downsizing

Is downsizing for retirement a good idea?

Is downsizing your home for retirement a wise move? Explore the benefits and considerations in our insightful post to determine what's best for you.

Siarra Ortiz
October 2, 2023

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As retirement approaches, many homeowners find themselves at a crossroads, mulling over whether to leave their family homes or age in place. The decision is far more than just a change in residence — but one that impacts all aspects of the retirement journey ahead. So, how do you determine if downsizing for retirement is right for you?

In this post, we'll explore the pros and cons of downsizing your home for retirement, how to decide if it's right for you, and tips to ensure a smooth transition.

What are ways to downsize your home?

There are many ways to downsize your home for retirement. After you sell your home, you can:

  • Buy a smaller home
  • Move in with a child or family member
  • Get into a townhouse or condo
  • Rent an apartment
  • Opt for an assisted living facility
  • Join a senior living community

Each option comes with advantages and disadvantages. Ultimately, where and how you’ll decide should be based on your retirement goals, health needs, and values.

Advantages of downsizing your home

Downsizing can be compelling for many reasons. Homeowners who choose to make the move can enjoy the following:

You’ll save on housing-related expenses

Moving into a smaller, more manageable property can lower your mortgage payments, property taxes, maintenance, and utility costs. For retirees on a fixed income, freeing up your monthly budget will help you stay financially secure in your golden years.

You’ll have less maintenance and responsibilities

Smaller dwellings commonly require less attention than larger homes. You'll have fewer household chores and upkeep, allowing more time for hobbies, travel, or spending time with loved ones.

The lack of maintenance can also be a kindness to your physical health. Routine housework can be a strain on the body, especially for homeowners with arthritis and other chronic pains.

There’s potential for increased mobility and accessibility

Choosing a home with features like a single-level layout or aging-in-place modifications can enhance accessibility. These added details foster safety and help you maintain independence throughout retirement.

If you choose to move to a senior living community, your dedicated space will likely have accessibility features integrated. It can save you the effort and cost of modifying a property yourself.

There’s an opportunity to lower your cost of living

It's no secret that where you live impacts how much you should save for retirement. For example, a person would need around $505,346 to retire in Mississippi, compared to $1,813,768 in Hawaii. ‍

Consequently, a common retirement strategy is to relocate from a high-cost-of-living area to a lower one, where essentials like housing, food, and healthcare are cheaper. This route can prolong the life of your savings and allow you to live a more quality lifestyle for less.

Disadvantages of downsizing your home

While there are various advantages to downsizing, it's essential to consider the potential downsides as well:

It can get expensive

The collective process of downsizing can be pricey. You'll have to cover expenses like prepping your current home for sale, paying closing costs, and buying and moving to your new residence. These expenses likely need to be covered upfront, which can eat away at your nest egg.

Additionally, your new abode may come with expenses. Depending on the community or type of housing you move into, you could face extra monthly fees, such as HOA, condo, maintenance dues, and more. These can seriously tie up your cash flow.

You may have limited ability to personalize or adapt your new abode

Most communities and homeowners associations (HOAs) have rules and restrictions limiting renovations or upgrades. These constraints can make it harder to implement age-in-place modifications or add personal touches to your dwelling.

In some cases, rules may be as strict as a limited guest policy or how many pets you can own — if any. Such rules can considerably impact your lifestyle and choices in retirement. It's best to write down your goals and wants — even something as small as how many pets you'd like — and compare them against community bylaws to ensure it's a good fit for you.

There’s no room for multigenerational housing

Multigenerational living has long been a cherished aspect of family life for many. Nearly 20% of the U.S. population lives in multigenerational households.

Having various generations living together provides a sense of unity, support, and shared responsibilities. It can help ease the burden of caregiving, provide child care, and lessen the financial strain for an entire family. However, if you decide to downsize, a multigenerational living arrangement may no longer be feasible.  

It can be emotionally challenging

Homes hold a lot of memories — from birthday celebrations and holiday traditions to achieving personal milestones. Bidding farewell to the place that houses these experiences can be challenging. Additionally, you're letting go of the familiar — saying goodbye to the neighborhood and community.

Smaller homes also mean less space for decor, sentimental items, or family heirlooms. You'll likely have to give things away to family members or rent a storage unit to keep items — another expense.

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Is downsizing right for you?

Determining whether downsizing for retirement is the right choice involves considering several key factors:

Personal priorities and goals

One of the fundamental considerations is aligning your decision to downsize with your priorities and goals. Start by envisioning your ideal retirement lifestyle and the role your living space will play in it.

Is maintaining a spacious home a priority, or are you more inclined toward simplifying your living space? Are you an empty nester, or is there a possibility of having loved ones live with you? Ensuring that your lifestyle — and home — can accommodate any wants and needs helps support an enjoyable retirement.

Health and aging considerations

Equally important is assessing the suitability of your current home for aging-in-place needs. When planning around your health, it's best to think short—and long-term. Carefully consider what you need now and your home's potential to adapt as other requirements arise.

Does it have accessibility features like grab bars, wider doorways, or ramps? If not, will it be easy to make the necessary upgrades? Would a single-level layout or a home with minimal steps suit your long-term comfort and safety?

On average, a homeowner will spend $3,000 to $15,000 to remodel their homes for aging in place. However, paying for a nursing home or senior community can get expensive. Will it be more cost-effective for you to renovate or sell your home?

Another aspect to consider is if you'll need support. If you suspect you'll need a little help with daily activities, in-home care is a feasible option. However, if you need a lot of support, an assisted living facility or retirement community may be a better fit. They can offer specialized care and support tailored to your needs.

Financial flexibility

Financial planning is an important part of retirement. Understanding how downsizing impacts your financial situation and flexibility is essential in making an informed decision.

Consider how—and if—the transition can enhance your retirement savings, fund your dreams, or finance necessary age-in-place renovations. Also, compare your current monthly budget to what it might be under a new living arrangement. ‍

If money is your motivation for downsizing, weigh the short and long-term impact of moving compared to aging in place. It's important to note that you can cash in on your home equity without selling your home. Equity is a great tool that can help you supplement your retirement income or fulfill other dreams without forcing you out of your home.

Downsizing for retirement tips

Feel more prepared and emotionally ready to downsize with the following tips:

  • Start Early: Don't leave downsizing until the last minute. Begin planning and saving well in advance of your retirement date. This allows you to take your time and make thoughtful decisions. It also gives you time to adjust your budget and save as you need.
  • Do your research: If you're moving to a new location, be sure to become familiar with the environs. Explore the area online or visit in person to help ease uncertainty and worry and even build excitement.
  • Get organized: Downsizing involves quite a few steps. If you can tackle some stages ahead of time, you'll have an easier experience when it comes time to move. Start decluttering, organizing, and even packing in advance. This will allow you time to decide what to keep, donate, or sell without feeling rushed.
  • Follow the real estate market: It pays to time the market. You can get more for your home during certain times of the year compared to others. Follow news outlets to keep tabs on the market or speak to various real estate agents. A professional can help you prepare your home for sale, gauge the selling season, and set the right sale price, getting you top dollar for your home.
  • Seek Professional Help: If the downsizing process feels overwhelming, consider enlisting the help of a downsizing specialist. They can provide guidance and support to make the transition smoother.
  • Embrace the Change: Downsizing can be emotional, especially if you're letting go of valuable items or moving away from family. Take time to acknowledge and process your feelings, but also focus on starting a new chapter. New adventures and memories await you.
retirement

The bottom line

Downsizing your home for retirement is a challenging decision. On the one hand, it can foster a more manageable environment and help you save money. On the other hand, leaving your primary residence can be emotionally challenging.

When deciding what's next, carefully weigh the advantages and disadvantages to make a more informed decision. There is no one-size-fits-all answer, and what works for one person may not work for another. Ultimately, your retirement should reflect your vision for the future, your financial position, and your lifestyle preferences.

If you love your home but are unsure how to bolster your nest egg and afford retirement, consider tapping into your home equity. Point's Home Equity Investment (HEI) empowers homeowners with financial security during their golden years — without added monthly payments. Visit Point.com to learn more.

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