Is Now the Time for Downsizing from the Family Home?
(A Smaller Home Very Well Could Be Right for You)
The word “rightsizing” may work better for you instead of “downsizing.” The time for this major life change is different for everyone. Maybe it’s shortly after your kids move out or after you retire. It might be even later in life when the house simply becomes too big to maintain or too difficult navigating around in. The time does come when most people experience more enjoyment from life in a home meeting their changed needs.
Right Size Your Way
Maybe surprisingly, a Gallup's annual Economy and Personal Finance Poll found that although total homeownership decreased from 71% in 2001 to 63% in 2017, the only age group to buck the decreasing homeownership trend were seniors (65+ years) that increased to 82%. So, wanting to continue owning their home seems to be what the vast majority of seniors are choosing to do.
There’s a long list of benefits for remaining a homeowner but in a more comfortable and smaller home. Cost can be one of the biggest incentives. And there are many costs to consider.
Costs. Savings with a smaller home come in many forms. First of all, you might be able to pay cash for a smaller home and stop making a monthly mortgage payment on the big old family home. Don’t think about what you paid for the home 20 years ago. Instead, think about what it might be worth today and what that will buy in a home more suitable to your needs today. Your big home might be worth $350,000 today even if you only paid $125,000 for it 20 years ago. If you sold it today to a young family needing all of that space, you could quite possibly buy a “rightsize” home for $275,000. You would be rid of the mortgage payment, own your home free and clear, and still have cash left over for retirement. Of course, you could do something similar with a reverse mortgage but that will not get you out of all the other expenses associated with a big old house. A rightsized house reduces costs in many more ways.
Energy effieciency. Energy effieciency is more than just better insulation and triple pane windows. Yes, you’ll get those with a newer house along with newer furnace and A/C systems that are both more efficient and less likely to need replacing or major repairs in coming years. Just the fact that the house is smaller means less cost for heating and cooling.
Maintenance and repairs. You’ll get a similar major cost savings by moving into a house with a new roof instead of needing to soon replace the roof on an aging house. You’re also likely to get newer and more energy efficient appliances that can include everything from the oven to the washer and dryer.
Less Taxes. Even if you decide to stay in your family home, I hope you take advantage of the tax breaks available with Homestead and Senior Tax Exemptions. Of course, a rightsize home will likely have less in taxes due each year. Smaller houses are built on smaller parcels of land and the land is a significant part of the property tax assessment. Besides the land, when you pay less for a smaller home than your current home is worth, that lowers the tax bill again. No mortgage and a smaller tax bill make a big difference in what your retirement income affords for your enjoyment.
Getting Close to Retirement?
Shortly before retirement, many people go on a quest to pay off the mortgage and other debts. Switching from a big house to a smaller house can eliminate that mortgage and generate the cash to pay of your other debts. Even if you don’t pay the mortgage off in full, a condo or smaller house can mean a smaller mortgage with smaller monthly payments.
Pay off debts. If you’re fully set for retirement, good for you and enjoy. However many baby boomers feel like they still have a ways to go with their financial goals. If you haven’t done the math yet but are starting to dream about retirement, maybe it’s time to do the math. Not just the downside of adding up everything you owe on credit cards and other consumer debt but also the upside of how you can pay off that debt to enter retirement financially healthy. If you’re paying $500 or $700 or more a month for debts, consider what it would mean to your retirement lifestyle if you paid those debts off in full or at least a big chunk of it to significantly lower the monthly payments. If you’re one of the lucky ones without any consumer debt, think about how lower monthly expenses will enable you to add more each month to your retirement account or even retire now.
But gracefully growing older and retirement are about much more than money…
Is It Time for Positive Lifestyle Changes?
What you want out of life today probably isn’t the same as what you wanted at age 40 or 50. The needs of most people actually tend to become less as life goes on. Along with no longer needing the big house to raise children, you no longer need to be in the best school district or where your children’s friends grew up.
What would be better today? Hopefully your health is good but some seniors benefit by living closer to medical facilities or maybe along a better public transportation system. For the activity orientated, it can be closer to entertainment, shopping, and sports venues. If your family home was partly chosen to be close to work, moving closer to grown children and family might be better for your lifestyle today.
Without a doubt, rightsizing needs to consider a lot of factors that include more than the biggies of finances and lifestyle. Take your time to consider all the implications before making the big decision.
More Resources for Making a Big Decision
I wish you all of the best and happiness in your retirement. I encourage you to continue reading our blogs. If you need more information or have questions, please Contact us. You can also reach us by calling at (678) 570-8123. We'll be glad to help you!