One of the big questions when we retire or are planning to retire is should I downsize or not?
There are so many questions that need answering when we retire and in the many years after. One of the inevitable ones is “should I downsize?”
There are plenty of options available. A large proportion of South African over 60’s choose to age in place but even then there are decisions and changes that need to be made.
Even if you decide to stay in your home and not move into a retirement home, you may feel you need to clear out, or allow space for others to move in such as family or friends or even decide that co-housing may be the answer.
YEI looked at several aspects of downsizing, all of which need careful consideration
What does it mean to downsize?
Downsizing means moving to a smaller home from the family home and simultaneously reducing the amount of possessions that you own. In later life, it becomes increasingly difficult to manage a large home and garden, and on a fixed and/or limited pension, the costs of maintaining the home can become a burden.
You may think that downsizing is not an option for you – you may think that it is a critical survival strategy that could boost your savings. Life events can overturn one’s retirement plans on their head. However, does downsizing boost your coffers – read on…
Research, research, research and then plan, plan, plan
Downsizing can set an emotional rollercoaster in place. Timing is a critical consideration and don’t move on impulse, you may regret your decision. Will the family home fund a happy retirement and bolster your nest egg? Consider unexpected life events that could be a drain on your pension. Also consider if you can adapt your current home to meet your physical and financial needs in later life? And when you think you are ready to make a decision, consult a Financial Advisor for assistance in crunching the numbers.
What do you want?
Do you want to live in a smaller home, a retirement village or a flat within a retirement complex? Do you want to live near friends, your children and grandchildren, in the country, the city or by the sea? What sort of climate are you looking at? Do you want to be close to medical facilities? Or do you want to stay in your family home?
Financing your retirement by selling your current home
Many of us bought our homes in the 70’s and 80’s and their current value has substantially increased. Many people believe that they can sell their home, buy a smaller place and invest the difference to boost their retirement savings. It’s time to do your homework, it may be possible that you have overestimated what your home is worth and you will reap less profit that you had hoped. You also need to take ???? tax into consideration. It may be worthwhile to consult three or four estate agents to get a realistic estimate on your home’s current market value.
Don’t forget the additional costs
It may have been years since you last bought a home. Don’t forget to factor in all the additional costs – legal fees, estate agent commission, moving costs, levies, maintenance, security and all possible hidden costs.
The good parts about downsizing
- You will simplify your life
- You will reduce your accumulated lifetime possessions which have probably become a burden
- Downsizing could mean easier, cheaper, less stress
- You could increase your retirement pot
- Your home-maintenance and utility bills will reduce for years to come.
- Lock up and go and travel more frequently
Thoughts to consider when downsizing
- Downsizing can bring about an emotional rollercoaster. Do your homework thoroughly and ensure that you are prepared emotionally before moving.
- We can’t emphasize this enough – check out the financials, the total cost of downsizing. Consider all the hidden expenses.
- Consider your friends and family. Some say that as you get older, your social network becomes even more important than your family. If you move, will you be further away from good friends?
- Are there activities that you would enjoy in the new vicinity? Are there health-care services available? What sort of transport is available?
- Will you be able to live in your new home for a long time? Does it have the features that enable ageing?
- Be honest about why you are considering moving. Consider the financial reasons and the practical reasons. Assess your current and possible future needs so that you can reach old age with dignity and comfort.
- How about renting in the new area for a year before you sell up the family home? This will give you a good idea of what your new location is like throughout the year, and whether moving to this new area is the right move for you.
- If you are living mortgage-free, but need more income – have you considered renting a room or turning the garage into a bedsit?
So is downsizing for you?
Experts have said that downsizing needs to reduce your expenses by at least 25%. If not, is it worth the trauma, the bother, the expense. If you have done all your homework and are convinced that it is, then a whole new simplified life could be waiting for you.
Where are you at in this cycle of life?
Do share your thoughts and experiences of downsizing with us in the comments section below