For a comfortable retirement, you need a large amount of money saved. One of the most common ways older adults increase their savings is by downsizing their homes. Selling your home will most likely result in cash windfall, and a smaller home means lower monthly expenses. In addition, you’ll spend less on utility bills, renovations, and maintenance. If you haven’t paid off your current mortgage, a new home with a lower mortgage will free up space from your budget. All of these savings will add a large chunk to your retirement fund.
If you’re nearing retirement and have concluded that downsizing is a great move for you, you want to do it right. You want to avoid many mistakes, such as accepting a low-ball offer for your home, keeping a piece of furniture that is too big, or not considering if you can age in place.
For people who already have a small house and can’t consider moving to a smaller one, doing essential updates for your old home and renting it out might be more advisable. Otherwise, we’ve listed our recommended practices for downsizing your home.
Take note of all the expenses
The point of downsizing is to save you money, but it doesn’t mean you won’t spend anything. There are a lot of fees you have to keep in mind if you want your downsizing to be smooth-sailing.
Moving to a new neighborhood means owing monthly home association fees. The more services and amenities the community offers, the higher the cost will be.
Preparing your house for the market means expenses, too. Repainting walls, installing new flooring, and other improvements mean you have to dish out some money.
Keep in mind that home insurance won’t necessarily decrease if you move to a smaller home. The proximity of your new home to hazards can even make insurance premiums larger than before.
Yes, you can sell your house without a realtor, but why would you? Hiring a real estate agent will take a lot of work off your hands and will speed up the process. Of course, real estate agents take commissions, and it’s an expense you have to take note of.
There are other expenses associated with downsizing. How much you will spend will vary from case to case. What’s important to remember is that keeping track of your expenses is the first step to spending money wisely.
Decide on the retirement lifestyle you want
A lot about downsizing will depend on what kind of retirement you want to have. The financial goal you have to set for yourself should be in accordance with the costs of your retirement lifestyle. Having these well thought out before making any moves will allow you to understand better how you can achieve the retirement you want.
Be realistic
Selling the home you’ve lived in for most of your life, along with all the other possessions, is not easy but might be necessary for your retirement goal. You might feel like putting a hefty price tag on your house because of the sentimental value you’ve given it, but that would only make it hard for you to sell it. This is where real estate agents come in. They will provide you with honest answers regarding your house’s value.
Donate or sell unnecessary items
You probably have plenty of items in your current house that you just left gathering dust in your basement. While you might not want to let go of them due to sentimental value, selling them off or donating them will free up space and make moving a lot easier. If you have stuff that are still in good condition, you can open a garage sale or list them in Facebook Marketplace or Craigslist to get rid of them and turn a profit. You can also just donate them to charities which will make sure someone will benefit from them.
Manage your emotions
Downsizing isn’t just a financial challenge — it can also stir up negative emotions such as sadness, anxiety, and grief. The thought of letting go of your home where you made a lot of special memories and going through all the objects that will remind you of them are likely to put you in a hurricane of emotions.
If you find yourself going through emotional turmoil while downsizing, it’s advisable to talk to your friends or relatives that you trust. They can help you go through these emotions and put you in a better state. If, by any chance, you don’t have anyone to speak to, consider getting professional help. You don’t need to be mentally ill to seek therapy.
Plan for a new routine
Moving to a smaller home might mean having an entirely new routine, especially if you’re moving far from your previous neighborhood. Before moving, plan a new routine by researching cafes you can go to, clubs you can join, or other activities you can get involved in within your soon-to-be neighborhood. Having a new routine planned will save you time trying to adapt to your new community.
Downsizing is a big retirement move that many people would have to consider when the time comes. It isn’t an easy task, and it requires a lot of planning. If you’re downsizing, give time to think about it thoroughly so you can spot anything that might become a problem. Consider all the expenses, decide on a retirement lifestyle, be realistic, sell unwanted items, manage your emotions, and prepare for a new routine. These aren’t the end-all and be-all of downsizing tips, but they will go a long way in making the move successful.
