5 Reasons Why Downsizing is the Right Thing to do as Your Retirement Approaches
Oct 9th, 2019 by: Wendy and Nancy
Downsizing has always been a kind of final chapter of the Canadian middle class – get married and have kids, move to a bigger house and then eventually downsize to a smaller one.
Most people move to a smaller house at some point after they retire. The reason may be because of health issues, finances or just a simple desire to simplify your lifestyle. There are many factors you should consider in order to decide whether downsizing is for you. You need to consider things like assessing your retirement finances and whether your current living situation is right for you; keeping up with a big house comes with its own problems – some of which we aren’t always too well equipped to deal with as we get older.
Most older adults still live in their family home after their children have grown up and moved out, and are reluctant to sell for either financial or sentimental reasons. What many don’t realize though is that moving to a smaller home can save them thousands of dollars a year in terms of taxes, utility costs, and insurance. That could be a lot of money you could invest in your retirement.
The Benefits of Downsizing
Cleaning, maintenance and yard work takes time and energy. Downsizing your home as your retirement approaches could be the first step to a minimal and stream-lined life that frees-up your valuable time for leisure activities, spending time with your family, getting more rest, enjoying your smaller, easier to keep-up space, and social activities.
If you’re starting to feel overwhelmed with your big house because of all the work it requires to keep-up, downsizing may be your best option.
Here are some advantages of moving to a smaller home:
There comes a time when a big house with lots of ‘stuff’ becomes too much, making downsizing a tempting option.
Tangible benefits are easy to see:
1) a smaller (or no) mortgage;
2) lower utilities and property insurance
Intangible benefits may include:
1) less upkeep;
2) more freedom to do things;
3) not tied to possessions.
1. You will gain access to the equity in your house
For many people, a significant portion of their net worth is tied up in their home equity. When you trade your current family house for a less expensive one, you free up that money to invest in other retirement plans. If you opt to move to a house that costs significantly less, you can add the proceeds of the sale to your nest egg. However, a smaller house may not be less expensive if the home is located in an area that has higher real estate prices.
2. You may lower your monthly costs
A smaller house will probably have lower utility bills, reduced taxes, repairs and cost less to insure. All these costs add up to a considerable amount at the end of the month. But be aware that these costs might be higher in your new neighborhood, even for a smaller home. Downsizing is also an excellent opportunity to sell some stuff that you’ve accumulated throughout the years.
3. You will have less to maintain
A smaller house means you’ll have less to clean. Moreover, if your new house has a smaller yard, it will require less effort to maintain. On the other hand, if you decide to move to an apartment, a condo or a retirement community then exterior maintenance is included in your monthly fee, and the chore will be eliminated altogether!
4. Downsizing will force you to reduce your possessions
Like most people, you’ve probably accumulated a vast array of things over your lifetime: clothes, items in storage, exercise equipment, kitchen appliances, furniture, the list goes on. Tidying up has become a popular craze over the past few years, but you may not feel the urgency to toss out your unused belongings if you have no plans to move in the foreseeable future. Downsizing will give you a chance to finally sort through things, and donate whatever you don’t actually need and use!
5. Downsizing will help you boost your retirement funds
If you’re falling short on your savings, you’re not alone. In Canada, nearly 32% of Canadians have nothing saved up for their retirement according to a BNN Bloomberg survey and the situation is worse for older workers – roughly one-third of the baby boomers. If you’re nearing your desired retirement age with no savings, you’ll need to take more drastic measures. Downsizing to a less expensive home can save you a lot of money, and make a big difference to your retirement fund.
Downsizing in retirement, the right option?
The decision to relocate for your retirement can put you in the front seat of an emotional roller coaster, but downsizing can make sense for whatever reason – financial or logistical. There are many factors that go into considering this step. You probably want to live in a house you can afford that also makes sense for your retirement situation, but real estate is all about timing, so be sure to consider the housing market in addition to your personal situation. While some people buy bigger, grander or more expensive retirement homes, downsizing for retirement is a smart strategy – especially for those of you who have not saved as much as you would have liked to.
Do you want to learn more? We invite you to join us for a fun-filled, educational evening, learning about various tips and tricks on downsizing, along with opportunities to grow your passive income!