Make home, retirement decisions early

Everyone dreams of a retirement with dignity and financial security. Many of us consider moving down after retiring to a one-story home with less maintenance when we reach retirement age. Some folks move to a retirement community like Sun City in Roseville, Trilogy in Rio Vista or even places like Palm Springs, the California Coast or Arizona. Here are a few tips on how to retire with financial options at 65. My first tip is to focus on your retirement goals early in life since time can be your friend or your enemy if you wait too long to plan. Step one is to maximize your IRA and 401(k) contributions, preferably by your 21st birthday and no later than your 35th birthday. In addition to maximizing your deferred compensation contributions, it is also advisable to invest 5 percent to 10 percent of your income in real estate or stocks every month for what I call non-IRA investments. Second, purchasing a home and getting it paid off by the time you are 65 is also advisable if you want housing options for when you retire. Your home should not be considered an investment because everyone needs a place to live. Your residence can only pay off as an investment if you downsize to a much lower-priced home at retirement. I think it is wise to purchase a home and pay it off by 65, then your housing cost at retirement will only be your monthly taxes and insurance for the property, which should be only around 10 percent of what the monthly rent will be for that same house. The average sales price for a home in Solano County was $160,000 in 1995, and in 2015, the average is $360,000. If we have the exact same appreciation rate for the next 20 years, the average price will be $810,000 and in 30 years, it will be more than $1 million. I always ask people what they would rather have, a home worth $1 million and a monthly housing cost of $600 per month for taxes and insurance in 30 years, or a rent payment of $5,000 to $6,000 and no equity. I always encourage people whether they have a great pension plan or a self-funded retirement to purchase a home and get it paid off by the time they are 65 or looking at retirement. This is the true American Dream.