Have you considered downsizing your home lately? My husband and I have reached a stage in our lives where we wonder if we need to move out of our four-bedroom, three-story home into something smaller, more efficient, and less costly to maintain. We have lived in our home for more than 20 years and if we make that move, we will stay in the same city, but in a smaller home in a neighborhood nearby.
This is not an uncommon dilemma for recent retirees or people of a certain age. According to a report from CNBC, “There are many considerations when it comes to downsizing, which generally entails moving to a less expensive—not just smaller—home. If you can earn a tidy profit on your home after selling and moving costs, downsizing is one way to boost your income during retirement. It will add to savings and ideally generate a higher level of investment income on your larger nest egg.”
I love change, so downsizing has its appeal. However, it is not easy for the average retiree to make the move. There is a lot of emotional baggage with downsizing your home—particularly if you have lived in your home for a long time—but the financial implications are also important. There is the selling price of your home—will you make a profit? Will that profit go into retirement savings or the cost of a new home? Likely, if you’re downsizing your home, the cost of the new home could be less than the sale price of your former home. However, the web site Investopedia.com suggests you look at the following points when downsizing your home:
- Don’t overestimate what your current home is worth. Have more than one local Realtor look at your home, and check comparable homes in your neighborhood via Realtor.com or Zillow.
- Don’t underestimate what a new home will cost you. Use the same tools mentioned above to find out what new home costs are in the area you have chosen to live.
- Don’t ignore the tax implications of the sale and purchase. Meet with your accountant beforehand so you are prepared.
- Don’t forget about closing costs. It may have been a while since you bought your current home, and there are all sorts of ways to eliminate or share these costs.
In a Wall Street Journal article, Sarah Lawrence-Lightfoot of Harvard University writes, “Downsizing” conjures up images and thoughts of decline and weakening. We envision a life that is descending, withering away, drawing to a close. Perhaps if we reframe the process, we will see its generative—rather than deteriorating—possibilities; we will focus on the gains rather than the losses.
I like thinking of the possibilities of focusing on the gains. I have slowly started to purge my home of things that have no use in our lives any longer. I believe it is going to take a couple of years before we are ready to downsize, but when we do, it will be a lot easier and with less stuff.