Ah, retirement! For some, that means traveling the world on a never-ending vacation. Others look forward to more time with family, or even just for one’s self. No matter what your retirement plans downsizing before you start your ultimate vacation is crucial. In this article, we’ll explore some of the best reasons to shrink your domestic footprint and some strategies to make sure your life in retirement is everything you want it to be.
Home Is Where the Heart Is
When you think of your home, what do you remember first? Is it the sound of little feet racing from room to room? Or maybe the comfort of a home-cooked meal, shared around the family dinner table? Perhaps it’s less of a memory and more of a feeling, but for many people a well-used home is full of memories. That’s why many retirees continue to live in their long-time homes despite no longer needing the space. But here’s the thing many pre-retirees and retirees fail to realize: downsizing to a more modest home before retirement may save thousands of dollars a year in taxes, utility costs, and insurance. The upkeep necessary for a larger house can also take a mental toll over time. Even if you’ve managed to save all your pennies and tuck away a substantial amount, don’t you want to maximize the results of all that hard work?
Downsizing? More like “Right-Sizing”
Owning a larger house while working or raising a family comes with innumerable benefits. However, many of those benefits can quickly become burdens in retirement. Remember, without the income you enjoyed prior to retirement, it's crucial that you allocate your spending wisely. Sometimes it can be helpful to think about downsizing as a way to “right-size,” instead. The end result is the same, but conceptually this may help transform what could feel like a step backward for some into a positive, retirement-boosting strategy. Switching to a home that’s the right size for your retired lifestyle can often lead to tangible benefits like, a smaller mortgage, lower utilities, or lower property insurance.
Smaller Doesn’t Always Mean Cheaper
That doesn’t seem to make sense, does it? And yet, the national median price for condos — which typically are smaller than stand-alone homes — is now higher than the median price for single-family houses.1 Now, this shouldn’t be a barrier to shrinking your expenses before retirement though. If anything, it just means you just need to do a little research before settling on a retirement-friendly home. One way to gauge affordability is to check out what the payments would be on a 15-year mortgage. But if the monthly mortgage cost on a 15-year makes you nervous, that's a pretty strong indicator you might want to look at less pricey homes.2
More “You” Time
Less upkeep can also be mentally freeing.3 With less “stuff,” you’ll have the freedom to seek out experiences and memories instead of being tied to possessions. Cleaning, home maintenance, and yard work all take valuable time and energy. In fact, in retirement it may be helpful to think of your personal resources much like you do your savings. With this in mind, where would you like to invest your time? Your newly freed resources could be easily dedicated to social activities, family visits, or planning your next great adventure. The point is, your retirement should be about you, not your finances or living situation. So go ahead, take the first step in “right-sizing” your life for retirement. Who knows? With less to worry about and pay for, maybe you’ll finally be able to catch up on all those dreams you had while working so hard to get where you are today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.