Insurance and Property Taxes a Heavy Burden for Some Island Residents

October 31, 2016

Retirees today face a multitude of financial hurdles that may hamper their ability to enjoy their golden years.  Some of the more familiar issues are lack of retirement savings, loss of cost-of-living-adjustments (COLA’s) to pensions and Social Security Income benefits, tepid investment and bank account earnings and rapidly rising costs of healthcare and basic necessities, all on limited incomes.

While these issues are common among retirees across the nation, coastal community resident retirees (and lower-income homeowners as well) also face two potential problems that are seldom discussed, but could directly affect their ability to make ends meet;  homeowners insurance and rising property taxes.

As we’re in hurricane season at the moment, the subject of having adequate homeowners insurance comes to front of mind.  Over the past decade, many insurance companies have retreated from insuring properties along coastal towns, seeking to reduce their risk after the losses incurred from hurricanes Sandy, Irene Katrina and Rita.  Those who have stayed have steadily filed with State regulators to raise premiums and deductibles, and have rewritten policies to exclude certain risks and exposures that could overly affect their profit margins.  Many homeowners also have to also obtain flood insurance which may not be included in their main policies.  Home prices and replacement costs on the Island have increased as well, adding to the cost of insurance.  For those on limited or fixed incomes, such as retirees, rapidly rising insurance costs could be a financial burden they weren’t counting on.

Higher property taxes is another area that may not get as much attention as needed.  With a better economy and still-low interest rates, the real estate market seems to be a healthy rebound, but with higher market prices comes an unwanted side-effect; higher property taxes.  So if you’re a retiree living in a home you’ve owned (and paid for) for many years, you may find that your property taxes have increased substantially over the years.  Not because of drastic improvements you’ve made necessarily, but perhaps because of several new homes that have cropped up in your area that have increased the market value of your home.  While this may seem like a good thing, (higher values mean more in equity, right?), it can be detrimental for retirees and others on limited income who may not be able to afford these higher taxes every year.  And for those who can’t, will they be forced to move out of the homes they’ve lived in most of their lives?  Might there be a better, more fair way of assessing property taxes, such as a combination of property values and income status?  After all, property taxes are paid with after-tax income and some may not enjoy the benefit of deducting these taxes if they don’t itemize their deductions.

These two issues for retirees point to the reason that having a thorough retirement income analysis is important to financial planning success.  Failure to consider ancillary expenses, the retiree’s particular location and circumstances and other such factors could result in unpleasant surprises down the road.  Living on the seaside offers many benefits and a unique lifestyle.  Just be sure doing so isn’t too detrimental to your financial well-being.