Planning for retirement is one of the most important things every adult should do, but we often focus solely on the saving money aspect without considering what lifestyle we’d like to lead during our post-working years.
For instance, do you think you’ll want to sell your home to live in a cheaper area or move into a smaller home once the kids leave the nest?
To help you determine whether you should rent out your current home, continue to live in it, or sell it altogether, here are some pros and cons of downsizing before or during retirement.
Downsizing Your Home for Retirement
Pro: Save Time and Money
The biggest advantage of downsizing is that you’ll likely save money on everything from mortgage payments, property taxes, maintenance costs, and monthly utility bills. If you need more money during retirement, then selling your home is an ideal strategy for both increasing your savings and decreasing your expenses.
While you certainly don’t want to short sell your home during rough real estate market conditions, selling your home when there is high demand can make the process of downsizing much easier. When there are plenty of buyers clamoring to buy your home, you won’t have to complete many home improvement projects to make it sell more quickly. Plus, you likely won’t have to worry about selling the home for less than a fair asking price.
By downsizing your living arrangements, you’ll save time and money when it comes to maintaining your home. You won’t need to spend countless hours each week cleaning and gardening around the home, you won’t need to pay a massive property tax bill each year, and you can dedicate your newfound free time to hobbies and other fun activities with family and friends.
Con: Moving is a Hassle
No matter what age you are, the fact remains that moving is a huge challenge for anyone, especially when you own your home. When you’re retired, the last thing you want is more headaches after years of dealing with work-related stress, raising kids, and dealing with other obstacles along the way. This time of your life is supposed to be meant for enjoying yourself and reaping the rewards of your hard work and perseverance all these years. So why would you take on the enormous burden of packing everything up, deciding what stuff to get rid of, and moving to a new, smaller home?
Then there’s the added hassle of finding a new place to live. If you enjoy the company of your neighbors, cherish your current home, and money isn’t a huge issue because you’ve already paid off the mortgage, then perhaps downsizing to a smaller home isn’t the right option for you.
Pro: Fewer Maintenance Requirements
Did you know that the average retiree spends more than two hours per day on housework? This may include cleaning, repairing, gardening, lawn care, food preparation, and other household management-related activities.
As a general rule, the larger your home is, the more hours you’ll have to spend maintaining it. A retired couple living in a 1,200 sq. ft. space with a simple patio likely won’t have to spend nearly as much time cleaning and maintaining their home compared to a retired couple living in a 3,000 sq. ft. space with a large backyard.
While there are smart home technologies to help reduce time spent on household chores, such as automatic watering systems, robotic vacuums and even self-cleaning windows, the maintenance requirements for a smaller home are simply more manageable for retirees who want to spend their free time pursuing more fulfilling activities outside of the home.
Con: Missed Opportunities for Extra Income
Downsizing by selling your home isn’t always the best financial option, of course. If you want to develop more income opportunities in retirement, then having a larger home can work to your advantage.
For instance, retirees are currently the fastest-growing demographic of Airbnb hosts, which suggests that renting out a room in your home, or your entire home, can be a lucrative way to supplement your retirement income.
If you live in a one or two-bedroom home, then you probably won’t want to host guests in such a crowded space, but a three ore more bedroom home is perfect for retirees who want to make money by renting out their extra bedroom to a college student or Airbnb guests.
Final Thoughts on Downsizing as You Retire
On the surface, selling a large property to move into a smaller home might seem like the best financial decision for most retirees. However, the hassle of moving and loss of a potential income opportunity might make some folks reconsider downsizing.
It ultimately depends on your lifestyle and financial needs, as well as how much time and money you’re willing to spend on routine household maintenance.