Should I downsize before retiring?

Reduce, reuse… retire? Instead of plastic bottles, we’re downsizing houses and recycling retirement dreams!

Planning for retirement involves a multitude of decisions, one of the most significant being whether or not to downsize your home. As retirement looms closer, you may grapple with the question of whether selling your current residence and moving to a smaller, more manageable property is the right move. Get ready to explore the factors that should influence this decision to help you make an informed choice!

Why downsize?

Personal preferences and lifestyle changes can drive the decision to downsize:

• Savings may not be sufficient to sustain your desired lifestyle
• The expenses of maintaining a larger home may become a burden
• The desire to take the money from your house and grow your savings and investment portfolio
• The setup of your current house may be physically straining
• Boredom!

There are countless reasons why someone may want to downsize their home. With retirement comes a time to visit new places and create new experiences, which may lead some to trade in their brick and mortar house for a house on wheels or a house on the water.

How to pull the plug on downsizing 

If you are certain downsizing is for you, it’s essential to understand the process of selling your home in retirement. Here are some tips for navigating this significant life transition:

• Don’t wait until the last minute to begin the downsizing process. Start researching the housing market and potential new locations well in advance of your desired move date.
• Seek guidance from experienced real estate agents who specialize in selling homes for retirees. They can provide valuable insights into market trends, pricing strategies, and how to maximize the sale price of your home.
• Before listing your home for sale, declutter and depersonalize the space to make it more appealing to potential buyers and easier to make the move.
• Evaluate how the sale of your home fits into your overall retirement financial plan. Will the proceeds from the sale allow you to achieve your financial goals, or do you need to adjust your expectations?
• Remember to factor in the costs associated with selling your home, such as real estate agent commissions, closing costs, and moving expenses. Be prepared for these expenses when planning your budget.

Why stay in your home?

On the other hand, there are circumstances where staying in your current home is the better choice. For example, we worked with a family and found they had:

• $700,000 saved up for retirement
• $6,000 a month coming in between Social Security checks and pension ($72,000 a year)
• $25,000 per year dedicated to luxury expenses like traveling and shopping

This family had a custom plan built out for them which included looking at their spending patterns. While they came in with the mindset to sell and downsize, it turned out that they only had to strategically withdraw funds from the proper accounts to sustain their desired lifestyle in their current home. The emotional connections and proximity to family ultimately solidified their decision to stay in their current home.

How to decide

Many people assume they have to sell their home and move into a condo or apartment to save money once they are retired. This is not always the case and most simply need to conduct a comprehensive financial assessment with a trusted Wealth Advisor. Prospective retirees should carefully analyze their retirement savings, projected expenses, Social Security, pensions, and potential rental income. It is also crucial to account for inflation, which can significantly impact future expenses.

If you’re unsure about whether downsizing is the right choice for you, consider scheduling a consultation with us. Remember the old saying: If you fail to plan, you’ll plan to fail.