Downsizing your home before retirement can seem daunting—after years of enjoyment in your current home, the prospect of decluttering, house hunting, and managing the financial adjustments of a pre-retirement move is often overwhelming. With a strategic plan, you can simplify downsizing for retirement and make sure the process aligns with your financial and lifestyle goals.
Embracing a Simpler Life: The Benefits of Downsizing
The choice to downsize ahead of retirement is significant, so it’s important to understand the “why” behind it. What are the key benefits of downsizing before retirement?
- Achieving financial security: Downsizing can greatly benefit your pre-retirement financial planning, padding your retirement fund and granting you greater control over your finances.
- Reducing housing expenses: Eliminating or lowering mortgage payments while reducing property taxes, homeowners insurance premiums, energy bills, and maintenance costs helps stretch your retirement dollar.
- Addressing health concerns: Downsizing to a smaller or single-level home can increase accessibility in the face of health or mobility issues.
- More convenience: Moving into a cozier home means less square footage to clean and reduced home maintenance.
- Living simply: Less square footage to clean and maintain, along with selling or donating items you will no longer need, creates a path to a simpler way of life.
- Finding optimal housing: Downsizing for retirement opens the door to finding housing that better suits your needs.
- Eco-friendly: A smaller residence requires less energy to heat and cool, creating a more environmentally friendly living space.
Evaluating Your Current Home and Possessions
It can be invigorating to look at your home through a fresh lens, evaluate its features, and decide what items to keep, donate, or sell. When you assess your home, ask yourself:
- Which rooms are regularly used? How much square footage goes unused?
- Are any areas of the home difficult to access or maintain?
- What features could be problematic as I age (stairs, narrow doorways, etc.)?
- Could I benefit from a smaller lawn or lot?
Inventory what you own to evaluate what’s essential, what has sentimental value, and what you don’t need. Sort items by category (furniture, kitchen, clothing, etc.) and track them in a spreadsheet or notebook with notes on what to keep, sell, and donate.
Deal with decluttering for retirement at your own pace. Drop off items to donate at your local charity shop, hold a yard sale, give items away to friends and family, or create listings online to sell smaller items. When it’s time to move, you’ll be left with only the items you want to keep, resulting in less to pack and move to your new home.
Determining the Optimal Size and Features for Retirement
What is the best size home for retirement? According to Southern Living, homes around 1,500 square feet are ideal for retirement. This isn’t the answer for every person nearing retirement, however.
You might be comfortable with 900 square feet or require closer to 2,500 square feet with space to host holiday gatherings. Consider these factors in finding your ideal home size, features, and location:
- How much house can you afford after the sale of your current home?
- What features will you need (single-level, accessibility features, large kitchen, etc.)?
- What amenities should be nearby (like family members, doctor’s offices, and grocery stores)?
Your answers will help you develop a vision for the type of home you’re looking for.
Considerations for Finding a New Living Space
What are the important financial considerations when selling your current home and transitioning to a smaller property? Property taxes, federal and state capital gains taxes, area cost of living, maintenance costs, and your retirement savings are key financial factors in finding a smaller home that works for you.
Research locations with lower property taxes (and access to the healthcare and community amenities you need). Some states offer property tax relief for seniors, including New York, Florida, and California. These tax breaks aren’t automatic—you must apply for them. Considering these factors helps ensure downsizing doesn’t create a financial burden.
Embracing the Next Chapter
Rightsizing your home is best done when you’re approaching retirement and have the energy, focus, and financial incentive to find a smaller living space that provides for all your needs. From financial security to simplified living, downsizing your home now is a decision that will serve you well for years to come.
MyStages® financial planners can guide you through the strategic stages of downsizing your home and integrating this process into your overall retirement plan. Find an advisor now to offer personalized guidance and help you on your financial journey through retirement.
