RETIREMENT: All-retiree housing isn’t for everyone

There seems to be a rule that if retirees move to a communal environment, it must consist only of other retirees. But some are challenging that notion by choosing intergenerational cohousing, living side by side with people of all ages, including singles, childless couples, and families with children.

Residents of cohousing make major decisions collectively, but these are not communes. Group meals and activities are optional, and members maintain separate residences.

“You have a choice between privacy and community,’’ said Charles Durrett, 57, an architect who has designed more than 50 cohousing communities.

Some communities that live by cohousing principles are for retirees only, and that is the best choice for some, Durrett said. Children can be raucous, and sometimes people want to spend their time in peace with like-minded friends and a glass of wine.


But other s prefer the energy and variety of cohousing, he said. The arrangement has value for younger residents, too: Children learn to respect their elders and ‘‘everybody’s seeing all of life,’’ Durrett said. That includes ‘‘what the end game looks like,’’ he said.

Cohousing is a way to avoid the isolation and depression that older people can face when they live alone, Durrett said. Cohousing residents are also more likely to check up on and care for their neighbors, he said.

Meg Palley, 95, lives in a four-bedroom house in Nevada City she shares with two caregivers, who receive reduced rent in return for services like driving and shopping. She said she chose

INVESTMENTS: The income property: Your late-in-life retirement plan

"Income property can be an important bridge to retirement for those without quite enough to retire in the traditional sense," says J. Camarda, a real estate investor, Certified Financial Planner, and Chief Investment Officer of Jacksonville, Fla.-based Camarda Wealth Advisors. Because real estate is such an inefficient market, it's possible to find awesome bargains with a very high return on investment, Camarda says. And if you can manage the property yourself, you can collect more income.

If you purchase the right property at the right price and on the right terms, he says, a rental property can produce significantly more income than traditional passive investments.

This article will describe how much you can expect to invest and earn, how to choose a location for your rental property, and problems that might derail your plans if you aren't careful.

How Much Money Do You Need?

If you plan to finance your purchase with a mortgage, you'll need to take action before you retire, says associate broker Janice Leis, who serves the premier residential areas of Philadelphia and South Florida.

Mortgage lending guidelines typically require applicants to be employed and have at least two years of steady employment history in the same occupation.

Lenders also require a substantial down payment, typically 30% or more, if you won't be occupying the property, says John Walters of LeWalt Consulting Groupe in St. Petersburg, Fla.

If you don't have the cash to make such a large down payment, consider using your IRA funds. All equity growth and income from rental receipts will grow inside your IRA tax-free, Walters says. Purchasing the property with funds inside a Roth IRA, on which you've already paid taxes, means all your earnings and equity can grow tax-free forever, he says.

After you've tackled the hurdle of affording the purchase, you need to think about ongoing expenses. Owning residential income property is like owning a principal residence in that there are variable expenses outside the mortgage, says Rob Albertson, a multi-million dollar residential real estate agent with Austin Fine Properties/PLR in Austin, Texas. There are maintenance costs for minor items (like leaky faucets) and major items (like a new roof).

Don't forget about marketing expenses and periods of vacancy and tenant change-over when you won't be earning income. Albertson recommends factoring no higher than a 92% occupancy rate into your calculations, even in a hot rental market. Be conservative in your estimates of expenses and income.

Tax considerations will also play into what you can afford.

"One of the chief benefits associated with rental property is the ability to claim a depreciation deduction on your federal income tax return," Walters says. Depreciation reduces the value of your property each year to approximate wear and tear. It lowers your tax basis so that you pay less tax on the property when you sell it.

First and foremost, discuss the financial feasibility of your plans with a CPA, a real estate attorney and an insurance agent to see how much everything will cost, recommends Leis.

Get valuable interest rate discounts on select new home equity loans from Wells Fargo.

Choose a Location

Purchasing the least expensive property you can find won't help you earn a return on your

THE ECONOMY: A comfortable retirement requires saving eight years of salary

Retirement savers need to set aside roughly eight times their annual salary in order to live comfortably if they retire at age 67, Fidelity Investments said in a report Wednesday.

The Boston firm is the nation’s largest manager of 401(k) retirement assets and is in the business of persuading people to save more. It offered a plan for arriving at the eight times figure, suggesting that workers should save an amount equal to a year’s pay by age 35. If they have three times their annual salary at 45, and five times at age 55, they would be on track.

Alicia H. Munnell, director of the Center for Retirement Research at Boston College, said the math tracks with her group’s research — but the eight times figure applies to people earning $100,000 or more.

“If you’re in a low-income group and you’re going to get most of your money from Social Security, you don’t need that high a multiple,’’ she said. By the center’s calculations, a person

MARKET TRENDS: Rethinking the 55-Plus Market

SOME would-be buyers who visit Villagio, a 55-plus housing development in South Brunswick, think they’ve arrived at the wrong place.

To members of a market segment said to avoid stair-climbing, second-floor bedrooms are not the only surprise. Villagio has a basketball court and a jungle gym, but at least so far, it lacks a clubhouse, which at a typical development of this type is usually among the first elements built.

“This is not your father’s adult community,” Mr. Gueyikian said during a recent tour of the development, a 100-acre property punctuated with 3,000- to 4,000-square-foot stucco houses painted in shades like amber, rose and terra cotta (although elevators are an option for their buyers). “The thinking was in the senior market that you sell your house and downsize, but some people don’t want to go to a smaller house. They want a new home with bragging rights. Today’s people are looking for the Porsche S.U.V., they’re not looking to buy a van.”

The 55-plus market was especially hard hit by the downturn in the housing market — so much so that in 2009 New Jersey passed a law allowing such communities to convert to serving the general populace. In any case, said Tim Touhey, president of the New Jersey Builders Association, “there’s been an evolution in the health and conditions of families.”

“Some 55 and older are still working and want office space,” he said. “Some may have adult children living at home. They want more variety and choice. And the development community is driven by what the market wants.”

In other words, Mr. Gueyikian may just have hit upon something. After several years in which, he said, buyers seemed to lose interest, Villagio is building seven houses, adding to the 43 that went up in late 2007. Long-range plans call for 210 homes.

A builder of million-dollar-plus houses in Holmdel, Marlboro and Colts Neck, Mr. Gueyikian said he identified an interest in his vision of 55-plus housing when meeting with a group of homeowners at his development in Ramapo, N.Y., which has retirement-age buyers living in $2 million to $3 million

RETIREMENT: Getting ready to retire? Start by rightsizing your home

If your long-term plan is to keep working, investing and living where you are until the day you retire, and then change your lifestyle and financial life, you are practicing what I call "cliff living" — living one way until you abruptly leave the world of work, then leaping to a whole new level of life and finances.

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Instead of waiting for this dramatic turn of events (which, incidentally, many people can no longer pinpoint in their future), I recommend living a "blended life," one that incorporates some major changes as early as possible that can continue seamlessly into your retirement years.

In other words, rightsizing your finances, work and lifestyle so that you ease the transition, and at the same time help to ensure that your income and assets (inflow), as well as your costs and liabilities (outflow), are well-suited to retirement or semi-retirement.

Small is beautiful

Current home sales are following this rightsizing trend; according the Census Bureau, the median floor area of new homes fell to 2,094 square feet in the third quarter of 2009 from 2,309 square feet at the start of 2007. The National Association of Builders agrees that the median size of new homes is shrinking, pointing out that rooms are getting smaller, and some of the luxury amenities that were popular last decade are disappearing—including opulent bathrooms and kitchens.

What about the market?

My clients — along with a lot of other homeowners out there — are leery of selling their property in today's unfriendly real estate market. However, I argue that this could be a good time to make a change.

The question you should be asking yourself is not "Is my house worth less than it was before?" but rather "Is my house worth less than it will be in the future?" If you're staying put because you hope that the answer will be yes — particularly in the next few years — it's important to understand that there is no guarantee that the market is going to recover at any kind of reasonable pace. And when the market does change, it won't have "the perfect storm" of easy money, dropping interest rates, and strong economic conditions to accelerate as it did in the past.

So if you are in a position where you would not buy your home today because of your situation (whether family size, finances, or location), you should take action toward rightsizing.

Sharing your home

Another option for rightsizing housing costs is to cohabitate, either in your current home or in a shared dwelling. This is becoming more common, as grown children move back in with their