Relocation of some kind is likely in retirement, but moving across the country can complicate plans
Evan Riddell says that most retired clients will move at some point after they stop working. Riddell is the Wealth Advisor, Investment Advisor, Associate Portfolio Manager and founder of Riddell Wealth Management of Richardson Wealth in Victoria, B.C. He explained that most retirees are aware that they will eventually at least downsize their home, unlocking some existing home equity as they realize they don’t need a big house anymore. While that process can still be complex to execute in reality, he notes that many retirees will choose to make a bigger move, travelling across the country to be closer to family members who have relocated and are building lives far afield.
Riddell outlined how he works with clients to plan for these moves, whether it’s the anticipated downsizing or the unanticipated total relocation. He explained the financial considerations he has to help them manage, from questions around taking on a mortgage to the overall impact on their financial plan. He also outlines the emotional challenges that can come when retirees relocate and move away from their communities and support networks, often into a place where they only have their busy children and growing grandchildren nearby.
“Every client will have some type of conversation about what does relocating look like. I think most individuals, as much as they may love their family home, they understand at some point in time they are going to have to move,” Riddell says. “Moving from community to community is really driven typically around family. We see it regularly with grandchildren. Once the grandchildren start showing up, I’ve seen clients light up and say ‘this is that next chapter.’ That’s where we see a lot of our clients will make significant changes, moving within the province or going from coast to coast. They’ll do whatever they can to be closer to their young grandchildren.”
Managing the financial realities of a move
Even downsizing can come with something of a financial reckoning. Riddell acknowledges that many clients are surprised that once they’ve selected the new property to move into and renovated it to their liking, they’re left with less equity from their prior home than they expected. Transaction costs, moving costs, and any renovation costs all start to add up. Riddell tries to prepare clients for those realities so that they don’t expect an unrealistic amount of cash out of their past home.
Those same issues can arise when clients want to move cross-country for family, in addition to a host of other possible challenges. Often the clients’ children might be building their lives and careers in big cities with expensive real estate markets relative to where the clients had retired. That might mean moving into a condo, which comes with a host of property taxes, condo fees, and other maintenance costs that can come at a retiree unexpectedly.
Because of the relatively short time period when grandchildren want to be in the mix with their family at all times, Riddell notes that some retirees will choose to maintain their existing home while purchasing a condo or small property closer to the grandkids and moving back to their main home as the grandkids get more independent. Those situations can be advantageous from a lifestyle standpoint, but come with some trade-offs and may require the client to take on a mortgage or significantly concentrate their portfolio.
Taking on a mortgage in retirement is both risky and works contrary to the goals of retirement income planning. A well-planned retirement income should minimize tax paid by the retiree, which means they have less income through which to qualify for a mortgage. In those situations Riddell will advise working with specialist mortgage brokers to manage that. He also has to have the wider conversation about trade-offs between taking on debt and keeping more of the portfolio invested, or liquidating more of the portfolio to buy a home with cash. That decision, he says, is so specific to each client situation that no hard rules should be applied to it.
Preparing clients for the emotion of moving
Moving is a deeply emotional decision. Even downsizing can mean giving up a house full of memories, love, and routines that shaped how people interact with the wider world and each-other. When that move also includes a full-blown relocation, the emotional weight can become unbearable.
For downsizing decisions, Riddell tries to ask questions around what clients want, what they feel they need to give up, and what their dream downsize looks like. When clients are preparing to relocate, those questions shift a bit to a view of the clients’ communities, their support networks, and their friends. He tries to introduce those ideas early on, in talking about client families and asking whether these clients might want to be more involved in their children or grandchildren’s lives before the grandchildren have actually arrived.
Preparing clients for a cross-country move requires the same kind of emotional preparation that Riddell takes his clients through when they approach retirement. He’ll ask them questions about how they plan to spend their day to day, what they need from a community, and how ready they are to put themselves in the vulnerable place of seeking new friends. Family, especially a young family, likely cannot provide the full community that someone needs and preparing for the potential of isolation is essential. As other advisors face questions from their clients about moving in retirement, even if those questions are purely financial, Riddell says that advisors cannot neglect the emotional side of the decision.
“Map out the true costs, add a conservative buffer, review several scenarios so the financial side is very, very well understood. So the client can go into this with eyes wide open before they make a commitment. Then spend an equal amount of time discussing the non financial consequences. Explore how a client rebuilds their community, their social network, what are they giving up and whether the move is generally going to support the life they actually want to live,” Riddell says. “I think the advisor’s role is not to tell the client whether they should or shouldn’t move… Our role is really to provide that clarity and for them to understand the trade offs, make sure we’re protecting the retirement plan, to make sure the client is going to be safe and secure throughout the rest of their lives.”
