Downsizing during retirement can help you reduce costs, and put some more money in your pocket so that you feel more secure about your finances during retirement.Downsizing by selling your property has its advantages and disadvantages which you should evaluate before making this decision.
- Increased cash flow: Downsizing will reduce your mortgage payments and free up extra money to invest or spend. This will give you more flexibility with your money.
- Easier to maintain: A smaller house takes less effort and is easier to clean and maintain. Approaching retirement, you may want to reduce the amount of time you have to spend cleaning your house so that you can participate in other activities.
- More convenient: A new house will mean that you can choose layout, fittings, locations and services that are more suited to your updated needs. While your old house might be close to schools, you may want to opt for a house that is closer to a recreational centre.
- Lower insurance and utility bills:
A smaller home costs less. Both in terms of insurance, and also in terms of upkeep and maintenance (such as heating and cooling).
- Less space: A small house means that you have less storage for things. You might have to make some difficult decisions about letting go of your possessions. Alternatively, you could consider leasing a storage space – although this would cost extra money.
- Less flexibility: There may be less privacy due to fewer or no guest rooms or less space for entertainment. If you regularly have many guests coming over, this might make downsizing unideal.
- New neighbourhood: Getting comfortable in your new suburb might be difficult. You might have to spend some time checking out your neighbourhood before and after moving into the new place.
- Emotional connection: A family home is full of memories and there is a strong connection with it. This can make it difficult to let go.
Downsizing has financial benefits but it does come with emotional costs and is a fairly significant decision to make. It is important to discuss the implications with your financial advisor and perhaps also, your family members.