Retirement Housing Considerations

HC03

You will need to consider future housing arrangements as retirement nears. Ask yourself the following questions:

1. Where do you want to live?

• Do you want to be close to friends and family?
• Do you want to live in a particular area of the country?
• Is it important to have easy access to cultural activities, such as theaters, museums, art galleries and libraries?
• Is access to public transportation important?
• Should you rent or own your home?
• Will your retirement benefits, Social Security and personal savings be enough to cover your rent or mortgage without straining your budget? Should you consider moving to a community with a lower cost of living?
• Should you purchase a home outright or apply for a mortgage and make monthly payments? Can you qualify for a mortgage?
• If you’re considering purchasing a home in an unfamiliar community, should you rent for a while to decide if you like the area or neighborhood?
• Are you anticipating future moves?

2. What kind of housing would be best?

• Do you want the independence and privacy of a house? If not, consider moving into a condominium, co-op or other similar housing if you prefer to have yard work and maintenance handled by someone else.
• Will your home need to be handicap accessible?
• Would you like to live in a building with a security guard, video surveillance and other security features?
• Also consider assisted-living facilities or housing facilities that offer independence now but provide assistance if you need it later in life.

3. What happens to the clergy housing allowance exclusion at retirement?

Most clergy exclude a housing allowance from their gross income when paying federal income taxes during active ministry. But, this housing allowance exclusion may be available after you retire. At that time, your annual conference becomes the church entity that determines if you are eligible to use the housing allowance toward your taxes.

During retirement, you may be able to exclude from your taxable income all or a portion of the retirement plan distributions you receive from sources covered by your annual conference’s housing resolution (published in the conference journal). The portion of such distributions you may exclude is equal to the least of the following amounts:

  • the amount designated as a housing exclusion by your annual conference for the tax year in question;
  • the amount spent for your housing (mortgage principal and interest, utilities, taxes, insurance, furnishings, maintenance, etc.); or
  • the current fair rental value of your home, including furnishings, plus the current-year cost of your utilities (whether you own or rent your home).

For more information about the housing allowance and a housing allowance exclusion worksheet, visit www.wespath.org/resources/clergy-taxes/ and read the Are You on Track to Retire? brochure.

Housing Calculators and Guidance

Wespath Benefits and Investments participants have access to the EY website at no charge. This site offers a wealth of resources, including calculators on various housing-related topics:

  • renting vs. buying
  • mortgage loans
  • mortgage debt consolidation
  • adjustable rate mortgages (ARMs) vs. fixed-rate mortgages
  • fixed-rate mortgages vs. interest-only mortgages

For more information about these and other topics, visit the EY website (company code: gbophb; company program: gbophb).

You also may be eligible for confidential, no-charge guidance from an EY financial planner about how to structure your home purchase to maximize use of the clergy housing allowance.

 
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