Electing to downsize after retirement is not an easy decision. Research shows that over 64 percent of retirees wish to age in place (meaning stay in their present home). It’s easy to understand why: it’s likely their family home, where they feel most comfortable, where they built roots and memories.
However, when looking at it in the long–term, maintaining a large family home can be very costly, and decreases in mobility and other issues as we age can make it difficult to maneuver around the house, provide necessary upkeep, and feel safe. Taxes, utilities, insurance, and maintenance on large homes, even keeping it clean, can quickly gobble up 30 percent of your retirement income and much of your leisure time and energy. With this in mind, once you put aside the sentimental meaning of your house, downsizing may be the best option for an optimal retirement life.
And there’s good news. If you know downsizing is the best course of action but worry about the effort involved, this time presents the best opportunity. Use this quarantine period to evaluate your options and conduct as much research as you can about the next phase of your life. Start with this article, where you’ll learn how to plan for downsizing to ensure that the decisions you make are the best for your needs, desires and finances.
What Housing Can You Afford?
For downsizing to be worthwhile, you must commit to a decrease in the size of your home. Smaller homes are more comfortable to maneuver and manage throughout retirement, and less costly to maintain. Make every decision with the long-term in mind; for example, two-story homes are more expensive to heat and cool as well as move through. Plus, eventually in the future, it may hurt too much to constantly go up and down stairs.
Similarly, it matters where you move as much as what size you pick. If you buy property in an expensive area, you could end up increasing your costs, even if the home is smaller. Be sure to at least maintain your current cost of living, if not decrease it, to ensure your retirement income and savings go as far as possible.
Retirement cost calculator tools are very helpful in determining how much money you need for a comfortable lifestyle (according to your definition). They can estimate your monthly expenses and evaluate how much you need to have saved before retirement.
Click here to read How Much Money Do I Need to Retire?
How to Calculate Home Sale Proceeds
You can also use online calculators to determine the estimated value of your home and any additional value of upgrades or amenities. You should of course subtract value for any issues, then deduct marketing, realtor fees, home staging, and pre-sale upgrade costs (e.g. painting).
Subtract attorney’s fees, HOA fees, and taxes, and then subtract your remaining mortgage balance. This figure gives you the proceeds from your home sale. Having this information will help you determine the type of living situation you can comfortably afford moving forward.
Click here to read Should I Sell My House When I Retire?
How to Choose Your Next Home
You should make a list of all the things that are important for your next home. How many bedrooms do you want? Do you plan on having frequent guests? Will this home fit your needs as you age? Is assistance available if it’s needed? Do you want to live somewhere that has a community feel and available activities and amenities?
We recommend considering a retirement community. A retirement community can offer you numerous amenities, from fitness centers and pools to cooking classes and art rooms, as well as the privacy you want or the assistance you need. Independent living provides residents all the benefits of owning a home without the tedious job of maintaining it, including lawn care and snow removal, and with a continuing care retirement community, should you ever need a higher level of healthcare, it’s included.
The key is to prioritize your goals for retirement and visualize our day-to-day living. If you hope to entertain family and friends, you should include space to account for that. If your priority is traveling, you likely want a small, low-maintenance house or apartment close to freeways or an airport. If you want to socialize, perhaps engaging in weekly poker or bridge tournaments or enjoying shopping excursions, find a neighborhood or retirement community that provides such options.
Downsize your Belongings
Finally, it’s time to consider disposing of items you no longer need. Research suggests that the average American has more than 300,000 items. That can’t all come with you to your new home, nor should it. Let’s use this time to begin the process of sifting through it all, determining what to keep and what can go. Here’s how to do it:
- Lay out everything and go through them one by one – this is slow but worthwhile. Decide what to keep, discard, donate, and sell. You can go by room, or by category, i.e. clothes, papers, books, etc.
- Upload pictures, videos, and other media onto a hard drive or digital media, and then you can toss most of the physical stacks.
- Invite family and friends to pick out what they might want to keep.
- Hold a garage sale for items in good condition or use online sites like eBay, Amazon, and others.
- Donate what’s left.
Downsizing your stuff is the most challenging part of this process, but once you finish, you’ll be set to move to your new, smaller home. Call family or friends to help with the process, and tackle it bit by bit. Get your family to join in and make it a wonderful reminiscing moment.
Click here to read 5 Tips for Staying Sane When Downsizing Your Home for Retirement.
What Are You Waiting For?
Starting early gives you the advantage of planning your downsizing according to what suits you best. Throughout the process, get all the help you can from professionals – financial planners, real estate agents, attorneys, etc. Take your time to research and plan, so that you will end up better off after your move – physically, socially and financially.
Remember: you are not alone — many adults in or approaching retirement grapple with the same decisions. If you can, get advice from those around you who successfully downsized and are better for it.
For more information on retirement, read these articles by Acts Retirement-Life Communities: