Weather events seeming to garnering all the headlines these days regardless of where you live or are traveling to. They are also influencing the choices people are making for retirement.
We ask clients going through the financial planning process how they envision retirement. Implicit in that question is where they would want to live either full-time or part-time.
Today, one of the primary factors that one needs to consider when contemplating where to live in retirement is climate change and the risk of a natural disaster befalling them in a given location.
Climate Change Considerations
In 2020 there were 22 separate billion-dollar climate and weather-related events in the US (see map above).
In 2021 (as of July 9), there have been 8 weather/climate disaster events with losses exceeding $1 billion each. That doesn’t include the heat domes that covered most of the western United States earlier this summer, nor does it include the Bootleg Fire in Oregon, the third-largest in that state’s history.
Climate change has had an impact on most geographies, some worse than others. These factors can have a considerable impact on the upfront cost and on-going expenses associated with where you decide to live. Some factors to consider are:
Of course we can’t live our lives in fear, but thinking through the risks and deciding what it is that we really want for ourselves will allow us to enjoy the things we desire in retirement and to avoid those things that will create stress and disruption. For some, the idea of having a home of their own in a location they love is a top priority. For others, they may just want to be near a beach for a few months a year or to be able to escape to the woods for a period of time. Perhaps it isn’t so important that they experience it through home ownership.
The home-sharing industry continues to provide many options for those who want a vacation home, but not the headaches that come with owning one. It isn’t necessary to own a beach home in LaJolla or Myrtle Beach. There is a wide variety of homes to be found on Airbnb and VRBO for the short and long term. Many of our readers enjoy traveling this way. Fun fact: There are over 7 million Airbnb listings in over 100,000 cities.
Redweek offers timeshares in both domestic and international destinations at reasonable rates. For those desiring a truly luxurious experience, check out Inspirato.
Consider seasonal rentals. Many people who live in Arizona head to the California coast as well as the Northeast and Midwest during the hot summer months. It is far less costly to rent for a month or two than to be responsible for home maintenance and repairs all year. In addition, the costs of property management continue to escalate due to climate change.
Fractional home shares are an interesting option. They are generally luxury homes located at vacation destinations. Ownership is shared with other parties. They do differ from timeshares. Check out this article from Luxury Fractional Guide. Homework required!
As we go through the retirement planning process with a client we will consider the rent vs. buy decision. It may sound like a lot to spend $20-30k to rent a home for a month or two in a desirable location, but when you compare it to the cost of capital and the on-going expenses of maintaining your own residence, you may come to realize that what you thought was expensive really turned out to be quite a bargain!
Where you want to spend your time in retirement is a big part of the planning process. Whether you are planning to change your residence or stay in your current home or community, it is prudent to think through the considerations we mentioned above.
Staying in your current home may end up being the answer. Perhaps staying in the same community and downsizing from the big family house to a smaller home or condo may give you the flexibility to stay near friends and family, but with the freedom to escape for a few months out of the year to a more desirable location.
If you are ready for a big change and want to buy a new home in a new part of the country (or world for that matter)do your homework. Understanding the risks and costs associated with your decision will help bring you peace of mind with whatever you decide is the best choice for you.
We would love to hear from anyone who has been, or is going through this process, and what you have learned along the way!
Jenifer Aronson is the Founder of Mosaic Fi.