Imagine you are in your 60s, looking over your shoulder for signs that your job will soon disappear.  Imagine you don’t have a pension. Imagine you don’t have much money in your 401(k) plan. Indeed, you may have next to nothing. What you have is your home, one you have lived in for a long time- long enough to have paid off the mortgage.

For millions of people, this situation requires no imagination. It is almost exactly what they are facing. Is there a way to turn an ugly situation into something better and more secure?

I believe there is. It involves re-imagining shelter. It means using what you have to transform your basic circumstances. Consider Bill and Ann, a couple in this situation. They own a home valued at $208,000, the recent median sales price for existing homes. They own it free and clear.

But they’re both 65 and have just lost their jobs. Worse, a previous period of unemployment forced them to draw down most of the money in their 401(k) plans. Now, their largest resource is their Social Security checks. As average workers, that's $1,215 a month for each, a total of $2,430 a month.

Now involuntarily retired, the house they love has become a major cost burden. Taxes, insurance, repairs, services and utilities cost them about $8,400 a year or $700 a month. That leaves them with $1,730 a month to cover the cost of everything else, including Medicare premiums.

What can they do?     

Here's the transformation. They can sell their house and move to a resident-owned manufactured home community. Doing so will provide them a two bedroom, two bath home with about 1,000 to 1,200 square feet. It’s not a palace, but palaces aren’t good designs for aging-in-place, anyway. Homeowner association dues cover outdoor work—such as lawn mowing. And they will have neighbors watching out for them as they get older.

They will net about $185,000 after the costs of selling their house and moving. Next, they buy a manufactured home for about $65,000 to $70,000. That's a common price level for manufactured home resales in resident-owned communities. The cash left over will be an $115,000 retirement fund. They will be able to withdraw enough from that fund to cover every dime of their new shelter expenses, a bit over $4,000 a year.

With the operating costs of shelter no longer coming out of their Social Security income, they will have the full $2,430 a month to spend on everything else. That's a $700 a month difference, a 40 percent increase from the $1,730 a month they had left before their move. The difference won’t put them in Fat City or Hog Heaven. But they will have some actual savings and more spending power. It will make their retirement much more secure.

The basic structure for this is simple. You transform your retirement with the proceeds from selling your conventional home. The proceeds need to be about three times the cost of your new manufactured home and co-op shares. (Yes, you can do the same with a more conventional downsizing.)

This takes shelter out of the spending equation.  It leaves Social Security and income from other savings free. You can spend that money on everything else.

Funding our shelter is a big deal. Keeping a roof over our heads is expensive for everyone. Shelter accounts for 40.2 percent of the consumer price index for urban consumers (CPI-U). But it is even more important for the elderly. The cost of shelter is 44.5 percent in the experimental consumer price index for the elderly (CPI-E). It dwarfs the 12.8 percent spent on food, the 11.3 percent spent on medical care, and the 14.4 percent spent on transportation.

So here is another perspective.

Changing your home equity into a manufactured home and a lifetime expense fund covers 44.5 percent of your cost of living. That leaves 55.5 percent to come from other sources.

Social Security will provide a lot of that money. A worker with typical earnings can expect Social Security benefits to replace 39.5 percent of gross earnings. Add shelter and Social Security and you have replaced 84 percent of income.
And don't forget the money you never see. Things like the employment tax and possible federal income tax payments. Toss in a bit of savings while working and, presto, retirement doesn’t look like walking off a cliff.

It looks like a change of address.