Downsizing For Seniors: Is It Right For You?
As published in the Star Advertiser on October 23, 2018.
Simplify Your Lifestyle
Once the kids are off to college or have an apartment of their own, an empty nest might seem too large and too expensive for aging seniors looking to relax and enjoy their golden years.
Some seniors look into downsizing for retirement as a way to simplify their lifestyle. A smaller home may mean less maintenance along with lower utility bills and other upkeep costs. A condo may have amenities or enhanced security if you plan on taking more trips in retirement.
The advantages of downsizing for seniors may appear obvious, but as with any financial decision, weigh the pros and cons to see if they make sense for you. Read on for downsizing tips if you’re looking to make the move.
Review Your Expenses
If you’re downsizing your home to save money, calculate your current monthly and annual expenses such as your mortgage, taxes, insurance, utilities and maintenance fees. Factor in estimated repairs and replacements as well, especially if you have an older home.
Now compare those costs with smaller properties you’re interested in. Real estate websites such as Zillow.com offer property tax history and estimated mortgage payments, and you can estimate other expenses to provide a total picture of your costs.
Monitor Housing Market Trends
When looking to downsize your home for retirement, you should consider looking at the current housing market to make sure you have realistic expectations. You may also want to meet with a Realtor to see how much you can expect to sell and buy for.
You may find that downsizing may not make as much financial sense as you thought. On the other hand, those with lots of equity in their homes may be able to sell, purchase a smaller property with cash and invest the rest to help fund their retirement.
Don’t forget to factor in the expenses that come with buying and selling property, such as your Realtor’s commission and closing costs on the new home. Your Realtor may suggest that you complete repairs or stage your home prior to putting it on the market, which may eat into your profits. You may also want to speak to a tax advisor when selling your home.
Meet Your New Needs
Think about what you want to accomplish by downsizing. If you want to do less yard work, look at a townhome where common areas are maintained by an association (while taking into account the added maintenance fees). If you’re tired of home repairs, consider a new construction. If you want to be closer to town or enjoy amenities like a pool or entertaining area, you may want to consider a condo in Kakaako or other trendy areas.
Look at the space in your current home. If you frequently have houseguests or plan on using your extra room to start a home business, downsizing may not make sense for you right now.
Renting is an often-overlooked option for seniors looking to downsize, but you won’t be on the hook for repairs and you won’t be tied down to a property if you want to move again in the near future. Those who have paid off their mortgage may even want to consider renting out their house, using part of the income to rent a smaller place and investing the rest toward their retirement.
Downsizing for retirement may help many seniors reduce their expenses and change their lifestyle. Check with your Realtor and financial advisor to see if make the move is right for you.