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Should You Downsize in Retirement?

Filed under: Supplemental Retirement Income, Life Events, Retirement

It’s a decision that nearly every couple faces at some point, often either just before or after retirement. The kids are grown and have long since moved out of the house. The effort to maintain the yard and clean the house is taking a physical toll. And you’re paying taxes and utilities for several rooms that you never even use.

Is it time to sell the family home and downsize?

Conventional wisdom might say yes. After all, for many Americans, downsizing is an integral part of their retirement plan. They may be taking the equity out of their home to fund retirement, or they may take advantage of reduced bills to live a more comfortable lifestyle. It could be a financial no-brainer.

On the other hand, there may be some unintended consequences of downsizing. Selling your home may not be easy. It could have an adverse impact on your personal and social life. You may miss your old home.

It’s not a decision to take lightly. Below are a few things to consider as you decide what to do with your home:


Reasons Why You Should Downsize

The logic behind downsizing is usually pretty simple. A smaller home or townhouse often means a smaller mortgage payment, as well as lower taxes, utility bills, homeowners association fees and even maintenance bills.

There could be another big financial benefit. If your home is paid for, you may be able to sell it, buy a much smaller and less expensive home and then pocket the difference to fund retirement expenses. If much of your net worth is tied up in your home, downsizing could give you a way to access that equity.

Finally, you may want to downsize if you’re simply not physically able to handle the upkeep. Houses are hard work. The cleaning, yardwork and other maintenance can be physically demanding. It may not be worth risking injury or illness just to stay in the family home.


Reasons Why You Shouldn’t Downsize

Even if downsizing seems like an obvious strategy, there are a few considerations you may want to review. One is that the financial benefit may not be as great as you think. Selling a home can often be difficult. You may have to invest in remodeling, renovations or improvements to get your desired value. During the inspection process, you may learn of a costly repair that has to be made before the sale can close.

There are also numerous fees associated with selling one home and buying another. You’ll have to pay your real estate agent, maybe a lawyer and possibly even closing costs. You also may have to pay for packing and moving help along with cleaning services. It’s possible that the strategy of downsizing to save money could actually cost you thousands of dollars.

There’s also the impact on lifestyle. What if your new, downsized home isn’t convenient for friends and family? As you age and your driving ability deteriorates, will you still be able to connect with your social circle while living at your new location? How will you react if you feel isolated from your network?

Downsizing may be the right choice for you. However, it’s important that you consider all of the possible consequences.
For help with your analysis and decision-making, contact us at Ambrose Financial & Insurance Services in Walnut Creek, California. We always enjoy providing our clients with all the information they need to make informed financial decisions. Let’s connect today.


Ambrose Financial and Insurance Services, LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

15821 – 2016/6/20