Posted on: 16 September 2020
When retirement planning, most people must address the question of whether or not to downsize their living style. There is no single right or wrong answer to this decision. But what works for your particular situation will have a big impact on how to craft a successful retirement plan. To help you make the right call, here are a few pros and cons to downsizing for your post-career life.
The Pros of Downsizing
The biggest reason most retirees downsize just before or after retiring is to save money. If you expect to have a mortgage when you retire, a smaller monthly payment could shave hundreds of dollars off your bills. In addition to lower mortgage payments, you'll spend less on utilities, insurance, maintenance, and property taxes. If you're behind on retirement contributions, this could save your plans.
Beyond the money saving potential, a smaller place is easier to keep up and repair than a larger one. Retirees often want to spend their time doing things like travel, visiting friends or family, and volunteering rather than maintenance work on their property. As you age, the work may become a physical burden too.
The Cons of Downsizing
Not everyone is a good candidate for downsizing their life, of course. Some retirees are very attached to their home, especially if they've raised kids in it. You may also fill up your existing house with hobbies, consulting work, family, or entertaining guests.
In these cases, downsizing would actually reduce enjoyment of your home. If the idea of reducing your living space or losing certain amenities fills you with anxiety, it may be better to find ways to boost retirement income rather than make unwelcome sacrifices.
Downsizing also means moving, which isn't an appealing idea for many. Have property values risen? Then it may not be cost-effective to sell your current home and move to another one in the target area if you'll end up paying the same monthly amounts.
How to Decide About Downsizing
Want help making this call? Start today by meeting with an experienced retirement financial planner. They will assess your overall financial planning picture to determine if you're saving too much, not enough, or just enough. And if the idea of downsizing doesn't appeal, they can help you look for ways to boost retirement contributions, adjust investment strategies, use tax savings, or even plan for part-time work.
Whatever you decide about downsizing, you and your financial advisor can work together to ensure the best possible results and the happiest retirement chapter.Share