Client login
Client login

6 Reasons to Downsize Your Home in Retirement, Plus Tips for Doing it Right

Should you downsize your home in retirement? It’s a common question and the answer is—it depends. Retirement is a time that brings many lifestyle changes—like going from a life scheduled around work to a life designed by you. Like making new friends, changing priorities and even changing our perspectives

And for many of us, retirement means trading your current home for a smaller home, condo, or apartment. It can be tough to leave fond memories behind, but downsizing your home has many advantages. Here are some of the top reasons retirees decide to move to a smaller place (plus some important factors to consider).

Top 6 Reasons to Downsize Your Home in Retirement

1.  Reduce Ongoing Costs 

Depending on your situation, downsizing could significantly reduce your monthly ongoing costs. Will you be able to shed your mortgage payment by moving to a cheaper abode? Perhaps you can save on utilities and maintenance or property taxes. You’ll have to crunch the numbers to get an accurate picture, but saving money can be a compelling reason to downsize in retirement. 

2.  Free Up Cash for Other Priorities 

If your home has appreciated over the years, you may be able to boost your retirement funds  (and gain liquidity) by selling your home for a profit and downsizing to a cheaper home. If you have specific retirement dreams such as traveling more or helping your grandchildren pay for college, downsizing may allow you to free up funds to put towards your goals. 

3.  Freedom to Move Wherever You Like 

When the kids are grown and you’re no longer tied to a job, you may find yourself wanting to move to a warmer climate or even go abroad. Downsizing your home can be part of a larger plan to relocate

4.  Empty Nest 

Do you have a lot of space in your home that’s not being utilized? While a house with a big yard and three or four bedrooms makes sense as you raise a family, you may not want to pay for a bunch of space you’re not using anymore. Thus, an “empty nest” is one of the most common motivators for downsizing in retirement.

5.  Cut Down On Maintenance

It could be you’re looking for less stress and upkeep—mowing the yard nice and keeping a big house clean takes work! Choosing a smaller dwelling can eliminate maintenance tasks like painting and cleaning the gutters. Also, as a home ages, issues and repairs become more common—which makes moving to a newer home or condo appealing. Condominium and other housing developments often have HOAs (Homeowners Associations) that will handle maintenance and landscaping for you for the cost of your dues. 

6.  Convenience and Accessibility 

If you have mobility issues, moving to a smaller home provides the opportunity to modify or shop for accessibility features. One-story homes are popular with retirees, since eliminating stairs reduces the risk of falling. You might also consider a walk-in shower as opposed to a bathtub or wider doorways in case you ever need to use a walker. Making such provisions now could allow you to age in place longer in the future. 

Tips for Downsizing Your Home in Retirement 

Along with the advantages of downsizing, there are also a number of pitfalls—there are two sides to every story, after all. If downsizing is something you want to do, some prudent planning and careful consideration is key to getting a happy outcome.

Get A Realistic Picture Of Your Home’s Selling Price 

It’s a seller’s market in real estate right now. It’s possible you’ve heard of your neighbors fetching an extravagant price for their home, and you now have visions of doing the same. 

Before you start counting your riches and planning to buy a yacht, make sure you know what your home is really worth. Look on sites like Zillow and to see current selling prices in your neighborhood. Better yet, talk to a few real estate agents or hire an independent appraiser to help you find out what your home is worth right now—not a few months ago. 

The market changes quickly and every home is unique, which means just because your neighbor’s home sold for a high amount, doesn’t mean yours will command the same.

Make Sure You Understand What a New Home Will Cost You 

A common mistake people make when downsizing is underestimating the cost of their new home or condo. A seller’s market means supply is low and demand is high, so there may not be much wiggle room on your purchase price. 

Again, you’ll want to do some thorough and objective research to get an idea of what’s available in the real estate market where you plan to live. Filter your search based on your desired square footage and number of bedrooms and baths. Does it have all the amenities you need, or will you plan to make upgrades?

If you’re moving to a new neighborhood or city, take some time to get to know the market there. If possible, visit and do some on-the-ground research. 

Don’t Forget To Consider The Related Costs & Tax Implications 

If it’s been years or decades since you’ve bought or sold a home, you may forget about all the related costs (and they do add up)! There’s closing costs, a realtor commission, the cost of hiring movers, and of course purchasing your new abode. There are insurance expenses, property taxes, and if you move to a condo, there will be monthly HOA fees. 

Tax implications should be a primary concern for retirees looking to downsize. According to the IRS “if you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.” However, this depends on eligibility requirements. 

Also, be sure to check out the general tax-friendliness of your new location, specifically when it comes to things like: 

  • Property taxes
  • Sales tax
  • Income tax, including retirement income 

Talk to Your Financial Advisor 

Want to be sure downsizing is a good move for you and your retirement savings plan? Your financial advisor can help. A financial advisor such as a Certified Financial Planner® (CFP®) can review everything with you to help you make the best decision and move forward with a plan. Specifically, they can help you:

  • Create a plan for downsizing that aligns with your retirement goals
  • Strategize and plan for responsible tax management
  • Find a reputable real estate agent specializing in the senior market to help you estimate the value of your home
  • If necessary, consider possible alternatives to selling your home such as renting out all or a portion of your home 

Have we gotten you thinking about your financial plans for the future? Good! Grab your free copy of the 2021 Essential Retirement Guide to identify potential gaps in your retirement plan and set yourself up for success. 

2022 Essential Retirement Guide

Ready to take the next step?

Let’s talk!

Explore what’s possible for you during your retirement

8 Biggest Retirement Mistakes to Avoid if You Want a Successful Retirement

Many people believe that all they need for a successful retirement is earning their nest egg. But that is very far from reality. While having enough m...

June 16, 2022

How to Choose a Financial Advisor for Retirement Planning - 5 Questions to Ask

When choosing a financial advisor, finding the right fit is important⁠—especially if they’ll be offering guidance on things like saving for retirement...

May 12, 2022

What is Sustainable Investing and is it a Good Idea for Your Retirement Savings?

A new way to diversify your assets, and one of the biggest trends sweeping the financial world right now, is sustainable investing. Interest in sustai...

April 14, 2022