7. A home equity loan may be a better solution from your particular situation. Most states, with the notable exception of Texas, where I live, have made setting up a home equity line of credit simple. If you have enough equity in your house, and you have a good credit rating, you should consider a home equity loan. Unlike a loan from your retirement account, the interest you pay on a home equity loan is usually tax deductible.

8. There may also be special deals available that are better than a loan from your 401k account or a home equity loan. For example, at the time this is being written, several car companies are offering 0% financing for up to 60 months. If you qualify, this is a much better way to finance a new car that borrowing from your 401k account or using a home equity line of credit to buy a new car.

In conclusion, everyone’s situation is a little different. When you’re talking about $1,000’s of dollars and the impact of tax laws, it’s always best to get professional advice from an accountant or tax attorney. It may cost you $100 to $200 for a simple consultation, but it will be money well spent to find out what’s right for you and your situation.

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5. As the old saying goes “some restrictions apply.” Our friends in Congress and the IRS don’t want this to be too good a deal, even if it’s our own money. After all, Congress thinks they did us a really big favor with 401k accounts by making it easier to save for retirement. Maybe they did, but like many good deals, this one comes with strings attached. First there’s the $50,000 limit. Even if your have $200,000 in your 401k account, and the general rule is you can borrow up to 50% of your 401k account balance, you are limited to borrowing $50,000 at any one time. In addition most plans usually limit the number of loans you can have at any one time to 1 or 2. For example, if you borrow 50% of your 401k account balance of $50,000 on a 5 year loan, and the $25,000 left in your account triples over the next 3 years from savings and increases in the value of the investment to $75,000, you cannot borrow another $37,500. First you are limited to a total outstanding balance of $50,000. Second, if your plan restricts you to 1 loan at a time, you will not be about the borrow 50% of the new value in your account until the first loan is paid off. Even if your plan allows for 2 loans at a time, most plans have another restriction that says the amount you can borrow on the second loan will be reduced by the highest outstanding balance on the first loan during the previous 12 months.

6. If you switch to a new company, you may have to pay off your loan immediately. In many cases, this can be avoided by rolling over your 401k account, but if you can’t do that, the outstanding balance of your loan will be considered an “early distribution” from you retirement savings account and will be deducted from what you have available. You won’t have to pay the money back, but you will have to pay taxes on the balance of the loan as ordinary income. And if you’re less than 59 ½ yeas old, you will also have to pay a 10% early withdrawal penalty.

Thinking about paying extra taxes is stressful, so we’ll end here today. Tomorrow, I’ll post 2 other reasons to think twice about borrowing against your retirement account.

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Better lighting is a change you can make now that’s an immediate benefit now and will also help in latter life. As we get older, our eyes can simply use a little extra help. This isn’t needed all the time, but if you have extra lighting, it can be great when you need it.

You can install adjustable lighting that can make a room really bright when you need it but will let you dial the light back at other times. You can also install additional task lighting at your work areas or your home office desk or workbench, over the kitchen sink and under kitchen cabinets.

Adding lighting to your front porch will help you see better who might be at the front door. And adding low voltage outdoor lighting along your front walkway will help everyone from your older friends to trick or treaters make it to your front door safely. A floodlight with a motion detector at the end of your driveway and at your back door will make walking safer at night for you also.

Other changes you might want to consider include grab rails in the bathroom, lever style door handles and wider doorways that can accommodate a wheelchair later on. These changes are much less expensive to make if you’re doing some remodeling anyway. Some day you might need to add a ramp to reach that front door, also.

For many of us, needing such accommodations to limited mobility may be years and years away, or we might never need them. The point is – if retirement is still a few years down the road – keep these needs in mind if you’re planning to do some remodeling soon. It can make life more pleasant now and can save money later on.

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First up is a little advance planning. Think about what changes will make life easier for you 10 or 20 years down the road. If you’re a bit of a handy-man, now is the time to begin to make needed alterations, while you’re young enough to do the work yourself. If you don’t enjoy doing your own work or don’t seem to have the time now for some remodeling, now is also the ideal time when you have a full-time income to pay for others to make the changes for you.

Most of the changes you will need to make fall under the general heading of accessibility and mobility. Whether we like to think about it or not, our bodies aren’t as flexible, and we aren’t able to get around as well when we’re 70 as when we’re 50. A few adaptations can make life much easier.

If you’ve been thinking of remodeling the bathroom, now might be a great time. But instead of putting in that Jacuzzi or garden tub, with the high sides that are hard to get into and harder to get out of, consider something like the walk-in tub from Safety Tubs. It has adjustable power jets for a soothing massage, like a spa tub. But it also has a door in the side to make getting into and out of it much easier.

As a matter of fact, many older American’s find it very difficult to get into and out of a conventional bathtub safely. Garden spa tubs are even more difficult. Many older folks end up only being able to use a shower. A tub like the Safety Tub will be a Godsend if mobility or bending ever becomes a problem for you.

Stairs can be a problem, whether it’s 3 steps up to a front porch or living in a two-story house. I found this out the hard way about 10 years ago when I had knew surgery. I never did learn how to climb stairs on crutches. It made me realize how big a barrier stairs can be to those with limited mobility.

For a permanent solution to getting up and down the stairs, you can install a chair-type stair lift. Do-It-Yourself models start from $2,000 up, such as the Ameriglide. Deluxe models installed by professionals can cost thousands of dollars more. Installing a stair lift can indeed cost a considerable amount of money, but it’s a lot less trouble than moving from a two-story house you like to a one-story house just because you can no longer climb the stairs.

We’ll continue discussing practical changes you can make to your home to adapt it for your later years tomorrow.

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New retirement communities are still being developed in Florida and Arizona. Del Webb is now developing Sun City Festival in Arizona, a 3,000 acre site designed to eventually be home to 7,200 households. But now not only are retirement communities growing in Florida and Arizona, they are now popping up in other Sun Belt states like Texas and New Mexico. But what’s really amazing is the development of retirement communities in such northern locales as Michigan, Massachusetts and Illinois.

Several things are driving this trend. Many retirees want to downsize from the house where they raised their families. They simply no longer need all that space, so they’re looking for a smaller house. They like the amenities planned retirement communities offer.

At the same time, many folks have realized they don’t want to move half way across the country from their children and grandchildren, better weather or not. How much fun is being able to play golf in January if there’s a new grandbaby you only get to see once or twice a year because of the distance.

The booming real estate market of the last few years, particularly in the Northeast, has driven home equity up to all-time highs. But if you sell your house to capture the equity, where do you go when you buy a smaller house? People moving out of larger houses can afford to relocate to a planned retirement community, but in what part of the country?

Oak Point in Massachusetts is a great example of this new trend of Northeastern retirement communities. It has the community clubhouse and shuffleboard courts you would expect in a 55+ community in the Sun Belt. It has almost all the amenities you’d find in a Florida or Arizona retirement community except the weather.

But it’s not just shuffleboard and bocce ball. Since Oak Pointe is also designed for active seniors, you can wait for the snow to melt in the heated swimming pool and the state-of-the-art fitness center. You also don’t have to shovel the snow: the maintenance staff does it. It’s all included in the price. When you want some big city excitement, Boston is less than an hour away by car or bus. If you want a day at the beach, Cape Cod is also an hour’s drive away.

Especially for those with children in the area, and for those who enjoy the cultural amenities of the Boston area, retirement in the North makes great sense. Even a few folks who were living in the Sun Belt have now moved into some of these Northern retirement communities. Who could have imagined that a few years ago?

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It can be one of the best retirement investing strategies you can have, because it can pay huge dividends. It can open our eyes to the reality of living in a new place full-time. This is the kind of information you need to know before you spend serious money to ship your furniture cross-country to a new area.

Let’s say you visited Phoenix in the winter and dreamed of not having to shovel snow for days on end. I lived in Arizona for 5 years, and there is a lot to like about Arizona. My mother-in-law still lives there.

Winter is very pleasant in Phoenix. But are you ready for 120 degree days in the summer, when your feet stick to the pavement of asphalt parking lots, and the steering wheel in your car gets so hot from being parked in the sun, that you can get blisters on your hands from touching it?

Yes, I know you can buy a cover to keep your steering wheel cooler. But the point is, to fully experience an area you might be considering making a permanent move to, you need to test it out for at least 12 months first. Experience all the seasons, so you can see the good and the bad.

Some people love the heat in Phoenix. Some people spend the entire summer under an air conditioner and never go outside, at least in the daytime. If you like to walk for exercise, you’ll have to do it at 5am, like my mother-in-law, before it gets unbearably hot. Only you know what you like and what you can’t put up with.

So…before you make a permanent move, check out your new area by renting there for a year. Granted - it is extra trouble and maybe a little extra expense, but it can save you from making a very costly mistake. Get to know the neighborhoods and the city. Find out about development plans. You will be able to gather the kind of information you need to make an informed decision. If you rent first and then you decide not to move, you’ll still have your house back where you came from to go back to.

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One of the big benefits you get by renting in an area before you buy is you’ll get to know the various neighborhoods. This is especially important if you’re not buying in an age restricted retirement community. In a retirement community, at least you know what kind of development will be going on around you.

If you buy in a regular neighborhood in a town in, say, the Sun Belt, you could be in for a rude surprise. If you rent first in your new area, it will give you time to find out what the future development plans are for the area you’re considering. If you’ll start reading the newspaper and watching the local TV news, you can learn some very valuable information.

For example, when we moved to the town where we live now, we almost bought a particular house because it was close to the local high school and had beautiful open fields behind the house. It was only by a little research and a lot of luck that we found out that the city was about to build a huge community recreational park on that field.

Now behind the house we almost bought are youth baseball fields with stands full of screaming parents and tennis courts lighted to at least 10 o’clock every night with huge floodlights. And right next to that, they built a new football stadium for the high school last year.

The beautiful back yard of that house is now as bright as daylight at 10 pm, and the floodlights shine right into the back windows of the house. And of course, if we had bought that house and decided we wanted to sell it later because of these distractions, it would be worth a lot less than we would have paid for it.

Tomorrow we’ll talk about getting to know the realities of living in a new area.

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Many folks relocate when they retire. Many more folks think about it but don’t do it. According to the Del Webb Company, the folks who built Sun City in Arizona, the first master-planned retirement community, 47% of those 51 to 60 years old would seriously consider moving after they retire.

Here’s a modest proposal to think about before you make that move. Take the area you’re considering for a test drive.

You wouldn’t think of spending $30,000 for a new car without test-driving it. You would not buy a car based on just reading the brochures and giving the car a quick walk-around. Yet every day people spend $150,000 for a small house in a retirement community of modest houses to $1,000,000 or more for a Miami condo based only on fancy brochures and a brief walk-through.

Instead, consider test-driving your new location for a year. If you’re thinking about a particular retirement community that’s limited to seniors, you also need to check out the surrounding local area. If you’re planning to buy in a mixed residential area instead of a planned retirement community, it’s even more critical.

In most parts of the country, it’s easy to find a real estate agent who can rent out your current home for a commission of 10% of the monthly rent. You can put your furniture in storage for about $200 a month or less, pay a small increase in your home-owners insurance and then use the rest to pay your rent in the area you’re considering moving to.

Since you’re probably planning to downsize your house if you move after retirement, the net amount you will have from your rental income after paying the real estate agency and paying for furniture storage should cover the rent on a smaller house in the area you are thinking about moving to. Also, since it’s only for a year, a small apartment may be fine.

You may want to take a small amount of your furniture with you in a Uhaul truck, or you can rent some furniture from one of those rent to own places. Maybe you can even find a furnished apartment.

Today we’ve talked about setting up a test drive of your new area. Tomorrow we’ll go into a couple of real world examples of why checking out your new area could save you a great deal of money and a lot of frustration later on.

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Back in 1850, when the average life expectancy was just 38 years, there really was no such thing as retirement as we know it now. The rich could continue to get an income from their investments as long as they lived. Everyone else, mostly still living on farms, worked as long as they were physically able. Quite often the illness that stopped a person from being able to work was the illness that would also kill them.

Even by 1900, when many people had moved into town and had gotten factory or service jobs, most folks still worked as long as they were physically able. If what stopped you from working did not kill you, you moved in with you children, if you weren’t living in a multi-generation household already. The retirement program then for almost everyone was for your children to take care of you in your old age. This usually was the only arrangement needed since life expectancy was still only about Age 50.

The idea of retirement as a lifestyle after working evolved along with Social Security. But even when Social Security began in 1935, average life expectancy was still just Age 63. Since most folks did not live past Age 65, it didn’t take too much money to fund Social Security payments to those who lived to Age 65 to begin collecting benefits. There weren’t that many of them for those who were still paying into the fund.

Now people are living longer, and politicians and pundits talk about the Social Security funding gap. Maybe, just for a moment, we can see the bright side of this. If most of us were still only going to live to Age 63 to 65, there wouldn’t be much of a Social Security “crisis” because there wouldn’t be that many folks living longer to collect money past Age 65.

So…let’s resolve to be happy, just for today at least, that we have the luxury to need to think about retirement investing. If we were just going to work on and on until we suffered some fatal illness, we wouldn’t need a retirement plan. But we are living longer and healthier lives, and that’s a good thing.

Here’s a thought on retirement investing and retirement planning that has stood the test of time, written by the wisest man who ever lived:

“Go to the ant, O sluggard, observe her ways and be wise, which, having no chief, officer, or ruler, prepares her food in the summer and gathers her provisions in the harvest season.”

Prov 6:6

Let’s resolve to be diligent and consistent with our retirement investing so we will have our provisions stashed away when the Fall and Winter come.

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