Saturday, 16 October 2021

Downsizing on Retirement? How to Maximize from the Change

In 2014, Darrow Kirkpatrick retired at the age of fifty. One thing Darrow and his wife were certain of is that they had just too much stuff and wanted to cut down some of it. Darrow reminisced about how he held a series of yard sales, gave out tons of items to charities and countless gifts to friends and family. Overall they reduced the volumes of their possessions by about 50 percent.

Then came the big one; they put up their four bedroomed home for sale. It was a big deal because this was their home for nearly 20 years and they had fond memories of the place. Surprisingly, the house was bought within a day and they had to move their stuff out to temporary storage. Eventually, Darrow and his wife settled in a medium town in the Southwest where they still are to date.

The term downsizing may not bring joy full memories for many baby boomers. It may re-ignite memories of companies laying off of staff due to economic strains or other events in business such as mergers and acquisitions. However, downsizing for retirement commonly refers to selling off of one’s family home and moving to a smaller home.

Moving to a smaller home means that you will have to contend with less furniture and less stuff in your home (that explains the garage sales and the charity giveaways). But, downsizing for retirement can also include other properties like vehicles, and other discretionary expenses like vacations, and recreation.

Read more: Retirement is in Your Future: 7 Things You can do to Get Ready

Why Downsizing is Important / The Benefits of Downsizing

Downsizing is increasingly becoming a popular topic amongst retirees, soon to retire Americans and financial advisors. This is because of the various financial and non-financial benefits that are associated with the move. Some of the benefits of downsizing include reduced costs that improve your cash flow, less clutter and a simplified lifestyle.

1. Downsizing Reduces Your Post Retirement Costs

Downsizing for retirement has several financial benefits, you’ll reduce your mortgage payments, incur less real estate taxes, have lower utility and maintenance costs, and lower insurance costs.

Moreover, it can help you boost your nest egg. For instance, if you are moving from a $ 300,000 home (with a paid off mortgage) to a condo valued at $ 150,000, you could end up boosting your nest egg by about $ 100,000 after deducting transaction fees.

Also, moving to a smaller home will help you drastically reduce your recurrent expenses such as heating, maintenance, furnishing, and other utilities. This will improve your cash flow and you can diversify your investments.

You can also make more savings by downsizing on your vacations – HomeAway is a great place to find low-cost vacation options – or cut down on your shopping expenses – is another great place to find excellent coupon deals.

2. You’ll Have Less Clutter

Many opponents of downsizing for retirement cite it as an emotionally taxing move. They say that you’ll have to part with precious memories, which is hard. Yes, it may be emotional but not hard. That is if you look at it as the sunrise to a new phase in life.

Think about it, college was fun and had several precious memories. But, you didn’t have to carry all that into your new professional and family life. And as you grew in the new phase of life, you kept only the most valued memoirs. The same can apply to your new phase of retirement.

You can choose to donate, sell or trash some of your items and free your mind and home for the new experiences.

3. You’ll Have Less Stress

Moving to a smaller home comes with a more simplified lifestyle that is less stressful. Think about it, a smaller home means you’ll have less maintenance, you’ll take less time to clean and you’ll have fewer mundane yard tasks to do.

As you free up your time, you’ll get more opportunities to take up activities that you’ve always dreamed of. For instance, you can learn a new skill on or if you fancy writing, you can spend more time on platforms like and get paid for it.

The bottom line is that downsizing for retirement gives you more time in your hands to do what you’ve always wanted.

But downsizing for retirement can also end up being the bane of your life. That is if you don’t consider the costs of the new home comprehensively or adequately prepare yourself. By considering all the critical facts for the change, you can downsize productively. Here’s how to do that.

How to Productively Downsize

Before making any decisions about downsizing, think about why you want to do it in the first place. Discuss it with your spouse and ask yourself if it’s worth it.

Are you looking to free up some cash to help pursue life goals in retirement such as finishing up on your mortgage payments?

When you downsize to a smaller home or condo, it may make sense from a lifestyle perspective. However, the costs may not. If your goal is to free up some cash so that you can pursue life goals in retirement, downsizing for retirement to a home that won’t draw much money out isn’t worth it.

You’ll have to contact a trusted financial advisor and do some serious number crunching – that includes all the actual and potential costs associated with the new property – to get an accurate picture. Selling costs such as realtor commissions, attorney fees, and haulage costs should be included in the equation. Also, if you are buying a new home, you must include costs such as the down payment, attorney fees, home inspection, and other associated charges such as taxes.

Speaking of taxes, you’ll need to consider the taxation rate of the new location, if it is in a different state. Consider moving to a state with lower taxes such as these 10 states with the lowest personal income tax rates.  Again, you’ll have to get down to some serious number crunching with a trusted and professional financial advisor to do the comparisons.

Where are you going?

One factor often overlooked when downsizing for retirement is the new lifestyle you’ll have to adapt according to in your new location. Before you move out from an area that’s bustling with activity to a small town or country cottage, are you ready and willing to adjust your lifestyle?

Some folks downsize and move to smaller towns only to find themselves abandoning their “new retirement homes” back to the cities and renting an apartment or living with a relative. They find it hard to adjust their lifestyles.

Many people downsize for retirement and move away thinking that their kids will enjoy visiting. The temptation of saving costs and a quiet life in a small country home often overshadows the reality that one day the kids will be busy and the visits will be fewer and far in between. If your idea of a perfect retirement is spending time with your grandkids, you may want to consider something closer to the family.

You have to evaluate your current lifestyle, what you love about it and what you truly value. After that, consider your proposed new location, what you love about it, and what you’ll have to give up.

Consider Your Health in Retirement

Health costs in retirement are the single largest cost take up for retirees. A recent study by Fidelity revealed that an average American couple can spend up to $ 275,000 in health costs during retirement.

Downsizing for retirement for you may include moving to a remote country cottage by the lake. However, how far is it from community services? Do you have to drive for miles to get to the nearest drugs store or access healthcare services?

Consider how close you’ll be to healthcare service providers and what will be the effect of the new location on your healthcare costs.

Consider Your Mobility

As we grow older, previously simple activities such as moving up and down a flight of stairs become challenging. Downsizing to a townhouse may seem like an excellent idea at first. However, townhouses are often built with multiple flights of stairs and going up and down those stairs may prove to be a challenge someday.

Also, moving to remote areas where you have to drive for hours to meet people will create some difficulty if you have to give up driving someday down the line.

The options of a condo or a bungalow are better. At least you’ll be sure that if after a couple of years you cannot handle stairs or if you have to give up driving, you’ll still be okay.

Making a Flawless Transition

To conclude, some say that retirement is like having a new baby, the actual experience is never quite like its anticipation. However, it pays to prepare for retirement and having crucial areas covered. Downsizing for retirement can help you make your nest egg last longer and gives you a practical way of planning for a worry-free retirement.

If you are relocating to a new home, consider the long-term affordability, location and how practical it will be for you and your family.


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