How Can Your Property Taxes Help You in Retirement?
By Alan Olsen
It used to be when people turned 65 they retired to enjoy the last few years of life. But those days are gone. As life expectancy has increased and health care costs have soared, more and more retirees are finding it difficult to sustain themselves for the long-term. Because of that, people are turning to different methods to come up with more money for retirement. It’s not uncommon to find people working past the age of 65, and in many cases, well into their 70s. It’s all in an effort to be able to afford the risingcost of living after retiring.
Property Tax Deferral
Another strategy that people are using involves their property taxes. It’s called a property tax deferral and it could free up a lot of money to use in retirement. By deferring your property taxes you actually put off paying them until you sell your home or you die. When that time comes, whatever the total amount of taxes you owe, plus interest, is reimbursed to your local government.
Retirees Have Less
To be sure,this is not a common practice amongst retirees. However, it’sstarting to gain a little more momentum. What’s the reason for the additional attention? It’s simply because individuals just don’t have enough income in retirement. According to research, in 2016, the average household with people between the ages of 55-64 who are working and have access to a 401(k) plan, had only $135,000 in retirement funds. There are many reasons for the low numbers. But no matter the reason, the majority of retirees are finding it difficult to support themselves completely in retirement.
Not All States Offer Deferral
That’s why using the property tax deferral method could be beneficial. It allows you to keep more money for living expenses while you still own your home. But, it won’t work for everyone. For starters, according to research, only 24 states offer some seniors the ability to defer property taxes. Additionally, not every location in these states is eligible and interestrates vary. There are also income restrictions in some states.
Rules Vary by State
Having an IRA is a good idea, no matter which type you choose. Additionally, for some people having both types of accounts is a good move. The bottom line, you have to weigh your options, evaluate your goals, and then choose the best method for you. Furthermore, your tax situation can change regularly so what’s best at one point might not be the best later on. In fact, it might make more sense to start with one type and later switch to the other. If you need additional help choosing how to save for retirement,then give a GROCO a call, or contact us online.
Make Sure It’s Right for You
Lastly, you also need to ask yourself if you could actually earn more by investing that money instead of paying off your property taxes as soon as they’re due. And remember, this is not free money. You are deferring payment so it’s actually a loan. It could also affect how much you have leftoverto give to your heirs when you pass away. So keep that in mind, as well.As always, be sure it makes sense for your overall financial picture before moving forward.