Retirement is a time of major life changes. For many people, this involves giving up work as well as moving to a smaller home.
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When it comes to downsizing, there are some significant pros and cons, and it may not be the right choice for everyone.
To help you decide if moving to a smaller place makes sense, here are a few key questions to ask yourself.
Can you afford to stay in your current home without compromising your financial security?
The first and most important question is whether you can afford to remain in your house when you no longer have paychecks coming in.
Using the income provided by Social Security and retirement investments, you’ll need to be able to pay for your expenses of home ownership, which may include:.
You don’t want to take too much out of your retirement accounts too quickly and run those accounts dry. If you can’t continue to cover the costs of your current house while maintaining a safe retirement withdrawal rate, then you need to downsize.
Could you pad your retirement savings accounts by downsizing?
If you currently have a lot of equity in your home, you may want to cash it out by selling.
If you can do that and purchase a cheaper property, you might be able to go without a mortgage by using the proceeds from your home sale to pay cash for the house. Or you may be able to take the profits from the sale of your home and add them to your retirement savings accounts, giving you more financial security over the long run.
Will a smaller house be more affordable?
In most cases, downsizing is more affordable because smaller houses cost less than large ones. But this isn’t necessarily always the case. If you’d need to move to a more expensive area because there aren’t a lot of small homes in your current location, then you might not end up saving much money by downsizing.
Will you have a lot of family coming to stay?
You may not think you need all the room you have in your current home, but it’s important to consider the future. If you have children who move back home, or if you have grandchildren who come to visit, you could end up happy that you kept your larger space.
Can you handle the maintenance and upkeep on your current home?
Sometimes, as you get older, it becomes harder to take care of maintenance tasks such as mowing the lawn or cleaning the gutters. Even cleaning can become a challenge if you have a large property. If you can’t handle the upkeep of your home and you can’t or don’t want to hire someone to do it for you, then you’ll need to downsize.
Would you be happy in a smaller space?
Moving to a smaller home can be a big change – especially if you’re used to having a lot of land and not being near neighbors or if you’re accustomed to having a lot of space to indulge in hobbies.
If you won’t be happy moving to a new place with less room, then you have your answer – downsizing isn’t for you. Just remember, you do need to make sure staying put is financially feasible because you’ll be a lot less happy if you try to stick it out in your current home and end up broke late in your retirement.
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