How Can I Afford To Pay My Rising Property Taxes, Home Insurance?

By Maurie Backman

Kiplinger’s Personal Finance

Q: I’m 65 andmy property taxes and insurance keep going up. Howcan I afford my house in five years? A: Homeowners are often advised to try to pay off their mortgages ahead of retirement. Thatway, they’ll have one less expense to contend with once theymove over to a fixed income.

But while shedding a mortgage payment could free up roomin your budget as a retiree, that doesn’t mean youwon’t have other homeowner expenses to deal with, like property taxes, maintenance and insurance.

The problem is that even with a paid-off home, your costs of ownership could rise in retirement, causing financial stress and making it difficult to keep up. It’s important to understand the costs of continuing to owna house— and to take steps to protect yourself financially when possible.

Don’t assumeyou can’t fight your property taxes

InAugust, the FederalHousingHouse Price Index measured a 2.9% increase in U.S. home values on a year-over-year basis. Whenhome values rise, property tax bills tend to followsuit, which can be a huge problem for retirees on a budget.

That’swhy Colton Pace, co-founder and CEOatOwnwell, a property tax appeal service, says older homeowners need to be informed about property tax relief programs.

"In most states, seniors 60 or 65 and older can lower their property taxes through homestead exemptions and property tax freeze programs," he says.

"For example, inTexas, homeowners can combine a general homestead exemption with a senior exemption and a tax ceiling that freezes school district taxes once they reach 65. Florida, another popular state for seniors and retirees, offers a similar setup."

If you’re older, it pays to check with your state’s Department ofRevenue or Division ofTaxation to see what programs you might qualify for. Your local tax assessor may also have that information.

And remember, even if you don’t qualify for a property tax freeze, you can always appeal your property taxes on the basis that your home assessment is too high.

Pace also points out that recent changes to theSALT(state and local tax) deduction could spell relief for some homeowners in high-tax states: "Under the One Big Beautiful BillAct, theSALTdeduction cap was temporarily raised through 2029 to $40,000." The previous limitwas $10,000.

However, "you can only deduct property taxes if you itemize deductions on your federal tax return." There are also income limits associated with thisnewrule, although they’re quite high.

Homeowners in states that include Connecticut, NewYork, NewJersey, Massachusetts and California may benefit the most fromthis change, according to the Bipartisan Policy Center.

Keep shopping forhomeowners insurance

Homeowners insurance can be a huge expense for older homeowners— especially when home insurance costs keep going up. Bankrate reports that the average U.S. homeowners policy costs $2,408 a year for a $300,000dwelling limit.

If you live in a state where homeowners insurance costs keep rising (like Florida, where natural disasters are all too common) or if your personal costs keep going up for some reason, it’s important to shop around for a policy every year. You may be eligible for a discount based on your age or other factors.

Budget carefully for maintenance

Although property tax and insurance costs can rise fromyear to year, on a 12-month basis, they’re usually locked in, making it easier to budget as a retiree. It’s maintenance and repairs that often push older homeowners to their breaking point.

State Farm says a good rule of thumb is to set aside 1% to4% of your home’s value for maintenance each year. But as your home value rises, that requires you to continuously increase your budget.

That, however, may not be a bad thing, because homes tend to need morework as they get older. And if your home is older already, you may need to start with the upper end of that 1% to4% range.

If youwant tomake sure you’ll be able to afford to stay in your home long term, you maywant to create an emergency fund for home repairs and maintenance specifically. Generally speaking, it’s a good idea for retirees to hold enough cash to cover one to two years of bills in case there’s a market event that sends portfolio values plummeting. Having dedicated funds for homerelated costs takes some of the pressure off.

As Pace says: "All homes require upkeep, ranging fromaffordable fixes like deep cleaning to more expensive jobs like roof or foundation repairs. Ignoring urgent needs can lead to hazards and bigger bills down the road."

You may alsowant to be careful when making home upgrades— something you may be inclined to do as a retiree if you’ll be spending more time at home.

"Adding a roomor installing a pool will likely increase your home’s assessed value and raise your property taxes, which can further deplete your retirement savings," he explains.

It’s amatterof priorities

As a retireewhoowns a home, it’s best to expect that your costs will rise continuously fromyear to year.

There are steps you can take to mitigate that, like looking into property tax programs, shopping annually for homeowners insurance and having separate funds for maintenance and repairs.

But at the end of the day, if your home-related expenses are eating too heavily into your budget, there may come a point when downsizingmakes sense.

Ultimately, you’ll need to ask yourself what takes priority— flexibility in your budget or staying put. There’s no right or wrong answer, but it pays to consider a move if the stress of keeping up with your home outweighs the benefits of living in it.

DREAMSTIME

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