Retirement brings major life changes. In addition to no longer working, seniors need to adjust to the realities of living on a fixed income and often declining health. Many older adults are opting to sell their homes and downsize to deal with those challenges.
Reasons to Move to a Smaller House in Retirement
Many adults who are planning to retire still owe significant sums of money on their mortgages. If your children have moved out, there’s no reason to pay a high mortgage if their bedrooms are sitting empty. You might be able to significantly lower your housing costs by downsizing to a smaller house and either paying cash or making a substantial down payment and borrowing a small amount. A house that is less expensive and has less square footage would most likely have lower property taxes and lower utility bills. Reducing your living expenses could give you more flexibility in your monthly budget and help you avoid withdrawing money from your investment portfolio too quickly and running out.
Seniors may also have to deal with physical limitations. Stairs can be difficult for people with arthritis and other medical conditions. Moving to a one-story home can make life easier and safer. Household repairs and lawn maintenance might be challenging or impossible for seniors, and paying others to take care of those chores can be expensive.
Potential Reasons Not to Move
If you want to buy a smaller house, you may face stiff competition from other retirees and first-time buyers. Depending on the value of your current home and others on the market, you might not reduce your mortgage payments by that much. When you factor in closing costs and moving expenses, downsizing might not make financial sense.
Where you live in retirement will have a major impact on your cost of living. Some states tax Social Security benefits and others don’t. The costs of groceries, transportation and other necessities also vary widely based on location.
Interpersonal relationships and community ties are important at all stages of life, but especially in retirement, when people don’t have opportunities to interact with others at work. If you have built up a support system and feel a strong connection to your local community, giving that up and starting over somewhere else in retirement could be difficult and might leave you feeling isolated.
Is Downsizing Right for You?
Deciding whether to downsize or stay in your current home will depend on several individual factors. Think about your health, your financial situation, the value of your house, where you might like to move, housing and other costs there, and how closely tied you are to your current community to decide whether moving to a smaller house is a good idea for you.