Financial experts suggest carefully evaluating monetary, personal comfort and family needs when considering downsizing upon retirement. Weigh the pros and cons.
ELIZABETHTOWN, Ky. – Question: Should I downsize my home when I retire?
Answer: Retirement is usually a time of major life changes ranging from not working full-time to modifying where and how you choose to live. With regards to the later, there are significant pros and cons to downsizing/rightsizing and it may not be the right choice for everyone.
To help decide if moving to a smaller or differently configured living space makes sense for you, there are a few key questions to answer. Perhaps the most important is what is affordable based on your income and expenses in retirement?
First, calculate the cost of your current housing by totaling monthly mortgage or rent payments, utilities, annualized maintenance, insurance premiums, etc. If you have an existing low-rate mortgage, significant built-up equity, already live in your preferred neighborhood and the home meets current as well as possible future physical requirements, perhaps aging in place is a viable option.
Or you may want to sell and cash out your equity to purchase a more affordable, smaller house or condo that could eliminate or greatly reduce monthly mortgage payments, according to the Ascent/Motley Fool website. Or perhaps add the proceeds to retirement savings for a more secure financial future.
However, if you relocate to a more expensive neighborhood or locale, you might end up spending more by downsizing in mortgage/rent, taxes, insurance and other services. A few residential retirement communities feature smaller homes, condos or apartments with maintenance, housekeeping and some personal services included, but at additional costs.
Next, consider how much space you currently have and what you’ll need in the future. Will there be enough room in a smaller home if grandchildren or relatives visit frequently; if you entertain often; or have adult children move back home?
Also, selecting a smaller home can be a big change in other ways, particularly if you’re used to land around your house. On the upside, some garden home retirement communities offer lawn services and provide other property maintenance, usually at an additional cost often included a monthly homeowners’ association fee.
Millions of older Americans are choosing to downsize in retirement. Forty-six percent of baby boomers selling their homes in 2017 did so to downsize, according to a Zillow report.
A 2018 Merrill Lynch study found the No. 1 reason given by respondents for moving in retirement was to be closer to family. The desire to reduce expenses came in a close second.
However, not everyone makes an intentional decision to downsize. Sometimes a move becomes necessary because of declining health, the loss of a spouse or an unexpected financial crisis. Understanding your individual motivations for moving then weighing the pros and cons carefully are important to feeling comfortable with your decision.
Beyond saving money and potentially bolstering retirement financial plans, downsizing and/or relocating could significantly change your lifestyle and possibly improve your quality of life. For example, moving from a suburban home to a condo by the beach or relocating from one side of the country to the other to be closer to family.
As life changes in retirement, financial experts suggest carefully evaluating monetary, personal comfort and family needs when considering downsizing or rightsizing.
Copyright © 2021 The News-Enterprise, Landmark Community Newspapers LLC (LCNI). All rights reserved.
Go to Source
Author: marlam