When you’re raising a family, you may want as many bedrooms and bathrooms as you can afford. Once your children leave the nest, you may find that you don’t need all that extra space anymore. Many people choose to move into a smaller home in retirement. However, this option is not the right choice for everyone. Before you put your house on the market, consider both the pros and cons of downsizing in retirement.
The Advantages of Downsizing
A downsize isn’t necessarily a downgrade. By moving into a smaller home, you can:
- Fund your retirement nest egg. If the home you’re selling is worth more than the home you’re buying, you could make a tidy profit. If you’re behind on retirement savings, this money could shore up the difference so you don’t have to worry about money. If you already have enough retirement savings to live on, you could use the money to travel the world or help out your family.
- Save on energy costs. The larger the house, the more expensive it is to heat and cool. Downsizing could lower your monthly costs so your retirement fund goes further.
- Reduce time spent cleaning. Even when rooms aren’t in use, they collect dust. A smaller home is easier to maintain, and that means you’ll have more time for retirement hobbies.
- This can be a good opportunity to move to an area that’s a better fit for your retirement life.
The Downsides of Downsizing
Downsizing also comes with some disadvantages that may or may not be dealbreakers for you. When you downsize, you risk:
- Losing money. Downsizing can yield a profit, but this is not always the case. If you’re moving to a more expensive area, or an area with sky-high insurance costs, you could actually end up paying more for a smaller house. If you need to finance your home, you also need to consider mortgage rates. If you bought your current home when rates were low, you might be getting a good deal, and you could get hit with much higher interest rates when you buy a new home.
- Wishing you had more space. Some retirees don’t need a lot of space, but you may end up feeling cramped. For example, you might wish you had some spare rooms to turn into an art studio or home gym. You may also want extra space for when family visits.
- Missing your old home. If you’ve lived in your home for years, and especially if you’ve raised a family there, you likely have many fond memories. You may want to stay for emotional reasons.
Should You Downsize in Retirement?
Downsizing in retirement is a great option for some and a big mistake for others. To figure out which group you fall into, ask yourself some questions.
- How much money would you really save? To answer this question, you need to get some real figures and break out a calculator. Find out the market price of your current home to see how much you could realistically expect to get for it, and look up the prices of houses you’d consider moving into. Also consider insurance costs, energy costs, and mortgage costs.
- Would you be more comfortable in a smaller space? On a day-to-day basis, do you enjoy having extra space, or do you see the required upkeep as a burden?
- Do you want to be able to host family get-togethers? Your spare bedrooms might go unused most of the time, but what about during the holidays? Or do you have grandkids who stay with you sometimes? If having family stay with you is an important part of your family traditions, you may want to keep the extra space. If you have adult children, also consider the likelihood that they might fall on hard times and want to move back in with you for a while, and whether this is something you’d want to support.
- Do you want to relocate? If you’re planning to sell your home anyway, it might make sense to use the opportunity to downsize. On the other hand, you could take advantage of the move to upsize – there’s no rule that your retirement home has to be smaller.
In the end, don’t downsize because you think you have to. Instead, decide whether or not downsizing makes sense for the retirement you have planned.
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