Are you ready to lower your mortgage or get rid of it completely so you can enjoy traveling and life?
Let's talk about downsizing!
[Read on or watch the video on Youtube]
Many people want to downsize when they are ready to retire but often it's best to look at downsizing five to ten years before retirement! At that time, you can actually enjoy your retirement. Why is downsizing a terrible idea in retirement?
First, think about closing and moving costs that might be considered. If you decide to sell your home you're going to have those closing costs when you sell your home and when you buy your new home as well as moving costs. Sometimes when you downsize you have to get new furniture because the home is smaller or the rooms are smaller and your furniture doesn't fit.
It is important to have a plan when you are selling your home. You want to make sure that you do have a place to go because in certain markets, sellers are finding that there's no place for them to buy or rent with the money that they have from their proceeds. It is important that you work with an educated Realtor who can make sure you not only have a contingency in your listing agreement to find a home to buy to be able to sell and as well as in a purchase agreement that you must be able to sell your home to buy. This way you're safeguarded on both sides and can make sure your offer goes through completely and you can easily transition from your new home from your old home.
Downsizing in retirement might be a terrible idea if you overestimate the value of your home. You want to make sure that you time your home on the market very well so that it is in a seller's market. You don't want to overestimate the value because it could keep your home on the market too long. This may result in you sell for less or not necessarily get the best offer. Don't be in too much of a hurry to accept the first offer. There may be other offers coming but you also don't want the offer to get away from you if it is a good offer and they're willing to work with you on your terms as well as timing. Also consider tax implications on how much you will gain and be taxed on it when you sell your home, capital gain taxes. If you've lived in your home for two over the last five years you should be able to waive that once but if you've already done it in your lifetime you won't be able to do it again. In this market (2022) we have been seeing sellers realizing a large gain so do make sure that you're aware of that when you go to sell your home and consider all the costs that would be come into play.
Downsizing is a terrible idea in retirement if you're worried about adjusting to a new community. You'll likely relocate within your town or city or state or country so you probably are going to make new neighbors and new friends. If you are a person that doesn't like to make new friends, downsizing might not be for you, but on the other hand, it might be a great opportunity for you to expand your friendships and meet new people. It would be a good way to make new opportunities, make new hobbies and also be a good stimulant for your mind, which will make you feel younger.
Downsizing and retirement might be a terrible idea because you will have less space and less privacy. Oftentimes sellers who decide to sell so they can downsize maybe looking at townhouses, retirement communities or assisted living. You'll realize the walls are closer and thinner. You may have pets and you may need to have them somewhere to take car of all of their needs. Your privacy is going to be limited and have less space to put your things.
Those are several real reasons why downsizing is a TERRIBLE idea so let's look at why downsizing might be a GREAT idea for you!
if you are thinking of saving money, downsizing might be a great idea for you. It is time to downsize when your housing is more than 30% of your income. You aren't making enough to maintain your home which can is officially considered a burden and can be very stressful. If you want to make some money or have some more liquidity, it'd be a great idea to sell your home. If you decide to downsize, you will likely save money by either going to a town home or a smaller home. You will have a lower: principal and interest payment, taxes and insurance, maintenance on your home or property because the home probally is smaller.
Downsizing can be great if you need to declutter! When you get ready to sell your home, you will want to declutter to make it easier for buyers to see all the great spaces in your home. Hopefully, it will be easy because you're probably using few rooms in your home. It will make you realize how much space you have and even though you're not using those extra bedrooms/family room/storage spaces in your home, they are great selling points to buyers. Keep in mind when you're selling and getting ready to downsize, make notes of all these features you loved when you bought your home but just isn't right for you anymore.
Downsizing will give you a great opportunity to relocate. Most often people pick a location due to their job, their school district but now people don't even have to worry about where they work since many can work from home. If you relocate, you'll have the opportunity to go to a more affordable area. Arkansas has a very low cost of living so it's a great place to retire and enjoy all the nature we have. You could get a chance to relocate and live closer to family/grandchildren/children or if you want to pick a place that you really love and always wanted to live! It may give you more opportunity to travel and visit those family and friends because you have a less burden on yourself and more time since you're not cleaning and maintaining so much.
Downsizing in retirement might be a terrible idea if you don't want to have your home be accessible. This is probably the most common reason people decide to downsize: they're afraid of stairs, slips, trips and falls and are more concerned about how their health and their abilities are going to be in their home. If you downsize, you may have an opportunity to age in place and the home that you move into will be much easier to live in longer rather than going to something like assisted living or a nursing home. Many people downsizing look for homes on one level, no or very few stairs, walk-in showers, hallways wide enough to accommodate a wheelchair. Maybe you're not necessarily in a position where you need a wheelchair now nor need a one level home but you see that it's a possibility in the future and so you want to have that opportunity to stay in your home as long as possible. Other important features for accessibility is not only within your home but within the City and neighborhood where you can get to amenities like doctors, hospitals, shopping and not have to travel far to get to them. All of these should be evaluated when you're consideringly relocating for an accessible home.
Downsizing in retirement might be a terrible idea if many of these aren't important to you but I imagine you would like to work less, save more, travel more, see your family, stress less and clean less! Hopefully, downsizing is in your future!