If you’re a Gen X woman, the word “roommate” might conjure up memories of a tiny apartment or dorm room decorated with the posters you collected from the mall and plastic dishes we probably shouldn’t have microwaved.
Yeah, no one wants to go back there.
But if you’re sitting in your home alone, wondering what to do with all the space you have or wondering what aging as a single woman will look like a few years down the road…you might want to change how you think about the word “roommate.”
Lots of things have changed since our parents’ generation:
Many solo adults live in homes with at least three bedrooms, census data shows, but find that downsizing is not easy because of a shortage of smaller homes in their towns and neighbourhoods.
Compounding the challenge of living solo, a growing share of older adults – about 1 in 6 Americans 55 and older – do not have children, raising questions about how elder care will be managed in the coming decades. (StraitsTimes)
Factors like these change how we think about aging and independence. This means that the options available need to change as well.
Any extra funds that you can bring in can lead to more retirement savings; every dollar helps. If you are in the distribution phase of your retirement, you are potentially compounding the impact of money brought in from a roommate.
If you’re not quite in the distribution phase of retirement, keep in mind that home-sharing is a great way to generate passive income that can be used as an investment in your future. By using the money you make from home-sharing wisely—such as putting it towards long-term investments or contributing it towards a 401K—you can significantly increase your retirement savings over time. Additionally, since home sharing is considered rental income by the IRS, any profits made from renting out your space may be eligible for tax deductions which could further reduce your taxable income in retirement years. As always, it is best to consult your tax professional for further clarification.
As always, the best first step is to make sure you have a very good handle on exactly how much you need to save for retirement; this is when it’s a good time to talk to your financial advisor. If you have run retirement scenarios and are coming up short on funds for your retirement goals, adding income from a roommate can bridge that gap. Perhaps you are okay with hitting your retirement savings, but your retirement is looking a little dull. You might be able to expand your options for what your retirement can look like by saving more money and setting DREAM retirement goals!
Aspen Wealth Management and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.