Most of us would welcome the prospect of heading off into the sunset and spending our golden years of retirement with enough money to do what we want with all that spare time available. The problem for a fair percentage of us is that money can sometimes be an issue in retirement, especially if a lot of your cash is tied up in your home, which is why downsizing can make a lot of sense.
If you are searching for a retirement property you can start doing pricing information research online. In the US you can use sites like trulia that provide information on each state. If you are looking to retire overseas, you will find similar services. When researching house price information in the UK you can obtain additional info by Entwistle Green for example, and see how you just might be able to retire big by going small.
Plenty of Good Reasons
When you start to look at the arguments in favor of the idea of downsizing, it can quickly look to be quite a persuasive argument, even if you are really happy with your current home. The truth of the matter is very often that many families have plenty of scope for downsizing their living space, without necessarily cramping their style in the process.
The average size of a house has more than doubled over the last sixty years but the average family size is much smaller, which means that in comparison to previous generations, you are actually living in a much larger space than you really need.
Nothing wrong with comfort and space around you of course, but the argument of not having enough room for all of your things if you downsize, wouldn’t look too convincing in the eyes of previous generations of your family.
Less is More
Moving to a smaller property immediately creates a great opportunity to de-clutter and put some extra money in the bank. Having a smaller home means lower maintenance and utility bills, and when you consider the idea that you can sell all of your surplus items before you move, that extra cash that you get can make your living costs and your retirement plans, just a little bit easier to work with.
Most of us are very adaptable and although it might seem strange to gather around one TV at first rather than heading off in different directions, downsizing might just bring you closer together as well as save you a ton of money by reducing your overheads.
The overriding factor when considering a downsizing move is money. Lifestyle considerations are relevant too, but they are also influenced by the number one issue for many of us, which is using what we have to make our financial situation as comfortable as possible. If you are planning for your retirement and want to get there as quickly as possible, but still have a mortgage to pay off, moving to a smaller home could be the solution that you are looking for.
Downsizing could allow you to either clear the remaining debt completely from the equity you have available in your current home when you sell it, or even if you move to a smaller property and reduce your mortgage debt, that can also make a huge difference.
As a rough guide, paying an extra $500 per month against a loan of $18,000 will clear that debt about seven years quicker. Freeing up spare cash from your home could allow you to pay off any loans and debts you have at a much faster rate, leaving you debt-free and ready for retirement sooner than you might have imagined.
Keeping your Options Open
Downsizing gives you options, and that includes having more freedom to decide where you might want to spend your retirement years. Not all of us have definite plans about where we want to retire too, so it could be an option that you sell your existing home, bank the cash and rent somewhere that you perhaps would like to try before you buy.
Buying and selling a home can get expensive so you don’t want to do it more often than you need to, as it will eat into your retirement money. Renting is a good option if you are not sure where you want to live or fancy moving around to different areas to get a few different experiences. If you bank the equity from your old house sale, you could set about investing that to try to generate a decent return, while you ponder whether to buy again or just carry on renting
It can be an emotional wrench leaving a family home where there are plenty of memories, but if you can look past the understandable sentimentality, downsizing could be the financial key that unlocks a golden retirement.
Rachel Daniels has a number of years of experience working in the real estate industry. From first-time buyers to retirees she enjoys sharing her knowledge of the property market.
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.