Along with diligent saving, part of preparing for retirement might include downsizing your home. Depending on your situation, there could be several potential financial benefits to making this move. As you decide whether downsizing your home for retirement might help facilitate a more financially sustainable and comfortable lifestyle, here are some considerations to keep in mind.
Downsizing might make sense in certain circumstances. For instance, if you have a large family home that only you and your spouse currently occupy, you might have too much space — and too many monthly carrying costs, such as a high mortgage, property taxes, utilities, landscaping costs and more.
Also, downsizing might be a smart move if you have debt that you've had difficulty paying off. Reducing some of your highest monthly expenses could give you more financial wiggle room to repay these debts so they don't consume too much of your retirement income.
When to Consider Downsizing
Downsizing is a personal choice, and only you can know if and when you're ready to do it. However, there may be signs that it's time to consider it, such as the following.
Your home has gained value: If you live in a hot real estate market, you may be sitting on a lot of equity. Selling your home — even with the cost of preparing it to go on the market — could help bolster your retirement income.
The cost of living in your area has increased: On the other hand, you may do the math and find that your retirement savings might not go as far in your current area as they could in a state or city with a lower cost of living. You may want to move elsewhere and downsize your home in the process.
You can't age with your current home: If your home has a lot of stairs, it might not be the right fit for you as you age. You might consider moving to a home that's modeled differently such as a ranch that's only one level. Finding a somewhat smaller home with a different layout could be the right way for you to downsize.
You want to be closer to the action: Some retirees take advantage of their nonworking years by relocating from the suburbs to the city. This move usually involves downsizing from a family home to an urban condo or smaller apartment that doesn't require as much maintenance. If you're ready to embrace urban living and take advantage of all the city has to offer, then it could be the right time to downsize.
You want to be closer to family: If you have family on the opposite coast, several hours or hundreds of miles away, you might want to move closer to your loved ones. If you're nearing retirement, downsizing when you make the move could make the most sense for you.
An Alternative to Downsizing: Aging in Place
Aging in place involves living as independently as possible in your current home, making any necessary renovations or accommodations, and it could be an alternative to downsizing.
Recent research shows that many Americans age 55 to 75 are making improvements to their homes to age in place. Their motivations for aging in place range from convenience to proximity to loved ones to maintaining a sense of independence and self-sufficiency.
If you want to remain in your current home, consider whether it would be helpful for you to start making certain modifications. For instance, you might:
- Update the flooring to help prevent tripping.
- Widen doorways for easier mobility.
- Add grab bars and handrails to your shower and bed.
- Install a home security system.
You might also consider changing the configuration of your home. For example, you could move the master bedroom to a room downstairs or add a full bathroom on a lower level to help make it more accessible.
Are You Ready to Downsize?
Downsizing your home for retirement could be a good idea if you've carefully considered all your options and the pros of doing so clearly outweigh the cons.
Downsizing before you retire could help you save money, especially if you no longer have to worry about a large mortgage payment, property taxes, maintenance and all the other daily obligations of homeownership, particularly for a larger home. This move could be a great way to help you financially prepare for the future and for the type of retirement you've always envisioned.