facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
The Ups and Downs of Downsizing Thumbnail

The Ups and Downs of Downsizing

Many Americans who are approaching retirement or have already retired are drawn to the appeal of downsizing their homes.

They look around their spacious residences and realize they don’t need all that room or the cleaning and maintenance that comes with it. And a smaller home should mean lower mortgage payments and a reduced cost of living, right? In reality, downsizing in retirement can be a good financial move but that’s not guaranteed. All too often, downsizers wind up with less money than they expected after buying their new place and their monthly expenses don't decrease as much as they thought they would. In some cases, they may even increase. Before you downsize, it’s important to consider the total financial costs involved, as well as how moving to a smaller home fits into your vision for your retirement.

How do you envision your retirement lifestyle? 

Take time to think about your ideal retirement scenario. Would you like to stay put in your current home for a few years? Is a charming house on the beach calling your name? If you plan to downsize, what does that mean to you a townhome, a condo, 50+ community, or possibly a continuing care retirement community (CCRC)? Many couples fail to communicate their plans for retirement and they end up with very different ideas as to where they’ll be living. Discussing downsizing plans with your spouse and other impacted family members is an important first step.

Carefully consider all of the costs involved in downsizing:

  • While every situation is different, moving can cost 10% or more of the selling price of your home when you take into account the realtor’s commission, closing costs, and moving costs.
  • The bells and whistles you select for your new residence can add up, too. Granite counters, hardwood floors, marble bathrooms, and new furnishings can significantly increase the price tag.
  • Be on the lookout for possible hidden costs. For example, even if your new home is smaller, certain factors can lead to higher property taxes, such as a more sought-after location that yields a higher fair market value.
  • Depending upon the community you choose, you may also incur significant ongoing expenses such as condo and HOA fees.
  • Transportation costs should be factored in, too. Will your new home be closer to the areas you frequent and the places you need to go, such as the grocery store, doctor, and your family?
  • Space considerations can also become an additional expense. With less room in a smaller home, many downsizers end up renting storage space.

Take a look ahead.

It’s important to think about the physical changes that come with aging and how those needs can be met in the most cost-effective manner. For example, changing medical needs may make staying put impractical. Many older individuals can’t manage the stairs anymore so they need to move to a one-story home. Remodeling to widen doorways for walkers, making bathrooms wheelchair accessible, or adding accommodations for live-in help can all be quite expensive. The vast majority of people over the age of 65 will need some type of long-term care service eventually, so it’s smart to assess your current home, or the one you plan to move to, to see how effectively it meets your long-term needs.

If you’re thinking about downsizing, start by working with your financial advisor to develop a comprehensive plan to determine your savings needs and what type of home you can afford. Get an appraisal for the selling price of your current home from your realtor. Then, start looking for your ideal retirement residence! Planning ahead will ensure you have sufficient time and resources to enjoy the retirement lifestyle you’ve always envisioned.

Please contact us today to discuss your specific situation.


About FAI Wealth Management, Inc.: Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life’s uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.
FAI Monthly Insights