relationships can be stressful and may take longer than expected;
- In some cases, there have been retirees suffering from depression due to the severity of their loneliness and the tree or sea shange not living up to expectations;
- Those desiring to move back to their pre-retirment area may find they can’t afford to do so due to changes in property market since their departure.
Whilstfor many, moving away may have been long held dream fulfilled, it does need to be given careful consideration.
An alternative to selling, moving and finalising ownership of their current home may be to consider renting out the family home for a year or two. While renting family home out, move to desired location and rental accomodation there … dip a toe in the water and try before you buy. In this case, it the sea or tree change isn’t what it was planned to be, a return to the family home is available minimising the effects on original living arrangements.
It is worth noting that the family home can be rented out for up to six years without incurring capital gains tax, providing another main residence is not held during that time.
Why is it dangerous for advisers to assume taht retirees income requirements will decrease as they get older? It is a common assumption and often quite a flawed one.
Whilst an elderley person may spend less on entertainment, clothes and new household items, other expense can substantially increase such as the following:
- Medical Costs: As a person ages, medical costs will generally increase (exponentially in some cases)
- Loss of independence: As a person beomces less independent there may be a greater need for paid services around the home ie gardeners, handyman services and home care
- Home adjustments: It may be necessary to add ramps, handrails and other similar items to enhance the safety and comfort of the home
- One partner may need to move to aged care facility while the other remains in the family home
- Desire to aid children or other generations financially
Decreasing the amount of income a retiree needs over time makes life easier for planning purpose as the retirement capital target is lower and therefor easier to achieve. But, it is often not realistic, fair or practical to the client.
Have you and your loved ones discussed these issues? Please talk about it early; before you are forced into a decision which may not necessarily be the right one, emotionally or financially.