Our lives are often defined by key moments – marriage, the birth of a child, a new career, children leaving home, retirement. Each of these creates a change in lifestyle, and with it, the need to re-evaluate the way we live and the financial needs we’ll face.
In addition to traditional retirement plans, many 55+ adults are including downsizing to a smaller home as part of an overall retirement strategy. Fannie Mae recently published an interesting survey. One statistic shows that 40% of homeowners 55+ plan to move either just before or just after retirement.
Leaving the home you raised your children in and the community you have been a part of for decades can be tough. How do you decide if it’s worth the effort? Here are 4 questions to ask yourself as you consider the financial benefits of downsizing:
- How do the home values in your potential new neighborhood compare with your current neighborhood? If you plan on moving to a high-demand location such an oceanfront community, but you currently live in an average housing market, a smaller home may cost as much or more than your current home. That can be a good trade-off if you plan on investing in a resort type of lifestyle – just know the impact of this decision on your annual living expenses.
- Do you need some of the equity from your home to fund your retirement plan? If this is the case, you’ll want to research potential homes carefully to find affordable options that will allow you to both stay mortgage-free and have a nest egg left over to re-invest.
- Will you be moving closer or further away from family or other support systems? Family, whether it’s grown children or aging parents, often play a huge part in the decision of where to move next. Younger retirees, however, will sometimes opt to go for their dream home in the tropics or other exotic locales. Just be sure to factor in extra travel expenses to visit family and friends.
- How do you feel about reducing the amount of your belongings by at least one half? This is both a financial and an emotional question to consider. If you have enough collectibles and items of value that you would be willing to sell, that could provide enough funds to cover moving costs. If, however, you have trouble parting with large family heirloom furniture, fine china or other collectibles that won’t easily fit into a smaller space, you may need to reconsider. The worst downsizing mistake most people make is what I call “moving the best and storing the rest”. Don’t rely on storage units as a fall-back to indecision about your belongings. It could cost you several thousand dollars, and your precious belongings will deteriorate, even in a climate-controlled storage unit.
If you are considering a downsize move as part of your parents’ estate planning, check out the website of David Disraeli, financial and estate planner and author of the book What To Do With Your Aging Parents. He provides clear information that answers many of the questions about ensuring financial stability as we age.
Kim Stanley is the founder and president of Downsize My Home LLC, a company that provides products and services designed to empower Seniors and families to transition to an easier lifestyle surrounded by the things that matter most.