You’ve finally arrived and can retire after a lifetime of sacrifices and hard work professionally, it’s time to relax, travel, pursue hobbies, and visit grandchildren. But retiring also implies downsizing so that things are more manageable including your finances because your retirement check won’t be as large as your former paycheck.
With longer lifespans, a pension, social security, and savings will rarely match a previous full salary, and this can mean added financial pressure. To reduce pressure financially, it’s advisable to begin downsizing immediately upon entering retirement by looking for ways to reduce monthly expenditures.
Choosing to go Small
For some retirees, choosing to go small is not a question of choice but necessity, and even when it is not mandatory, it often is a wiser path to follow. Most downsizing begins with your home, but multiple necessities, such as home insurance and auto insurance, offer specific products for senior citizens. There are multiple opportunities for a senior discount for homeowners’ insurance.
You can also look for an insurer that offers an average insurance bundle including car and home insurance. As part of downsizing for retirement, these are just a few of the things that seniors can benefit from.
Where and how to Begin Your Retirement Downsizing
Downsizing is daunting, but don’t allow the thought to overwhelm you. Undoing a large home and selling it for a smaller solution has a cost both economically and emotionally. The need to sell a home, find a new one and then move all your possessions is complicated. There’s no way around this.
Why do you Want to Downsize and Move?
Determining your reasons for moving is the perfect beginning of the process. Common reasons include
- To be closer to adult children and grandchildren, or family in general
- To reduce expenses
- Declining health
- Loss of a Spouse
- Financial problems
Be clear on your reasons for moving and evaluate the pros and cons so you feel good about your decision.
Selling Your Current Home
When selling your home for retirement, get information about taxes and how they may affect any government benefits you receive. Both the IRS and some states apply capital gains tax on any difference between what your home cost and what you are selling it for.
When you sell your home it will increase your income, so a sudden influx of cash may disqualify you for disability and Medicaid. Consult a legal or tax professional to assist you.
How to Select a new Living Space
When beginning your strategy for downsizing, begin by deciding on these aspects of your move:
- Where you prefer to live (same location or a new area)
- What kind of home do you want to live in (small, condo, one floor, retirement community, assisted living, or other?)
- How large of a space do you need
- The amount of time and money you can commit to moving
- What things or conditions are indispensable and what you’re willing to sacrifice
All these considerations need to be fully discussed with a spouse or immediate family for your support network. Any children should be involved in the process for support and to prevent potential conflict later.
Financial Downsizing
The principal reason for downsizing in retirement is to save money. Some important financial advantages of downsizing include:
- Less expensive mortgage payment, especially if your current home isn’t paid off
- Increased monthly cash flow. If your house is paid for, any profit can be added to your nest egg.
- Less maintenance and cleaning
- Smaller utility bills
However, note that selling a home and moving doesn’t come cheaply. Before making the move get estimates from:
- Moving companies
- Homeowners Association fees, condo fees, or retirement community fees depending on where you want to move to
- Homeowners insurance
- Property taxes
- Real estate agency fees with commissions and closing costs
- Getting your home ready to sell with any necessary repair work
- Things you may need to purchase for your new home
Material Downsizing
So, you’re moving and now you need to downsize your actual possessions, and this may be the task that proves to be the most overwhelming. What do you keep and what do you give away?
- If it seems to be too great a task physically or emotionally, consider hiring an expert to help you wade through downsizing. Professionals offer multiple services tailored to any budget.
- Know the spaces of your new smaller home. Select furniture that you plan on taking with you and measure it for your new home, so there are no surprises.
- Plan on eliminating as much as 75% of your current possessions. Be realistic about what you can take with you and stick with it.
- Make a plan for doing one room at a time. Do not move forward until you have completed the room you began.
- Donate or sell things you no longer need, it’s a way to raise some extra cash for your move.
- Know that downsizing will take an emotional toll on you so invite a family member or close friend to support you in saying goodbye to objects filled with memories.
The Sooner you Start, the Better
Know that downsizing will be physically exhausting and an emotional rollercoaster. You’ll be wading through a lifetime of memories, and that’s okay. Downsizing also requires time, so the sooner you start, the better.
You may want to do it in a month but six months to a couple of years is a better estimate and will allow you time for adjustment and for managing physical exertion. Allocate time weekly to work on downsizing and begin with spaces or rooms you no longer use.
Consider a storage unit if you can’t part with all of your possessions but remember to budget the cost. In the end, you are parting with a considerable chunk of life, so exert discipline to get the job done, but do so gently.