Where To Live In Life’s Third Age

In our last post, we discussed the wide variety of retirees’ circumstances, preferences, and styles. A domain in which they enjoy an increasing variety of options is where they call home.

One of the many rewards that comes with maturity and retirement is having new freedom to choose what kind of home to occupy and where to live. About 70% of people in their 30s and 40s say that where they live is primarily determined by their responsibilities and obligations to their jobs and families, and only 30% say that they are free to choose where they live. However, for people in their late 60s and 70s, the proportions flip – 70% say they now have greater freedom of choice to live how and where they wish than ever before.

Over the years, we’ve studied retirees’ living preferences in depth, and now we’re also thinking about how the COVID-19 pandemic may be changing these patterns or even curtailing retirees’ freedom of choice in the long term. Here’s what it looks like to us.

Staying Put

Today’s retirees’ most popular choice is actually to stay put in their familiar and comfortable homes – usually referred to as “aging in place.” More than three-quarters of Americans age 60 and older own their homes, and seven in ten of those are mortgage-free. The majority have lived in their homes for more than 20 years. So the emotional attachment can be high, especially if the home has seen the raising of children and countless memorable family gatherings. Nearly half of Boomer generation retirees (47%) intend to stay in their current residence through retirement.

That doesn’t mean the family home remains unchanged. Not at all. Retirees who love their homes also tend to love making their homes even better – more functional, attractive, comfortable, and versatile. In fact, half of all home renovation expenditures – over $117 billion annually – are made by people over age 55 (and half of that is by those over age 65). Upgrading kitchens and bathrooms may be the first improvements that come to mind; however, the most common renovation is creating a home office (see the chart). That makes sense given how many retirees choose to work, even start businesses, in retirement.

Re-Planting Yourself for a Better Life

Notwithstanding the fact that so many retirees are hunkering down in their family homes, nearly three million people over age 60 move each year. Some are relocating because there’s a place they’d prefer to live, others are doing so in order to adjust their cost of living, and more and more are relocating because they want to try out a totally different type of accommodation or community setting.

Retirees who want to do their homework can start with the Milken Institute’s excellent ranking of the “best cities for successful aging.” The ratings assess city-by-city differences in cost of living, climate, healthcare and transportation services, safety and security, civic and cultural activities, and other factors. Paul Irving, chairman of the Milken Institute Center for the Future of Aging, told us that the point of the rankings is not necessarily to encourage migration to specific cities, but rather to encourage people to recognize the key factors that enable successful aging, and to encourage community leaders to improve the appeal and “aging friendliness” of their communities.

Popular perception has retirees flocking to warmer, more comfortable climes, and those destinations are indeed popular. Metropolitan areas with the greatest net migration gains in recent years include Phoenix, Las Vegas, Tampa, and Jacksonville. Many of today’s retirees are moving out of large cities. The areas with the highest numbers of people age 55 and over moving away include New York, Chicago, Los Angeles, San Francisco, and Washington, D.C. But it’s not a one-way street. Realtors are tracking a countertrend of retired Boomers moving back to the urban centers from the suburbs where they had been raising their children.

Some folks are even relocating overseas. Over half a million retired Americans currently live abroad, and the number is steadily increasing. Futurist and award-winning travel writer Don Mankin, PhD, aka, “The Adventure Geezer,” who before he became a renowned expert on travel was a psychology professor and college dean, told us: “The Boomer generation was extremely adventurous in their youth from attending Woodstock, to backpacking through Europe, and experimenting with mind-altering drugs. In retirement with newfound freedom, they’re looking to rekindle that adventurous spirit.” Whether it’s an immersion experience in a foreign culture or relocation abroad, Boomer retirees are increasingly on the move. Their most popular destinations include Panama, Costa Rica, and Ecuador.

Changing the Cost Equation

Most retirees relocate in pursuit of lowering their overall cost of living, including the cost of housing. The purchasing power of a dollar varies quite a bit. It’s less than 90 cents in New York, New Jersey, California, and Hawaii, but more than $1.10 in much of the Midwest and South. It’s over a dollar in Florida and Arizona.

Relocation can also improve retirees’ financial posture by tapping into home equity, which averages $300,000+ for retiree homeowners. Selling, moving, and purchasing a downsized home in a less expensive location can free much of the equity, while dramatically lowering cost of living going forward. Another option that’s gaining in popularity is selling in favor of renting, which adds all the home equity to the retirement nest egg, while removing the responsibilities of ownership and maintenance. Among Americans age 60 and up, the growth in renter households is far faster than that of owner households.

Hearth, Home and Neighborhood

People downsize in retirement, correct? When we surveyed retirees on their most recent moves, we were in for an “upsize surprise.” Half of those who moved had downsized for predictable reasons – lowering costs, reducing maintenance, and simplifying and decluttering their lives. However, a full 30% of relocating retirees moved into a larger home. Why would they do that? They told us that they wanted more room for family – especially grandkids – to visit, or they may anticipate having aging parents or other family members move in with them. They want room for the facilities and amenities they’ve long wanted – gourmet kitchen, exercise room, entertainment center.

Another common perception has retirees congregating (and golfing) in “active adult communities.” There are indeed more than 2,000 age-restricted (typically 55 and older) communities in the U.S., many of them self-contained with dining, fitness facilities, and resort-style amenities. Many are very popular. For example, The Villages in central Florida, with over 100,000 residents, is the fastest growing metro area in the country. Some new communities now project a Boomerish lifestyle, such as Latitude Margaritaville in Daytona Beach, inspired by the music and laid-back style of rocker/entrepreneur Jimmy Buffett.

But not all retirees want to hang out with people in their own age range. Two-thirds of Boomers say they prefer living in neighborhoods with people of diverse ages and generations. To accomplish that, many college towns provide the right mix. There’s plenty of things to do – cultural and sporting events, lectures and classes – and plenty of opportunities for social and community engagement. Medical care tends to be very good, especially if the university has a teaching hospital. And the age demographic naturally skews young and curious, which many retirees find energizing. The metro areas atop the Milken Institute’s best cities list tend to have major universities, and 11 of the top 25 locations on Forbes’ Best Places to Retire (2018) are college towns.

The COVID-19 Effect

The pandemic has certainly put many relocations and renovations on hold, as many retirees have hit the pause button and are waiting to see how things play out. It’s also leading retirees to think about their options differently. For example, living in large cities may become even less popular given the density that made them hotspots of coronavirus infection. Living abroad may be less popular if returning stateside for a family emergency is difficult when a pandemic curtails transportation. On the other hand, some destinations like Greece, Slovenia or New Zealand might become even more popular as they appear to be better havens in a pandemic-troubled world. And for all their advantages, college towns may become less attractive because of the potential to become hotspots of infection when people from many places gather and live in close quarters.

Similarly, due to the tragic levels of infection in some skilled nursing facilities during COVID-19, many adult living communities will now be judged on how well they weathered the storm of the pandemic and how prepared they are in case another one surfaces. We’ll make housing accommodations for older retirees, including assisted living and skilled nursing facilities, the subject of a subsequent post.

We hope that retirees’ freedom of choice in where and how to live is only temporarily constrained, even as the pandemic has made safeguarding health a more important decision criterion than ever.   

This is the third in a 10-part series on “The Future of Retirement” that we are posting over the course of several months. If you are interested in better understanding what’s ahead, we invite you to check out our new book What Retirees Want: A Holistic View of Life’s Third Age.