As you contemplate your options for where you’ll live after you retire, you may be considering moving to a smaller dwelling.
Downsizing might make sense for both financial and logistical reasons, but it might not be an advantageous choice in every situation. There are many factors you should consider in order to decide whether downsizing is right for you.
Here are some of the pros and cons of moving to a smaller home.
You will gain access to the equity in your house.
You probably have a significant amount of net worth tied up in your home equity. When you trade your current house for a less expensive one, you free up that money to invest in other ways or simply to have more money to spend. However, a smaller house may not be less expensive if you are moving to an area with higher real estate prices.
You may lower your monthly costs.
A smaller house will probably have lower utility bills, lower taxes, and cost less to insure. But if you’re moving to a different geographical area, these costs may be higher in your new locale, even for a smaller home.
You will have less to maintain.
A smaller house means you’ll have less to clean. If your new house has a smaller yard, that will require less effort to maintain. If you move to an apartment, a condo, or a retirement community where exterior maintenance is included in your monthly fee, you will eliminate that chore altogether.
Downsizing will force you to reduce your possessions.
You have probably accumulated a vast array of possessions over your lifetime. Tidying has become a popular craze over the past few years, but you may not feel any urgency to toss your unused possessions if you have no plans to move in the foreseeable future.
You will probably find that it is liberating to get rid of all those things you no longer use.
You’ll also leave fewer possessions for your heirs to sort through and dispose of after you’re gone.
You can move to a home that’s better suited for aging in place.
A one-story floor plan, or at least a floor plan with a bedroom and all necessary facilities on the first floor, will make it easier if you should require a walker or wheelchair during your later years. You can make other adjustments as needed, such as replacing door knobs with lever handles. If you or your spouse should someday require a wheelchair, you should evaluate whether doorways are wide enough and if countertops, cabinets, closets and bathroom facilities will still be accessible.
You can move to an area where services are conveniently located.
As you age, you’ll appreciate being closer to medical providers and stores where you shop frequently.
You should also consider whether good public transportation or city-sponsored transport vans are available, and if there’s a strong senior center in the area that provides activities as well as support services.
Moving is costly.
The cost of moving or disposing of your possessions, the realtor’s commission, and the money you spend to fix up and furnish your new home could easily amount to 10% of the cost of your current house.
Your house might require a lot of repairs and upgrades before you can sell it.
You may be perfectly satisfied with your house’s decades-old fixtures and you have learned to live with a few things that don’t work as well as they should anymore. But when it comes time to put your house on the market, your realtor may suggest that walls need to be repainted and carpet needs to be replaced, and all those repairs you have put off for years now need to be made. All of this will cost money.
Moving is a hassle.
It takes a lot of time and energy to pack and unpack. For everything you’re not going to move, you will need to sell it, donate it, dispose of it, or make arrangements for your kids to come and get what they want. (Reality check: Your kids probably don’t want much of your stuff – they have plenty of their own.)
You will also need to stop and start utilities and change countless addresses. And while the idea of tidying may seem appealing, you may find that it’s difficult to part with possessions that you have an emotional attachment to.
Your monthly expenses may increase.
The monthly fees in retirement communities and condominiums are often substantial, and they will probably increase over time. The homeowner association or condo fee may surpass the amount of money you will save on utilities. In some condominiums, you may have to pay extra for parking or storage space.
Your new house could have problems of its own.
If you buy a house, you could be inheriting problems that need to be fixed. Before you buy, try to find out how old the air conditioner, furnace, and hot water heater are. Make sure your home inspector does a thorough check on the roof.
Aside from problems you may encounter, if you want to do significant remodeling at your new house, that will add to the cost.
If you are married, you and your spouse may have less room for personal space.
You and your spouse probably enjoy having a place to go when you want some time away from each other. This is where you go to work on your hobby, listen to music, or read. In a smaller house, there may not be room for each of you to have your own area, and you will spend more time in close proximity.
You may be emotionally attached to your house.
Even if you determine that it would be financially beneficial for you to move to a smaller house, you may not want to go. Plus, you are familiar with your current neighbors and your surroundings, and you will have to re-orient yourself in your new locale.
Here’s a tool to help you compare the cost of moving vs. the cost of remaining in place.
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