The question staring many would be retirees in the face, what are the pros and cons to downsizing your home for retirement? Should you remain in your existing house or get something smaller and more affordable? The answer depends upon your circumstances and desired lifestyle.
When to Downsize Your Home for Retirement
With rare exceptions, we’re all going to be forced to downsize at some point. Almost inevitable as we age and health issues creep up. Thus, the real question is when should you downsize your home?
Many couples choose to defer this decision remaining in their home after retiring. They may remain there for the next 20-30 years, dependent upon their health. When the time comes, hopefully they’ve made arrangements to downsize to the appropriate facility based on their needs.
For others, they may choose to downsize before or shortly after retiring. This is their opportunity to reduce debt and / or live in a new location. Some of their considerations may include:
As you can see, there are lots of pros and cons to downsizing your home for retirement. This is very much a personal decision each and everyone of us needs to make.
The Cons: Why You Shouldn't Downsize, at Least for a While
Many folks prefer to retire in place. After all, they’ve worked hard to be mortgage free and it suits their lifestyle. They may have done renovations over the years and love their kitchen, bathrooms, etc. Why would they want to start over?
Other factors might include a safe neighborhood and fantastic neighbors. In addition, they have close proximity to all the services they use such as shopping, medical, hair salon, etc. In short, they are happy with where they live.
Deciding to sell can lead to regret especially when your home is filled with fond memories. Besides all the upheaval and costs associated with moving, there’s no guarantee you’ll be happy in your new place.
From a financial perspective, a home is an investment increasing in value year over year. If the real estate market is strong in your area, your home is likely increasing in value at a faster rate than any comparable living arrangement. You need a place to live and we all know you build no equity when renting.
The chart above shows that, over the long-term, home ownership is a good investment.
The flip side to consider are all the maintenance and repairs associated with owning a home. Even factoring these in, the increase in property value generally outweighs the costs.
Another aspect is the best time to buy or sell. When the market is depressed, selling your house could become a long arduous process. This once in a century pandemic certainly won’t help matters.
This really came to the forefront for Debbie and me. With COVID and everyone being told to shelter in place and avoid crowds, we felt safe and secure in our humble abode.
Stories abound of folks who went stir crazy suffering “cabin fever”. Not so much for us. We have four acres of land with lots of space to putter about on. If anything, I feel as if there’s not enough time in the day to get to my many projects. That ties in with downsizing and decluttering which I’ll elaborate on further down.
Sure, it’s been inconvenient not getting together with family and friends. If there’s another “wave” in the fall, I’m sure we’ll do just fine. The point I’m making is we love our country lifestyle and, especially now, couldn’t envision living elsewhere.
Although we’ve talked about downsizing, that is likely in 4-5 years. We’ve discussed travelling more and perhaps wintering in a warmer climate. At that point, it would make sense to have something smaller and maintenance free.
Debbie has always dreamed of experiencing Greece. We planned fly to Athens this September and spend the month island hopping. With this global pandemic, those plans are on hold.
In some respects, this is a mixed blessing. It’s a hassle to get someone to look after our house, especially for an entire month. And then there’s our four-legged little sweetie, Shiloh. In dog years, she celebrated her 85th birthday and isn’t quite as spry as she used to be.
Helping Family Members
Lately we’ve heard stories of a son / daughter or, often, a grandchild moving back in with mom and dad. These are trying times with all the layoffs. While that’s not exactly what most of us planned for, it’s hard to say no. Another reason for remaining in a house with extra space.
Downsizing Doesn't Always Reduce Costs
Sometimes the average older house is about the same value as a condo or townhouse. In other words, you’re swapping one for the other. That’s not to say there may not be other benefits. However, saving money may not materialize.
All too often, the monthly maintenance fees are higher than the upkeep you had with your house. If you’re not careful, you could find yourself in a property that’s underfunded. The board can levy a one-time assessment fee for major costs such as a roof replacement. They could also increase the monthly fees.
The Pros: Why You Should Downsize Your Home
There are lots of reasons for downsizing and re-engineering the lifestyle you desire. This can include:
The Story of Our Friends
Betty and Barney (not their real names 😊) had a gorgeous million-dollar plus acreage. Just minutes from the city and close to all amenities. Location, location, location! They also had a massive mortgage. For them, this was their investment strategy as the property was sure to increase in value.
Over the course of 15 years, they completed massive upgrades. These included hardwood flooring, kitchen and bathroom upgrades, roof replacement, landscaping, you name it. As beautiful as everything was, they were house poor.
The deck needed to be refinished, yet another major undertaking. While they both enjoyed the yard work, at times it felt like a full-time job cutting grass and tending the flower beds. The best way to describe it, their beautiful home had become a demanding all-consuming mistress.
Shortly after her 60th birthday, Betty received a separation package when her employer relocated head office. It was time to downsize!
That was when they made their deposit on a townhouse. This was in a new development complex designed for those 55+. Still under construction, the builder allowed them to choose the exact options they wanted.
The best part was the equity they’d built up in the acreage finally left them debt-free! This was the start to the next chapter of their lives and were delighted with their new neighbors. Besides frequently getting together, they formed an informal travel club.
It really is about weighing all the pros and cons to downsizing your home for retirement. This is the opportunity to make a decision that best fits your lifestyle.
Why You Shouldn't Leave it Too Long
I’m no poster child when it comes to downsizing possessions. In fact, it’s my Achilles heel. My parents were reluctant to throw anything away. Ingrained with that belief, the reality is I’ve got lots of storage space and, over 30+ years, accumulated way too much. It’s become a recipe for disaster.
To my credit, over the past few years, I’ve made a diligent effort to ween down a lifetime of valued possessions. Some stuff was easy to let go of; whereas others have significance to me.
For example, does anyone still have their first vehicle?
Mine is a 1977 Chevy van, my pride and joy when I was 18. Lavishing hours and every spare nickel I had, customizing my “boogie van”. It became a labor of love. Learning how to upholster crushed red velvet, wiring in an awesome stereo, and a multitude of other improvements. After driving it for 12 years, I never had the heart to sell her.
Now, she sits neglected in my Quonset. Part of a long “to do list” and, one day, I’ll get her back on the road. Just the other evening, Debbie and I were talking about “Project Van”. I’m trying to come to terms with selling my precious van. Debbie suggests maybe doing a road trip and see the country. Wouldn’t it be cool to show up in a KOA campground with a “boogie van”?
Back in my youth, I raced motocross. It was my passion and I loved getting out on trails. Naturally, I still have three of my vintage dirt bikes from the early 80s. Yikes, hard to believe they’re almost 40 years old! After all this time and memories, it’ll be hard to see them go.
Twenty years ago, I started a renovation on my father’s 1974 Jeep J20 pick up truck. Initially, I did some spot sandblasting to uncover some rusted areas. One thing led to another and I dismantled the body right down to the frame. In all fairness, I bit off more than I could chew and "Project Jeep" remains in limbo.
Most of us are guilty of accumulating stuff over the years. The problem is, as we age, it becomes more difficult to part with our treasures. At a certain point, we’re either forced to get rid of them or someone else needs to do it for us.
My guiding principle has become if you don’t use it, why keep it? This might include books, collectibles, family heirlooms, or anything else sitting around collecting dust. These might be items to pass down in the family, sell and make money or donate to a worthy cause.
Closing Thoughts - Pros and Cons to Downsizing Your Home for Retirement
You can either plan and have a strategy to downsize or react when the time comes. The latter isn’t the recommended option as someone else could very well be making the decisions.
Sooner or later, we are going to be forced to downsize. Either because we can no longer take care of our home or health issues begin to pop up.
Flexibility is key as things will change and the right decision now will likely be much different in ten or twenty years. Two aspects to consider, where do you want to live? What about all your “stuff”?
When to downsize really is about making the most out of your retirement. The bottom line is you, your spouse, and loved ones are going to be happiest when you’re proactively managing this thorny issue.