Is Downsizing in Retirement Right for You?

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Is Downsizing in Retirement Right for You?

Three out of four Americans say they would downsize their home to reduce ongoing costs and benefit from the equity, but it’s not always the answer to a happy retirement.

Downsizing can make sense for both financial and logistical reasons, but it might not be an advantageous choice in every situation. Here are 5 points you should consider when deciding on whether to downsize your home in retirement…

1. Money

First of all let’s address the upfront costs of moving house. From legal fees to house movers, the costs quickly add up when you move your home. Before you think about the money you’ll be saving in a smaller unit, think about the money it will cost upfront and decide whether it’s worth it for you.

On the flip side, the bigger the house, the more it costs… in mortgage, taxes, insurance, maintenance and utilities. If your current home is paid off, you have equity, which can add a lot to your retirement assets. It may also mean you don’t have to take on a mortgage if you downsize.

2. Market timing

If you sell at the wrong time, you could lose a lot of money — something you can’t really afford to risk if you’re now living on your retirement. If moving means you’ll need to take on a mortgage, you’ll also want to carefully consider the financial impact.

Also, it’s worth considering how long it will take you to sell your home. Putting up a ‘for sale’ sign doesn’t always guarantee a quick bid as it may be harder to sell your house than anticipated, especially if it hasn’t been updated in a while.

3. Reducing possessions

It’s impossible to condense four bedrooms into two without A. Getting rid of some stuff or B. Renting a large off-site storage unit. Take a long, hard look at all the vast array of possessions you have and ask yourself – can I cope without this space and these possessions? While the idea of tidying may seem appealing, you may find that it’s difficult to part with possessions that you have an emotional attachment to. On the flip-side you could find it liberating to hire a dumpster and clear out your old belongings making way for a brand new life in retirement. Nonetheless it’s a consideration worth noting.

4. Moving is a HUGE hassle

It can be difficult to forget the stress, heartache (and backache!) it takes to move home. If you look back you’ll probably remember saying “never again!”. It takes a lot of time and energy to pack and unpack. As stated above, for everything you’re not going to move, you will need to sell it, donate it, dispose of it or make arrangements for your kids to come and get what they want. You will also need to stop and start utilities and change countless addresses. Are you up to it?

5. The unknown

Making the decision to downsize in retirement is one of the, if not the biggest retirement decision you’ll make. When you’re putting your retirement income ducks in a row, you need to make sure each step is the right one for you.

Whether you decide to downsize or not, it’s ultra-important you talk to someone who knows what they’re doing. Whatever you’re looking for, speaking with a retirement income expert is a must when strategizing your golden years.

At CKS Summit Group, our focus is to bring you fresh new ideas for your retirement income. Click here to set up a complimentary strategy session so we can discuss the best retirement income options for you.