The kids have all left home, you spend a lot of the year travelling and visiting friends, and the maintenance on your property is quickly getting out of hand. Saying goodbye to the family home will never be easy, but with the possible boost to your savings, a more manageable property and access to financial liquidity on the cards we ask the question- should you downsize in retirement?
Why Would I Want to Downsize in Retirement?
It seems obvious, but retirement usually results in a rather large reduction of income for most households. Of course, we all hope to be comfortable enough to maintain our current standards of living, but downsizing can often make our lives more comfortable and manageable as we age.
In saying that, the decision to downsize will depend on your own circumstances, and there are a lot of reasons that people choose to downsize their properties in retirement. They begin with the physical components, such as:
Access to medical care
More appropriate living arrangements as you age (mobility)
Moving to a new neighbourhood with better amenities
Closer to transport
Typically, however, the decision to downsize in retirement also takes into account personal, financial and lifestyle factors, such as:
Travelling more in retirement
Access to liquidity and capital, potentially for other investment opportunities.
The cost of maintenance may put strain on your retirement fund
Selling a larger family home may boost your retirement savings
Reduction in utility bills and property taxes
Moving closer to family
Downsizing your property may also reduce or eliminate mortgage stress if you are still paying off your loan when you enter retirement. This capital boost, and the possible capital appreciation on your property, can enable a much more comfortable standard of living, and often creates more time and opportunity to spend on hobbies and with family.
Is Downsizing the Only Option?
Selling your home to move into a smaller one is a great retirement strategy, but it isn’t the only option available to you. Instead, you may choose to:
Sell your property and rent another
Take on tenants yourself (depending your property set up)
Downsize and take on tenants
Downsizing may also put you in a position to purchase an additional property or condo, which can generate an ongoing rental income to supplement your retirement.
Conversely, with the costs of selling and moving taken into account, altering your existing property to account for mobility and care as you age may become a more viable solution.
Are There Any Disadvantages to Downsizing My Property?
There are always pros and con’s when it comes to major financial decisions. When it comes to downsizing in retirement, some of the major considerations include:
The cost of moving
The cost of selling
The potential loss of relationships with friends and family (if you choose to move further away)
You may need to renovate/update your current property in order to sell
If your property is not listed as the primary residence you may need to account for capital gains
It can be difficult to establish yourself in a new community
There can be other costs involved if you choose to move further away from your amenities, such as travel costs and limited access.
It’s also imperative that you downsize to the right property. Not making a big enough leap could lead to more costly adjustments in the future, i.e. you may need to sell and move again. Going too far, however, may compromise your retirement-lifestyle by more than you needed.
Thinking About Downsizing in Vancouver?
Downsizing in retirement has a specific set of challenges that can make it a difficult process. The timing of this decision can also greatly affect it’s viability, whether that is dependant upon the current state of the market, or your personal needs moving forward.
At the West Haven Group, we can help you to downsize your property, and ensure you are making the right decisions to provide for a comfortable retirement.
To find out if now’s a good time to downsize, or for any other information, please reach out and connect with our dedicated team.