There are many perks to downsizing your home for retirement, and one of the most compelling is the financial freedom it can provide. For many clients, downsizing their homes for retirement is a large part of their retirement strategy. They plan to live in a less expensive home in a less expensive area to free up equity and help fund their desired retirement lifestyle. They usually time this move from a few years before retirement to a year or two into retirement, sometimes longer.
As a Seniors’ Real Estate Specialist (SRES), I have a few tips for an easy and financially beneficial downsizing process.
Make A Plan
If you don’t plan and execute your transition carefully, you could miss out on big savings. Or, in some cases, you could even find yourself in the red.
You may already feel the financial pinch of increased utilities, taxes, and excessive food costs. Is your house in need of pricey repairs? If financial concerns are causing you anxiety and stress, you should consider downsizing your home for retirement. Everyone is different in terms of the right time for them. In my experience, planning for this transition is never too early, as it’s usually a more significant move than most expect.
Looking for more advice on downsizing? Check out these related blogs.
- What Seniors Need to Know About Downsizing for Retirement
- Should I Buy a Home or Sell First as a Downsizer?
- 5 Tips For Downsizing Your Home
What Are You Looking For?
Our priorities and lifestyles will change as we age. A young person’s perspective on retirement often involves just sitting around at home. Most retired people I know report frequently on their busy and active lives. They travel and visit friends both locally and far away. They golf, play pickleball, hike, bike, and kayak.
My parents and in-laws both have much busier social calendars than I do. My mother downsized into our income suite and is enjoying her retirement from travelling and spending time with her friends. She can see her youngest grandson whenever she wants. She joined a local knitting group and enjoys joining us for forest walks with the dog. She gets the perks of dog ownership without the responsibilities. The downsize has given her the financial freedom to spend time doing the activities she enjoys. Her sisters downsized in retirement so that they could have the money to invest in winter homes in Florida and became snowbirds to avoid the winter.
Unique Lifestyle Options
My travelling clients love downsizing to condos, which they can leave without worrying about maintenance issues while away. My golfing clients choose bungalows or townhomes in golf course communities. My social clients love 55+ communities with an active social scene or a retirement home with organized activities. Clients move into retirement homes because they no longer want to cook or maintain a home. They often report that it’s like living on a cruise ship.
Searching for the perfect home to spend your next chapter? Check out these blogs next!
- Should I Retire to the Suburbs?
- 5 Tips For Downsizing Your East GTA Home
- Is Scarborough Good For Seniors?
Housing Costs As A Downsizer
Transitioning to a smaller home goes deeper than saving a few bucks here and there. The downsizing process is usually a big part of my client’s overall financial plan for retirement. Housing costs aren’t cheap – especially in the Greater Toronto Area.
When you move to a smaller home, it’s not just the size of your living space that shrinks. Most of your housing costs will also be reduced when you move. Some of these savings will be instantly noticeable, while others, although small, will add up in the long run.
Moving to a smaller, less expensive home usually means managing a smaller or no mortgage. As a result, your monthly housing expenses – i.e., your mortgage, will be reduced, potentially quite significantly.
On top of the savings that come with smaller ongoing costs, moving to a lower-cost property also means you pocket more of the equity you’ve built in your current home. If you’ve been in the same place for a long time, there’s a good chance it’s worth much more than when you bought it. Leveraging this equity, you could have a nice surplus to increase your savings for the years ahead.
How Else Do You Save?
When it comes to the ways downsizing can help you cut back on housing costs, a smaller mortgage is only the beginning. Downsizing to a smaller or less expensive property can reduce your annual property tax bill, quickly adding to substantial savings over the years.
Property Taxes
Property taxes are generally calculated based on your home’s assessed value. So, while your current place may come with high property taxes, your next home’s reduced market value means your annual property tax bill won’t take such a large bite out of your wallet.
Home Insurance
The same goes for your insurance. Homeowners’ insurance premiums are partially based on the value and size of your property. So, by moving to a smaller, lower-value home, your insurance premiums may decrease, too—adding another angle of savings. However, a client recently informed me that their insurance premium had increased from their previous home. This was due to a specific feature in their new home. I need to mention that they moved to a larger bungalow in a rural community compared to a small bungalow in Scarborough.
Utilities
Another way downsizing helps you save money is by cutting back on utilities without thinking about it. Older, larger homes often lack modern technology that many newer, smaller homes include, like better insulation, energy-efficient windows, and updated appliances. However, a smaller house with fewer rooms and a smaller footprint is generally more energy-saving and will cost less in utility expenses.
New Habits
Finally, some ways downsizing can help you save money that isn’t directly attached to your home. For instance, downsizing comes with the need to pare down belongings (aka decluttering), a process that can encourage a streamlined lifestyle focused on experiences rather than possessions.
A recent conversation with a client who is currently going through a downsize reminded me how good it feels to eliminate items they no longer use. They realized they had accumulated way more stuff than they had thought, as they had lived in the same house for forty years. In the future, they have determined that they will be more thoughtful before making household purchases. They figure this new mindset will significantly save on their living expenses. With that in mind, this shift in focus can help you resist the urge to accumulate things you don’t need, which can contribute to savings in the long run.
Senior Real Estate Specialist: Guiding Your Downsize
Working with a Seniors’ Real Estate Specialist (SRES) to guide you to downsize is worth their weight in gold. Having the right resources to support your unique situation will reduce the stress and help you get excited about the next chapter that you’ve earned.
Looking to downsize your home? I can help! Call 647.283.2127 or email me at stuart@stuartnodell.com to get in touch.
Your Personal Market Guide
See how I simplify your real estate experience with personalized plans and total project management.
