Questions to Ask Before Deciding on a Real Estate Agent

 

Roughly 5 million residential real estate transactions were conducted in 2014. Of those, nearly 87 percent involved real estate agents, who can help both buyers and sellers of residential properties save time and maximize the value of their home. Before deciding which real estate agent might be the best fit for your needs, you might want to ask yourself—or your agent—the following questions.

1. ARE THEY LICENSED?

Real estate agents licensed by state property boards are usually expected to complete regular training courses and abide by board-approved practices. Agents affiliated with the National Association of Realtors (NAR) are also bound by the organization’s Code of Ethics, which are intended to make sure real estate agents follow NAR’s approved protocols for home sales.

2. HOW MANY HOMES HAVE THEY SOLD IN YOUR AREA?

Because neighborhoods often have their own unique traits when it comes to advertising benefits like school districts and property values, you’ll want an agent who has successfully completed several transactions in the area you’re considering. For sellers, an agent with experience in the local market will know how best to appeal to buyers most likely to complete a sale.

3. HAVE YOU VISITED AN OPEN HOUSE THEY ARRANGED?

One of the better ways to assess an agent’s ability to move a property is to visit an open house to see how they handle prospective buyers. An impressive presentation means they’re likely to devote a similar amount of energy to your own transaction.

4. HAVE THEY WON ANY AWARDS?

While it’s not necessary that an agent’s office be packed with trophies, third-party recognition for outstanding sales or customer service can be a good sign that the agent is proactive and attentive to their client’s needs.

5. DO THEY HAVE THE RIGHT CREDENTIALS?

Agents often come with designations that might resemble a word jumble until you get familiar with details. An Accredited Buyer Representative has had additional training in representing those in the market for a home; a Seniors Real Estate Specialist has had experience working with buyers over the age of 50. Get to know an agent’s abbreviations and find out if they specialize in your situation.

6. HAVE THEY SOLD A HOUSE SIMILAR TO YOURS ALREADY?

As a buyer, you’ll want an agent familiar with the specific type of home sale you’re interested in. That means experience in navigating the details of federal loan programs, dealing with military financing, or having sold more residential properties than commercial. Buyers and sellers of private properties can also have a variety of special interests depending on the type of home being targeted. Rural homes, for example, have different details to work through compared to historic properties or condominiums. You’ll want an agent who has experience dealing with your specific case needs.

7. HOW MUCH DO THEY COST?

Agents typically receive a percentage of the sale price from the seller. Ask for specific amounts (typically three to seven percent), along with other closing costs. Sellers should also know whether an agent charges a fee for things like staging (dressing the home for viewing), photography, and other attempts to stand out in the market.

8. DO THEY HAVE REFERENCES?

Hiring an agent should be like hiring any other employee: You’ll want to know that they have gotten the job done previously. While you can look at online reviews, it shouldn’t be a problem for an agent to provide contact information for buyers or sellers they’ve worked with so you can benefit from their perspective.

9. WILL IT BE A TEAM EFFORT?

Keeping homes visible in the market, analyzing new listings, and communicating to clients requires a lot of leg work, so many agents have workers who assist them in keeping on top of their workload. At the same time, you don’t want an agent who will use assistants to pass along information. Make sure the agent will make keeping you informed their first priority.

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Shocking Truths About Real Estate!

 

You’ve probably read about—or even met—people who claim to have made fortunes large and small trafficking in real estate. “Flipping” houses can seemingly make tens of thousands of dollars appear overnight, all while working your own hours.

If it you think it sounds a little too good, you’re right to be suspicious. Below, some harsh realities about the real estate game that most aspiring investors, homeowners, or potential buyers should learn about sooner rather than later.

1. IT’S NOT ALWAYS A GOOD LONG-TERM INVESTMENT.

Property owners who aren’t looking to make real estate their livelihood can generally commit to homes for personal use because of their perceived long-term value. But maintenance costs—new roofs, plumbing, property taxes—and interest rates can all conspire to negate any appreciation in the home over time.

2. YOU NEED A BACKUP PLAN. (AND PROBABLY A BACKUP TO THE BACKUP.)

Buying an investment property to sell at a profit has a lot of pitfalls, but one of the most dangerous is not having a back-up plan when the market has turned a bad corner. If selling outright isn’t an option, learn about a lease-to-sell arrangement, renting, or selling below cost to another investor.

3. INSPECTIONS DON’T REVEAL EVERYTHING.

Having a property examined by a professional prior to closing is a wise decision, but not all problems present themselves in an obvious way. Inspectors generally don’t remove or cut into walls to inspect interior issues; water problems might not be apparent until the area gets a considerable amount of rain. Once you own the property, you’re on the hook for any expensive repairs that could have been brewing quietly for years.

4. STRIP MALL LOCATIONS NEED FACELIFTS.

If you’ve considered investing in commercial property, strip mall locations can be an attractive option: they’re modestly-sized and can attract a lot of foot traffic, making them appealing to business owners. But those locations typically need to be renovated top to bottom every five to 10 years. Unless you plan on turning it around in short order, realize that a very large bill—adding to the overall cost of the property—will come around before long.

5. SELLING? THE FIRST OFFER MIGHT BE THE BEST YOU GET.

When you first put your home on the market, you might expect to spend months fielding offers. But in some cases, the very first potential buyers will be the ones making you the most attractive offer. Early birds tend to be highly motivated and have already scoped out your neighborhood to determine a fair market value.

6. EVICTIONS CAN BE BRUTAL.

Say you’ve tried to circumvent a lot of hassles by buying a rental property. The tenants cover your mortgage and leave a profit, but one or more come forward and say they can’t make their lease payments on time. While laws vary by county and state, evicting them isn’t a straightforward process. Waiting for a court date can add months to their delinquency; showing up with law enforcement to have the (ex) tenant moved out means cleaning up, repairing damage, and removing any belongings left behind.

7. YOU CAN’T ALWAYS FIX IT YOURSELF.

Property owners might believe they can handle minor repairs themselves, but residences can have issues requiring major plumbing or electrical work. By law, some of these repairs need to be performed by licensed professionals, adding hundreds or thousands of dollars to the cost of maintenance.

8. FORECLOSURE SALES CAN BE A HUGE BURDEN.

Buying a home in foreclosure is often perceived as a significant savings opportunity—but these homes are rarely abandoned in immaculate condition. Foreclosed homes can be in violation of codes and might even come with a buyer-beware asterisk to the sale, meaning that buyers would have no recourse if they bought something with major structural damage.

9. AGENTS ARE DROWNING IN FEES.

If you’d prefer to represent buyers and sellers in real estate transactions to collect commissions, keep in mind that a portion of your salary will be eaten up by recurring costs. Accessing online listings carries premium charges; so does getting a license. Joining associations means paying dues.

10. IT COULD TAKE YEARS TO MOVE A PROPERTY.

For commercial buildings, sellers can often find that buyers have very particular size and layout needs. A property might be too big, too small, or with the wrong kind of parking available.  That’s why investing in commercial listings require a lot of patience: it could be months to years before both parties find a perfect match in one another.

11. MOST INVESTORS DON’T MAKE IT PAST A YEAR.

So much can go wrong with real estate that investors who decide to make it a career usually don’t make it past the 12-month mark. Like any business, it requires long hours, patience, and an ability to roll with unexpected crises. If you’re still standing in your second year on the job, you might just make it.

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Upgrades to Make Your Home Smarter

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Selling Your Home for Maximum Value

HomeChecklistSelling a home is almost as exciting and nerve-wracking as buying your first property. Fortunately, if you work with an experienced real estate agent and take the time to prepare your home, it will sell faster (and most likely net you an excellent price.)

Don’t underestimate the power of home improvement projects and home staging—these things can amp up your home’s appeal inside and out, and have buyers fighting to make an offer. Preparing your home for the market is a chance to make money and gain experience—take advantage of this opportunity by working hard.

Home Improvement Projects and Repairs

Small repairs and upgrades often have the biggest impact. Buyers want a home that is move-in ready. Minor things like burned-out lights, broken windows and cracked pavement detract from a home’s perceived value. Make sure everything is in good working order, and then tackle the upgrades. With a return on investment of 130 percent, replacing your front door is the top improvement.

If you’ve lived in your house for years, you probably have a few projects that have been on your to-do list forever. Some of these may be good choices, but others may be prohibitively expensive—projects that have excellent returns share these traits, as they are affordable and reduce maintenance requirements. They improve efficiency, and they address problems.

Improvements for Kitchens and Baths

The kitchen and the bathroom are prime candidates for remodeling, but you might be able to get away with less—replacing drawer handles and knobs is an excellent step. You may also want to repaint or refinish drab cabinets if they are structurally sound. Purchasing a new fridge or oven is also a nice step, as a premium appliance can give a room a measure of quality.

Installing modern light fixtures is another winning effort. In the bathroom, neutral colors create a classic look. Install a new shower head, and make sure the floor and shower itself are in good condition. Replace the caulk. Review thishome improvement guide to see which projects are worth the work.

What about Paint?

Fresh paint is one of the most welcome and recommended improvements if you’re selling your home. This project is simple and inexpensive. With good preparation, paint can cover minor blemishes and nicks—it can also conceal the bold paint in a child’s bedroom (buyers generally prefer neutral colors). You can maximize your return and achieve professional results by completing appropriate prep work, masking the trim, spackling holes and sanding the base coat. Low-VOC paint is an excellent choice and can be a selling point when you’re marketing your home.

Outdoor Upgrades

Exterior improvements are extremely beneficial for improving your home’s market value. Purchase new house numbers, replace broken or drafty windows, or install a new garage door. Invest in new siding, or make sure that your existing siding is free from mildew and stains. If you want to make a more major improvement, build a deck or patio. These functional areas will help buyers visualize a new life in a new home.

Landscaping for Curb Appeal

Landscaping can increase your home’s curb appeal and value considerably—the challenge is knowing where to start. First, how does your landscaping compare to other homes in the neighborhood? Is it lagging behind, or is it leading the way? Second, if your home has overgrown landscaping, it should be trimmed back, or even removed completely. Dying, neglected or overgrown plants will decrease your curb appeal. However, if you add a variety of landscape plants, your home’s value can increase by as much as 10 percent. You can easily double the money spent on plants, mulch and other supplies.

If you spend just 2 percent of your home’s estimated value on landscaping, you’ll see major returns. A study by Virginia Tech found that adding landscaping increased the value of a $150,000 home by more than $8,000. The sophistication of the design, the diversity of the plants and the size of the specimens are generally the most important aspects.

If you’re getting ready to sell, you should have about two months to make changes to your landscaping—a bag of lawn fertilizer and a load of mulch are ideal for sprucing up a home quickly. Outdoor furniture, potted plants and seasonal flowers are excellent choices for improving the appearance of your yard, and adding value to your home.

The Best Times of the Year to Sell

You’ve worked hard to spruce up your landscaping, and you want buyers to see the result. However, this might be impossible if your yard is covered by a foot of snow. Timing a sale is tricky, and it can’t always be helped, but you can maximize your returns by understanding what drives the market. Traditionally, spring has been the best time to sell, though this may not be the same in every case.

Buyers are active, and families want to get their kids settled before school starts. Approximately 60 percent of families who move do so in the summer, which shows how many homes sell in the spring. However, this trend is slowly changing. If you aren’t ready to list in the spring, you still have a good chance to profit—new data shows that November is one of the hottest months for home sales. But why?

Today, more than half of home buyers are retirees, single millennials, and couples without children. The school calendar doesn’t affect these individuals—in fact, listing in the autumn and winter is advantageous, because the housing supply is lower. It becomes a seller’s market!

As a general rule, homes listed in the fall and winter are 10 percent more likely to sell for the listing price, and to sell within six months. Don’t fear the holiday season either! If you can handle showings during this hectic time of year, feel free to list your home. Wintertime buyers are often in a hurry to relocate for a job, and thus need a home quickly. If your home is available, they may be willing to pay a premium price.

Staging a Home

Homes that are staged sell faster, and for more money. You could hire a professional, but many of these things can be done on your own (and for a fraction of the cost). Home staging starts with a thorough cleaning—strip waxed floors, shampoo carpets, and make every surface spotless. How much light a home has is also a major selling point.

Wash the drapes, or buy new curtains. Clean the windows and screens to let in more sunlight. Put in high-wattage bulbs that show off your home.

After you’ve cleaned, it’s time to declutter. Remove family photos and keepsakes. Clear out the garage. Donate items that you don’t use. Then, store the rest!

Ideally, your home should be 90 percent packed when it’s time for a showing. Closets and storage spaces are especially important to buyers. Make sure closets are tidy and no more than half full.

Finally, arrange furniture to give each room a distinct purpose. Multi-purpose rooms give buyers a mixed message—it’s better if the buyer imagines a home office in a spare bedroom, rather than seeing a computer desk crammed next to a daybed.

Test your improvements by walking around your home and looking at everything like a buyer would. Staging gives you the power to decide what potential buyers see (and what they don’t see), including your children and your pets. This process starts before you list your home, and continues through the showing. It can be a good idea to brainstorm a variety of home staging ideas in advance.

Aromatherapy for Home Sellers

Staging makes your home look great in listing photos, however, pleasant smells can make your home appealing in person. Before you get out the air freshener, it’s important to remove unwanted odors. Pet odors and cigarette smoke are two of the biggest turnoffs for home buyers. If you have a problem with either, take steps to address these issues early in the process.

Some homes suffer from musty odors. Open the windows regularly to draw in fresh air. Clean the walls, carpets, upholstery and any surfaces that harbor unwanted odors.

Scientists know that olfactory experiences have a great effect on behavior. Neutral and natural scents, such as lavender, orange, lemon and pine, appeal to potential buyers. Avoid overbearing blended fragrances or artificial air fresheners. Studies show that strong scents create a mental disturbance and inhibit the decision-making process that is critical when someone is making the biggest purchase of their life.

Vanilla extract and essential oils are excellent choices for perfuming various areas of your home. You can also boil cinnamon sticks or orange peels about an hour before a showing.

Think seasonally, and consider what fits your home and the buyer. Avoid derisive scents like patchouli, and keep in mind that many people are sensitive to powerful fragrances.

Hiring the Right Realtor

All of your hard work up to this point won’t pay off without an effective real estate agent. The right realtor can make the process of selling your home easy and profitable. It’s tempting to hire the realtor who originally sold you the home or who found the perfect property for a friend, but these choices can prove to be less than ideal.

A selling agent needs to be on top of the market and understand all the nuances of your neighborhood, including the sale prices of comparable homes—pricing a home is an art!

If you start with the right number, you’ll get more offers and still have room to negotiate. If you start too high, your home might sit on the market, face price reductions and eventually sell for less than it would have.

Look for an agent who is experienced and works in your area regularly. You need an accurate market analysis, not an inflated valuation. Here are a few questions to ask to help you find the right realtor.

1. How quickly are your homes selling? How does this compare to the average selling time?

2. Did the homes sell for more or less than the listing price?

3. What will you do to market my home locally and online?

4. How often will you update me on any progress?

5. May I speak to your most recent clients? Ask about the agent’s communication skills, sales strategy and interaction from the listing through the closing.

How well you prepare your home for the market can alter a buyer’s perception and help you get top dollar. Everything you do should send the message that your home is well-maintained and ready for new owners. If you’re preparing to move, you’re probably ready to buy, which means that you should be able to see your home from a buyer’s perspective. These strategies will help you sell your home quickly, and capitalize on its full value.

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How To Become A Millionaire Through Real Estate (Really)

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Real estate can make you a millionaire.

Sure, this might sound like the promise of a late-night television salesperson trying to get you to attend the latest “free seminar,” but the reality exists: real estate is a powerful wealth building tool that has made millions of individuals millionaires.

Could you be next?

Maybe – but here’s the catch: not everyone who buys a piece of property becomes rich. In fact- many people buy real estate only to find stress and empty bank accounts. They struggle for years and years but never build the kind of wealth they’ve dreamed of (or the riches promised by the late night TV guru.)

So – how does someone use real estate to truly become a millionaire?

As I discussed recently in the longest article I’ve ever written, How to Become a Millionaire, there are four primary “wealth generators” at play when you invest in real estate, depending on the strategy you get into:

Cash Flow. This is the extra income you’ll get to keep each month (or year) that you own the property. Cash flow can be deceptive because it fluctuates when certain repairs are higher or lower in different months, so it’s important to factor in non-monthly costs like vacancy (the amount of time the property sits vacant), repairs, capital expenditures (expensive projects that need to be replaced on a home every so often, like appliances, roofs, windows, plumbing, etc.), along with the regular expenses (utilities, management, etc.).
Appreciation. When the value of a property increases, we call this “appreciation.” While appreciation is not always guaranteed (just ask people who bought in 2006 and sold in 2010!), over time, historically, real estate has always increased in America, averaging 3% per year over the past century. Another type of appreciation that can come into play is known as “forced appreciation,” the concept of increasing the value by physically improving the property.

Loan Pay-down.  When you buy a property with a mortgage, each month your loan balance decreases. This means, over time, your tenant is essentially paying the loan down for you, helping you build wealth automatically. To make this concept clearer, pretend for a moment you owned a property that you bought for $1,000,000 with a mortgage for $800,000, and it made $0 in cash flow (it “broke even”) and never climbed in value. However, after that thirty-year mortgage is paid off, you’ll now have a property worth $1,000,000 that you didn’t actual save for. Your tenant paid it off due to the “loan pay-down.”

Tax Benefits. The final wealth generator from real estate are the tax benefits associated with owning property in the United States. The U.S. government likes real estate investors and uses the tax system to encourage our purchase and leasing of properties. From extra tax write-offs to the lack of “self-employment tax” to the 1031-exchange and more, real estate investors can pay significantly less tax than other business owners, using the extra cash to buy more properties or pay of the loan faster — helping to build greater wealth.

Of course, just buying some real estate will not give you all of the above benefits. Different strategies in real estate will give you different benefits. For example, when you “fix and flip houses,” you are most likely not paying off a loan, thus you will not get the benefit of the “loan pay-down” nor are you getting cash flow or many tax benefits. Instead, flipping relies mostly on the “forced appreciation” you get by fixing it up.
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One of the reasons I love buying rental properties so much is because they may capitalize on all four of the wealth generators — if you buy it right. Let’s use a quick example:

Jenny wants to build wealth through rental properties. So Jenny finds a duplex for $250,000 in her neighborhood. After running a careful analysis, she determines that it is a good deal. Jenny uses a $50,000 down payment and obtains a 30-year loan for $200,000. Combined, both units bring in $3,000 per month, but Jenny’s expenses average just $2,500 per month, leaving her with $500 per month in cash flow, which increases each year as rents climb with inflation. Although that income is taxed, she doesn’t have to pay any because of the depreciation deduction she gets on the property, thus part of the tax benefits of owning it. Over the next 30 years, the value of the home increases to $600,000 (a 3% per year increase due to appreciation). Finally, each year during those 30 years the loan has been paid down, and Jenny owns the duplex free-and-clear. She now has an asset worth $600,000, plus she’s making thousands per month in cash flow.

This example above is not “pie in the sky” numbers — these are real life options when you buy the right deal and utilize all four of the four wealth generators. Imagine what Jenny’s net worth would be after 30 years if she had purchased two duplexes — or four, or twenty of them early on.

Now, of course, no one wants to wait 30 years to become a millionaire. So how do you speed up this process?

Well, there are a few ways you could speed this up:

  • Get a better deal. In the example with Jenny above, what if she was able to negotiate stronger and get that same duplex for $200,000 instead of $250,000? This would supercharge her growth.
  • Buy more deals. Jenny could have also purchased more properties. Perhaps she would buy one each year.
  • Buy in appreciating areas. While I used a 3% average for appreciation, Jenny could have researched job growth and other growth indicators to find an area where appreciation would be higher, perhaps 5-8% instead of 3%.
  • Force appreciation. Jenny also could have purchased a fixer-upper property that she could improve, increasing the immediate appreciation on the property. For example, maybe she could buy it for $150,000, put $30,000 of work into it, and it might be worth $275,000 at that point. This could also increase the speed at which her wealth would build.
  • Trade up. If you are familiar with the board game Monopoly, you’ll know the value in trading from four houses to a hotel. The same is true in real estate. Jenny could upgrade to bigger/better deals every few years to maximize her return. This is perhaps one of the fastest ways to achieve wealth through real estate — and if you want to know more, be sure to read How to Make a Million Dollars from Real Estate: A Step By Step Path.

I’ve only just barely scraped the surface on what real estate investing can do for you in your quest to become a millionaire. In fact, there are so many different paths and strategies you could take to become a millionaire through real estate that I could write a thousand books on the topic and never cover it all. You could spend your whole life learning about real estate and never learn it all. And that often becomes a problem! People get stuck in “education mode” and never escape it.

I’d encourage you to not get overwhelmed, not try to learn everything. Pick one niche (like single family houses, commercial properties, etc.) and one strategy (like rental, flip, etc.), and focus on that. Read one or two books on the subject, and then start moving! Find someone local who is doing the same thing as you want to do, and take them out to lunch. Ask for help, but don’t stop moving!

The road might be foggy — but if you just keep moving forward, more of the road ahead will be revealed.

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An Alexa-enabled Home Robot

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Home robots are very interesting devices that appeal to children as well as adults (especially geeks). We’ve seen quite a few of them recently, with the charming Asus Zenbo leading the pack.

If the Zenbo, which will retail for $599 when it hits the market, is out of your price range, you might want to consider waiting for the new kid on the block. Omate, the company behind the Rise and TrueSmart+ smartwatches, recently announced its Alexa-enabled robot that goes by the name of Yumi.

The device, which looks very futuristic, is essentially an Android tablet with a set of wheels that responds to your voice commands, thanks to Amazon’s Alexa. On request, it will provide you with the weather forecast, play a song you want to hear, tell you what time it is, and answer any other random question you might throw at it.

A 5-inch 720p screen serves as the face of the robot and is able to show different expressions. It also boasts a 1.3GHz quad-core Cortex-A53 processor, 1 GB of RAM, 8 GB of storage, dual stereo speakers, and a 3,500 mAh battery. Unfortunately, it doesn’t have avoidance sensors, so there’s a good chance it will eventually crash into a wall or fall down the stairs. It does, however, have a 5-megapixel “ultra pixel” front-facing camera above the display, but because the head of the device isn’t able to tilt, you’ll have to place the robot on a higher surface to use it properly.

The Yumi robot will be available on November 15th through a crowdfunding campaign on Indiegogo, with shipments starting in March 2017. Available in black or white, it can be yours for $369. But if you’re really interested in getting your hands on one, we suggest you head over to Omates’s website to get an early bird discount, while you still can.

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How Do Streets Get Named?

 

 

For the most part, real estate and subdivision developers have the privilege of naming new streets in the United States. The name is submitted to the town or city for review, at which point the public service departments, such as police, fire, and the post office, are given the opportunity to veto the name if they feel it creates any confusion.

“The developer submits street names to the city through the relevant departments for review. The building, engineering and public works departments all comment, but the departments that have the most input and veto power are police and fire. The concern here is that the street names are unique and intelligible enough for them to distinguish and find a street and property in an emergency.

While developers can feel free to submit any name they’d like for a new street, such as the name of their child, it typically doesn’t work out because cities have guidelines and standards for certain areas that require street names to be of a specific theme.

This is why, for example, you see a large quantity of streets named after trees in one particular section of Philadelphia, or all 50 states represented in street names in Washington D.C. If the proposed name of a new street does not fit that theme, there’s a good chance it will be rejected, but how strict these policies are depends on the individual town/city. If you happen to be a developer (or decide to bribe one) and want to name a street after yourself, you’d have better luck in a newly developing suburb than you would in an established city.

With that in mind, here’s some food for thought: The names of trees and numbers make up the greatest number of street names in the country, and the most popular U.S. street name is “Second” or “2nd,” because “First Street” is often replaced with “Main Street” or something similar.

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When Should You Retire?


Should you retire at 60? 62? 65? 70? It’s a tough decision.

A recent survey from Boston College’s Center for Retirement Research found that the average retirement age is now 62 for women and 64 for men. That has some interesting implications, and it can have each of us pondering our own retirement date.

To put those numbers in perspective a bit, know that the average retirement age for Americans overall has been stabilizing in recent years. It had been inching up over decades, because of factors such as the death of the corporate pension, the increased “full” Social Security retirement age for some, increases in overall health and longevity, and a shift away from manufacturing jobs, which can wear out a body faster. According to Gallup data, the average retirement age in 2002 was 59.

Interestingly, even though the average retirement age has increased over the past few decades, to most people, retiring at 62 or 64 seems a bit early. After all, that’s earlier than the earliest possible full retirement age for Social Security — that’s 65 for those born in 1937 or earlier (and 67 for those born in 1960 or later, and somewhere in between for those born between 1937 and 1960).

Should you retire at 62 or 64, too?
If so many people are retiring around age 62 to 64, should you do so, too? Do they know something you don’t? Well, the best retirement age for you is … it depends. There’s really no one-size-fits-all best retirement age. Here are some reasons you might want to retire early or late, followed by some suggestions.

There are pros and cons to retiring early or late. (Photo: Julia Manzerova, Flickr.)

Why retire early?
The most obvious reason to retire early is to enjoy more years of not having a full-time job. If you have a sufficient nest egg, retiring early can be a reasonable financial move, too, Social-Security-wise. That’s because although you’ll receive smaller monthly checks if you retire before your “full” retirement age, you’ll receive a lot more of them than you would if you retired on time or late. Another plus for retiring early is that despite actuarial tables, exactly how long we’ll live remains a mystery — and it would be a shame to end up with far fewer retirement years than you expected.

Why retire later?
Many people retire later simply because they have to, but others choose a late date because they want to beef up their finances more or perhaps because they’re afraid they’ll be bored in retirement. By working longer, you can save more of your income, and you can give all your retirement accounts more time to grow before you start tapping them. You may also be able to remain covered by your employer’s health insurance, saving more money. (The folks at Fidelity have estimated that a 65-year-old couple will spend, on average, more than $200,000 on health care during their retirement.) Better still, if you don’t start receiving Social Security benefits at your full retirement age, your monthly checks will increase by about 8% for each year you delay until age 70.

Keep in mind …
Clearly, there are many factors involved in the when-should-I-retire decision. As you deliberate, the most important question to ask yourself is, “Am I financially ready to retire?” It’s not smart to quit working early if you don’t have enough expected income in retirement to carry you through it — and through more of it if you retire early. Estimate your expected nest-egg size at retirement, your anticipated income streams in retirement (Social Security, income from IRAs and 401(k)s, dividend income, and so on) and your expected living and enjoyment expenses. Then crunch the numbers to see when retiring makes sense. (Think hard about your expenses, so that you don’t forget any significant ones. Many retirees, for example, spend a lot supporting their children. If you will, too, factor that in.)

It can be worth spending some money on a financial advisor, too, to get a professional opinion on the state of your finances, some suggested actions, and assurance that your ducks are or will soon be in a row.

Finally, remember that many people don’t get to retire at the age they choose. A job loss or health setback may push you out of the workforce before you’re ready. You can defend against being financially hurt by that by saving aggressively and investing effectively for retirement. If you end up with a little more than you need, that’s not the worst problem to have.

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