No matter when you’re planning to retire, the earlier you take action the better. (Photo: Andrea Piacquadio/Pexels).

Duane Duggan, Realtor and Author RE/MAX of Boulder

No matter when you’re planning to retire, the earlier you take action the better. The sooner in your life you start saving, the more time there is to grow your retirement nest egg. In addition to financial investments, start thinking about where your ideal retirement home might be located, whether it’s here in Colorado, in another state, or even another country. Once you’ve decided where you want to live, buy a home to retire in as soon as you can. Ideally, you will own this second home free and clear to move into when you’re ready to retire.

There’s no better time than now to buy a retirement home. If you change your mind in 15 years and don’t want to move to the home you buy today, you can still sell it and use the proceeds to buy a home where you want to live. The homebuying environment is perfect right now for making such a decision: mortgage rates are still at historical lows and the rental market is strong. The combination of these two factors make it possible to rent out your future retirement home — and even have a positive cash flow. There may even be tax advantages for you if you treat the property as a rental on your tax return. Of course, be sure to check with your professional tax advisor first.

Odds are pretty high that your future retirement home will cost a great deal more 15 years from now than it would today. We don’t know what the interest rate will be 15 years from now, but again, odds are high that they won’t be any lower. This is another argument for purchasing now, so you can lock in the home price and interest rate. Otherwise, it may be tough to afford a home 15 years from now.

For example, if you’re thinking of moving into your retirement home 15 years from now, a 15-year mortgage could be just the ticket. A tenant paying rent now would help support the current mortgage payment, and in 15 years, you could own your home free and clear. After the home has been a rental for 15 years, you will probably need to fix it up and make improvements to transform it into the retirement home that’s right for you. If cash flow is tight, you can still take out a 30-year mortgage loan to keep the payments smaller, although the equity build-up won’t be as fast.

In Colorado, we have quite a number of “snowbirds,” or seasonal retirees. When the snow starts falling, these snowbirds travel to their retirement home in warmer climes, such as Arizona. They return to Colorado in the spring and summer. A great example is to buy your retirement home in Arizona and rent it out until you are ready to use it for yourself.

If you go ahead and buy a retirement home today and finance it so that you own it free and clear by the time you retire, there’s yet another benefit. Rather than using the proceeds from the sale of your primary residence to buy a retirement home down the road, you can use the proceeds to help fund your living expenses during your retirement.

Finally, another option for buying your retirement home is to use your IRA account for buying the home. You will need a self-directed IRA (SDIRA), and you can use your SDIRA funds to invest in real estate. The catch is that you CANNOT use it for personal benefit while your IRA owns it. However, you can rent it out to someone who is a third party. There is a list of “disqualified persons” who cannot use the property for vacations and personal benefit, but in general, this includes your family members. If you have planned far enough ahead, you can start dispersing the value of the retirement home over time to yourself personally. An example would be to disperse 20% of the value of the retirement home over five years. If you plan even farther in advance and have a ROTH IRA, the disbursements would not even be taxable! Then you can move into the home after 100 percent of the value has been dispersed.

Your Realtor® has connections across the nation. If you’re thinking of looking for a retirement home in another city, ask for a referral for an Realtor in that city and get the process started. Be sure to consult your tax professional and a reputable self-directed IRA custodian to go over these ideas as well.

By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed byRE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, email [email protected], call 303.441.5611 or visit