Hiring a contractor for a home renovation is a major decision, especially when it comes to large-scale projects that cost six figures. Susan from Dayton, Ohio, called into The Ramsey Show seeking advice after she and her family had dumped around $300,000 into a home addition that was scheduled to be completed in the fall. Must Read “It was supposed to be done by Thanksgiving, and it’s not anywhere close to being done right now,” she said in a clip posted Feb. 2 (1). She says the family had a retainag ...

Core Insights - Many retirees wish to renovate their homes but face liquidity issues if they pay cash, which can hinder their ability to cover emergencies and other expenses [1][4] - There are smarter financing alternatives to cash payments that can help retirees manage their finances better while renovating [2] Renovation Budgeting Challenges - Home renovation projects frequently exceed initial budgets due to unforeseen issues such as outdated wiring or increased material costs, which can escalate a $40,000 project to $50,000 [3] - Draining cash reserves for renovations can leave retirees vulnerable to unexpected expenses, forcing them to liquidate investments at unfavorable times [4] Tax Implications - Large withdrawals from taxable accounts or IRAs to fund renovations can increase taxable income, potentially leading to higher capital gains taxes and increased Medicare premiums [5] Financing Alternatives - A home equity line of credit (HELOC) allows retirees to fund renovations in phases, drawing only what is needed and often offering lower interest rates compared to credit cards [6] - Promotional financing options, such as zero percent interest credit cards, can be beneficial if retirees ensure they can pay off the balance before the promotional period ends [7]