Downsizing your home tends to be painted in a relatively negative light. But it’s an important and at times a worthwhile decision for recent retirees and empty nesters.
For a significant number of retirees, much of their wealth is tied up in home equity. That’s important to realize because downsizing is a great way to turn those assets into a welcomed windfall. The house may not reflect your current life situation either. If you moved into a larger home to accommodate growing children – who are now in college or even older – the room that goes with such a home may no longer be necessary. But money acquired from selling isn’t the sole benefit of downsizing. Smaller homes can be cheaper to heat in the winter and cool in the summer. If you choose a newer house, there may be less upkeep and fewer repairs. Search out places with lower property taxes when considering where to move.
The most obvious financial drawbacks of downsizing are related to the cost of real estate brokers, general moving expenses and legal fees. These are headaches many would prefer to avoid entirely. And while there are many financial incentives for downsizing, there are other things to factor in as well. This home could have a great deal of emotion tied to it. Perhaps this is where you raised your children, began your adulthood, forged long-lasting friendships or became a pillar of the community. While those things are not quantifiable like the ability to turn your property into liquid assets, they can be just as compelling. Moving, no matter your age, is considered one of the most stressful things a person can do. Ultimately for some people, moving later in life can be an exciting and fulfilling endeavor.
Before downsizing, assess your life holistically. Make sure whatever decision you choose is one you can live with both financially and mentally. The biggest reason to downsize is to get more savings than would’ve been possible had you stayed put.
What do you think about downsizing? Is it something you’re planning on or have already done? We’d love to see your responses in the comments below.