As retirement approaches, many homeowners find themselves at a crossroads, mulling over whether to downsize their 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.
We'll explore the advantages and disadvantages of downsizing your home for retirement. Furthermore, we'll highlight the factors that can help you make an informed choice that aligns with your priorities and goals.
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 mortgage payments and property taxes, decrease utility bills, and reduce maintenance costs. For retirees on a fixed income, freeing up your monthly budget is an excellent way to prevent income volatility during your golden years.
You’ll have less maintenance and responsibilities
Smaller dwellings commonly require less attention. 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 mobility and 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 how much you should have for retirement is directly tied to where you live. 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 relocating from a high-cost-of-living area to a lower one, where essentials like housing, food, and healthcare are cheaper. Should you go this route, you can prolong the life of your savings and 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 will likely need to be covered upfront and can eat away at your nest egg.
Additionally, your new abode may come with fees. You could face extra expenditures such as HOA fees, condo fees, maintenance fees, and more, depending on the community or type of housing (such as a condo) you move into. These can tie up your monthly cash flow and make you susceptible to income volatility.
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 — and it continues to grow in popularity, with nearly 20% of the U.S. population living 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 are more than just structures — they're places where birthdays are celebrated, holiday traditions are carried out, and personal milestones are achieved. Bidding farewell to the place that houses your memories can be challenging. In addition to the experiences within your home, 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.
Is downsizing right for you?
Determining whether downsizing is the right choice for your retirement 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. It's best to think short and long-term when planning around your health. 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. Will it be more cost-effective for you to renovate or sell your home?
Additionally, If you expect to need a lot of assistance and aid, alternative housing options such as assisted living facilities or retirement communities may be a better fit. They can offer specialized care and support tailored to your needs.
Financial planning is a critical aspect of retirement. As a result, 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. It's also best to compare your current monthly budget to what it might be under a new living arrangement.
If saving money is your primary motivation for downsizing your home, weigh the short and long-term impact of moving compared to aging in place. Although many homeowners believe that selling their homes is the only way to tap into their equity for extra cash, it's important to note that equity can leveraged without the need to leave your current dwelling. Equity can be a financial cushion, allowing you to make strategic investments, pay off debts, or fulfill retirement dreams without forcing you out of your home.
Downsizing your home for retirement is a challenging decision. On the one hand, it can foster a safer and more manageable environment. On the other hand, it could limit your flexibility and diminish your financial security.
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.