Life in old age: Five tips for age-appropriate living after retirement

Tip 1: Make sure your home is age-appropriate

Your hip hurts, your knees are creaky and you can’t see as well as you used to. Aches and pains of one kind or another are part and parcel of growing old. So you should review your home, taking account of the following points:

• Accessibility
  What floors are the living spaces on? Is there a lift or just stairs?
  
• Labour-intensity
  How big is the living area and garden? How much work does it take to maintain them?
  
• Supplies
  What are the local shopping options? What about medical care?
  
• Connections
  How well connected is your home to public transport? Are there support organisations and clubs in the area?
  

Tip 2: Calculate affordability

Financial institutions calculate affordability before granting a mortgage. Even if interest rates are currently much lower, they will use a so-called imputed interest rate of 5 percent. According to the general rule of thumb, the running costs – comprised of ancillary costs, maintenance, interest and amortisation – should not be more than a third of your income.

The financial institution will contact you several years before your retirement. Together, you will look at the affordability of the mortgage. Is this still the case after you retire? After all, your income will usually be much lower than when you were working.

Start planning early on so you can continue to be able to afford your home when you’re older and it doesn’t become a burden for you.

Tip 3: Plan repayment

How much of your mortgage should you repay? On the one hand, repaying your mortgage will reduce your living costs – now and in the future. However, doing so means a higher tax burden as the mortgage interest you can deduct will be lower. And your capital will be tied up in your home.

Speak with your lender at an early stage to discuss its expectations regarding repayment of the mortgage when you reach retirement age.

As a general rule, if your savings do not earn a better rate of interest than the applicable mortgage rate, it may be worth paying off the mortgage.

Tip 4: Compare your needs and your budget

Create a budget for life after retirement. How do you want to live later on in life? What will any new hobbies you pick up during your new-found free time cost? Are you planning to move to a new home? Be sure to include any expenditures for taxes, health insurance and other health-related costs as well. Expenses can generally be divided into three areas:

• fixed expenses
• variable expenses
• reserves for investments

Income comes from pensions, lump-sum withdrawals and other sources. Our advisors can provide you with practical tips related to the topic “budget planning for retirement”.

Tip 5: Plan sensibly

By planning in good time you will be able to prevent financial difficulties and ensure that you are able to stay in your own home. For example, those who pay into Pillar 3a benefit in two ways:

1. First, they get a direct tax advantage for the rest of their working lives.
2. And they can use the money they save to fund the purchase of their own home later on.

Additional voluntary contributions into a pension fund are another option for building up a financial cushion to ensure a care-free life in your own home in your later years. Any early withdrawals that have been made to finance the purchase of a home should always be repaid before retirement.

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