There’s a lot to consider before you retire, which is why I wrote a book called 65 Questions to Ask and Answer Before you Retire. In it, I go over 65 questions that you at least need to consider before you finally call it quits.
Downsizing homes in retirement may be one decision you make to save on expenses, live a more nimble lifestyle, and make your retirement income go further.
Before you downsize though, consider these factors to make it the easiest for you and your spouse.
1. Choose a Home that’s Easy Now and in the Future
When you retire, you may not be thinking about disabilities or difficulty climbing stairs, or even keeping up with a larger home, but as you age, it may become an issue.
Consider investing in a single-story home so you don’t have to worry about maneuvering stairs. Also, think about the number of rooms/size that’s feasible. Will you have family and/or grandchildren spending the night often? You’ll want adequate room without making the home so large that it’s hard to maintain or even keep clean as you age.
Lastly, consider the accessibility of the home, even if it’s a single story. Slip and fall accidents are one of the top reasons older people call an ambulance. Preventing such accidents by purchasing an accessible home may be in your best interest.
2 . Choose what to do with your Extra Stuff
Americans in general have too much stuff! We are programmed to keep items we ‘know’ our kids will want, but surprise, surprise when it comes time to give it to them, they want nothing to do with it. Rather than holding onto items you ‘know’ your kids will want, have the conversation now. Ask them if they want it. Let them be honest and if they don’t want it, why hold onto it any longer?
If you have stuff you can’t part with quite yet, consider temporary storage, but it must be temporary. Things like a dining room set your child wants when he/she moves into his/her home is acceptable or items you may sell at an antique shop or auction are okay. But don’t use temporary storage as an excuse not to part with things you’ll never use.
The items you no longer want, separate into two categories – donate and garage sale. If you have items in great condition that you think you may make a few dollars on, go ahead and have that garage sale. Take the money and keep it for your future expenses. If you don’t want to be bothered or aren’t sure if it’s worth it, donate the items to a local shelter or resale shop that can help those in need.
3. Think about Intangibles
Forget the material things now, but think about the intangibles you’ll leave behind. Family and friends are a big part of your decision. Are you okay leaving them behind? Have you formed close relationships with your neighbors, fellow churchgoers, or members of other groups you’ve joined? If it’s a big part of your life, think about how you’ll fill that void. It may not hit you right away, but eventually, you’ll miss that busyness in your life and need to fill the void.
Don’t forget about doctors, specialists, and other professionals you’ve formed relationships with throughout the years. Are you close with your banker? Have you seen the same doctors for 20+ years? Even things like the local cleaners or the cashier at your grocery store. We all get into habits and form relationships that may be difficult to replace when you move.
4. Be Realistic about your Home’s Value
It’s normal to be emotionally attached to your home, but this may make you inflate its value. Instead of pricing the home yourself, ask a trusted real estate professional, such as a real estate agent or appraiser for their opinion.
They’ll consider the market value of homes in the area (homes sold within the last 6 months), plus any adjustments your home may be allowed if you have extra features or your home is in better condition than the homes that sold recently.
Being realistic about your home’s value gives you a better handle on how much money you’ll need from your savings for your new home.
5. Understanding the True Cost of Selling your Home
Once you know the home’s value (aka how much you can sell it for), you can plan for the seller’s costs. It may feel great to have $500K of proceeds from selling your home, for example, but don’t forget to factor in the costs that will eat up those proceeds.
On average, sellers pay 8% – 10% of the sales price in closing fees. This includes the real estate agent’s commission, title insurance, transfer taxes, prorated property taxes, and HOA fees, and any attorney fees.
Also don’t forget the cost of moving, especially if you’re moving long-distance. The average cost of professional movers for a local move is $1,250 and $4,800 if you move long distance.
Most of the fees you’ll pay come out of the proceeds of selling your home, but you’ll have less money in hand when it’s done.
Bottom Line
Downsizing is often a smart decision for retirees. If you no longer need ‘that much house’ you can cut down your costs, including maintenance, utility, and upkeep costs, plus taxes and insurance. Before you downsize, though, make sure you understand the bottom line.
Just because you can sell your home for $500K doesn’t mean you’ll walk away with that much money in hand. There’s also a lot more to consider including what you’re bringing with you and who/what you’re leaving behind.
It’s a smart, yet big decision to downsize. Before you do, download my free book 65 Questions to Ask and Answer Before you Retire to get yourself on the right track and to make the right retirement decisions. That book is available at FreeRetirementBooks.com