If you’re in or nearing retirement, we’re betting the thought of downsizing your home has crossed your mind at least a time or two.
Maybe you’re now an empty nester and the extra bedrooms no longer make sense. Or maybe taking care of such a big property is becoming too much work and hassle. Or perhaps you’re concerned about your ability to stay safe and mobile in your home as you age.
There is a lot to consider when thinking about downsizing for retirement. Your house is one of your largest assets, after all. Before posting a for-sale sign in your yard, here are the pros and cons you need to consider.
PROS of downsizing your home in retirement
You could reduce—or even eliminate—your mortgage.
You could reduce—or even eliminate—your mortgage.
While it’s widely recommended to enter retirement with no mortgage payment, the reality is that 10 million homeowners, 65 and older, are still paying off their mortgage. If you still owe on your home, finding a smaller, less expensive place to live may help you lower your housing costs and add a bit of wiggle room in your monthly budget.
Your other monthly home expenses may be reduced as well.
A smaller house may not only reduce your mortgage, but may also reduce your other homeowning expenses. Utilities in a smaller house will likely cost less, as will your property taxes and homeowner’s insurance. Plus, if you’re open to relocation, you may be able to move somewhere that’s more affordable for retirees. Be sure to check out our list of 7 of the Best Retirement-Friendly Cities.
You can live somewhere that makes more sense.
Like we mentioned earlier, your current house may no longer be meeting your lifestyle. Whether you need fewer bedrooms, a smaller yard, something with less maintenance or single-story living, downsizing for retirement may help you find the home where you can live safely and comfortably for the rest of your life.
CONS of downsizing your home in retirement
You may have a hard time finding a house that saves you enough money.
Earlier we mentioned that buying a smaller house could mean a smaller mortgage payment for you. Unfortunately, it oftentimes isn’t that simple. With a tight housing inventory and a lot of competition for smaller homes among Baby Boomers and first-time home buyers, many retirees who are hoping to downsize are experiencing roadblocks. With increased mortgage rates, low supply of smaller homes, and increased prices, reducing your housing costs may not be worth the effort.
Selling, buying and moving are expensive.
To put it simply, selling a house, buying a house and moving are all expensive ventures. Home inspections, repairs, closing costs, agent fees, moving expenses and furnishings can add up fast—and really cut into the savings from downsizing.
You may gain a few extra wrinkles and grey hairs along the way.
Besides being expensive, selling, buying and moving tend to also be stressful, personal and emotional experiences. There are negotiations, bidding wars, unreasonable sellers/buyers and snap decisions that must be made. Your home inspection may reveal defects, the lender may reject your loan or your home may receive a low appraisal. The list of things that can go wrong during a real estate transaction is long. In order to help the process go as smoothly as possible, work with a real estate agent who you’re comfortable with and who you trust to protect your interests during negotiations. A good agent will give you the guidance and support you need to smoothly navigate the process.
When downsizing for retirement, you’ll need to downsize your possessions too.
Then there’s the issue of what to do with the possessions you have collected over a lifetime. It can be an emotional experience parting ways with your possessions and memories. If you need help, a local auction house or senior moving service may be able to help with everything from packing and unpacking to helping sell and give away unneeded furniture and possessions. An objective third-party business that specializes in this situation can help smooth the emotional process of object-by-object decision making and letting go.
You might end up regretting the smaller space.
While many retirees downsize their homes, there’s a growing movement of retirees who do the opposite. According to CNBC.com, 22% of older homeowners are opting to buy bigger homes. There are a few compelling reasons why. Many retirees who upsize do it because they’re spending more time at home and want more space to spread out and enjoy their time. Other upsizers want more space to host guests, family—and especially grandkids! Finally, a third of young people ages 18 to 34 live under their parents’ roof. If it’s possible your adult kids could move back home, you may be unhappy in close quarters. Upsizers who play their cards right relocate to a place with a smaller price per square foot—so they’re getting a bigger house for the same amount or less.
So should you downsize your home in retirement?
Our list of cons may be longer, but that doesn’t mean downsizing your home is necessarily a bad idea. It just means there’s a lot to consider before making the move. If you have questions about the impact downsizing may have on your retirement, your Bankers Life financial representative may be able to help!
