Many older retirees end up downsizing out of necessity. There are good reasons to downsize before health or money problems force you into it. Here are seven reasons to consider reducing your housing expenses.
1. Eliminate the mortgage. Selling big and buying small may allow you to pay cash for a downsized home. This sets you up for a mortgage-free retirement.
2. More money to invest. The sale of a large, expensive home may free up equity and cash flow that you can invest to generate more retirement income.
3. No outside maintenance. If you downsize to a condominium, an active-adult community that takes care of the outside of your home, or a rental, your outside chores are gone.
4. Lower monthly expenses. Generally a smaller home means lower taxes, reduced insurance premiums, and smaller utility bills.
5. Less furniture. Downsizing lets you sell or give away a lot of what you own. Then you can concentrate your budget on fewer but nicer pieces of furniture for a new, smaller home.
6. Reduced transportation costs. A smart downsizing strategy can include moving closer to work, shopping, or your children and grandchildren. This can lower your travel expenses as well.
7. Reduced cost-of-living. If you live in California or the northeast, your overall cost-of-living, including food, gas, housing, and taxes, is generally higher than in other geographic regions. Downsizing can mean relocating to a more affordable part of the country. In some cases a move may even allow you to afford a more luxurious home in a less expensive city.
If you add up the financial benefits of downsizing, you may find that your retirement plan becomes more realistic. This can help you overcome any emotional attachment you may have to your existing home.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.