How and When to Downsize a Home in Retirement

Finding a Smaller and More Manageable Home

Apr 15, 2009

For various reasons, seniors would like to sell their current home and downsize to a smaller home. Here are some tips on how to select a smaller home in retirement.

Though many people may consider the term retirement to mean one continuous phase of rest and relaxation after a hard life’s work, retirement is actually far more complex and varied. Of the various stages of retirement, one is the downsizing phase where retirees let go of their larger homes where they raised their kids and opt for smaller, less expensive, and easier-to maintain-homes.

Timing the Downsizing

Three groups comprise those who are considering downsizing: pre-retirees, those in early retirement, and those in mid-retirement. People in pre- or early-retirement may not necessarily be ready to pack their bags and move to a retirement condo in Florida. However, they may wish to downsize their 2800 square foot home because the kids moved out years ago and the larger home is more expensive to maintain.

When Downsizing a Home Makes Sense

Retirees who are considering downsizing their home must consider a variety of factors. Is it financially advantageous to purchase a smaller home or condo, or is renting a better bet? Will taking on another mortgage at this time save money in the long run, or perhaps refinancing the current home would save even more? Other factors that go into any decision to downsize a home include:

Downsizing makes sense when the senior decides to sell the home and move to a smaller home in another location, particularly in a new city with a lower cost of living. It makes sense to downsize from a larger home to a smaller home if family is distant and guests are infrequent. It also makes sense to downsize if the senior is simply unable to maintain a large house and would like an apartment, condo, or even assisted living.

When Downsizing a Home Doesn’t Make Sense

Some seniors who have their homes paid off completely feel overwhelmed by keeping up the home, particularly if they have no family around to help them. Homes can be expensive, particularly older homes which may need new furnaces, hot water heaters, roofs, or air conditioning units. However in this case, the benefit is that the home is paid off and monies collected from retirement funds go straight into the retiree's pocket rather than toward a hefty mortgage.

If the home is a large home, or is two or three stories and the senior can no longer get up and down stairs without assistance, moving into a condo, apartment, or even an assisted living retirement community may be worth considering. However if the home is a smaller one-story rambler or ranch home, it may be financially wiser to stay put in the paid-off home and get help from neighbors or community assistance if necessary.

The Bottom Line on Downsizing a Home in Retirement

Bottom line, downsizing a home during retirement saves money if selling a larger home and buying a smaller home, buying a condo, or renting an apartment. However, there are some cases where downsizing may not be prudent, such as when the current home is already paid off. With careful planning, seniors can enjoy the convenience of a smaller space and spend the extra money on fun things including more frequent vacations, eat-outs, and trips to see the kids and grandkids.

The copyright of the article How and When to Downsize a Home in Retirement in Retirement Planning is owned by Daniel Gansle. Permission to republish How and When to Downsize a Home in Retirement in print or online must be granted by the author in writing.