Monday, September 26, 2011

The Case for Downsizing Your Home

First, some numbers. Even if the mortgage on your house is paid off, taxes and upkeep can still put a sizable hole in your wallet each year. Given that annual property taxes nationwide average about 1 percent of a home's value (according to the Tax Foundation) and annual maintenance bills average from 1 to 3 percent (according to Freddie Mac), carrying costs alone on a $500,000 home total about $15,000 a year. Move to a $350,000 home and the figure drops to $10,500. Put another way, you need a nest egg of $375,000 just to cover taxes and upkeep on the former house (assuming a 4 percent rate of withdrawal annually from your prudently invested retirement savings) and a nest egg of $262,500 for the latter
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