The 5 Benefits of Downsizing Your Home for Retirement

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There’s a lot to be said about how plenty of people enter the property market, looking for a ‘forever home’. Even first-time homebuyers like to think in the long-term sense when it comes to finding that perfect home that would suit them throughout the majority of their life’s milestones. However, even ‘forever homes’ can eventually become a burden to upkeep, especially when you consider how a person’s priorities do change as they progress through their years. 

Some homeowners consider selling off and relocating due to work, or even just for a change of scenery. But a common consideration faced by more mature homeowners tends to involve deciding whether or not to downsize for retirement. Like any important investment-related decision, this isn’t one that’s easily settled in just one conversation. Obviously, a person’s home carries with it more intangible value than what’s attached to its price tag. Beyond providing just a financial benefit, there certainly are other plus points to consider when it comes to downsizing as a way of moving on with life. 

Downsizing to a smaller home can mean less need for upkeep, especially for those who wish to keep daily living simple. It can also provide opportunities that free you up from needing to ‘stick with what you’ve got’ — and these types of benefits can also include allowing you to be closer to your loved ones. While it may not be a pressing need for every retiree to consider, it can be a common consideration among clients that I’ve helped in the past. If you or your spouse have been mulling over this topic, I would definitely encourage you to read on to see what I would recommend as the top 5 reasons you stand to benefit from downsizing for retirement.

1. You Could Free Up Cash for Retirement

Downsizing to a smaller home generally frees up cash flow for your retirement. If you’re considering purchasing a smaller living space, remember that this can also come with a number of financial benefits — especially as contributions towards your superannuation. It’s generally prudent to check with your accountant to understand how you could best benefit in this scenario. In general, you may be able to contribute up to $300,000 from the sale of your property if you are 65 or older, and have owned your home for 10 or more years. Additionally, this would benefit you if you are a couple who are both retired, as this doubles your downsizer contribution opportunity to $600,000. 

Some retirees are rightly concerned about how freeing up cash from the sale of their home could impact their age pension or government benefits. Understanding this impact, if relevant to your situation, would require you to complete an assets and income test, to determine how your financial standing will affect any government benefits you receive. When you sell a principal place of residence, proceeds from this sale are considered an exempt asset for up to 12 months — as it is generally assumed that you would spend this time to buy or build a new home.

2. A Smaller Residence Could Keep Life Simple

There’s also a doubling effect when it comes to downsizing to free up cash for your retirement. Besides costing you much less, a smaller home will be easier for you to upkeep in the long run. This leaves you with more time, more money, and less to worry about so you can enjoy your retirement by focusing on activities that you’re passionate about. Why spend your silver years bothering about the state of a house that’s far too large for you to enjoy?

3. Downsizing Lowers Your Overheads and Bills

Moving to a smaller home can also mean moving into a life with fewer things to fuss over. By keeping to what you need in a smaller property, this can certainly provide you with the benefit of lowering your utility usage and helping you to reprioritise time for what matters to you most. As you’ll be moving to an easier to maintain space that’s adjusted to what you’ll need in retirement, this can also give you the opportunity to declutter your old home, and put non-essentials into storage. 

4. It Provides the Option to Relocate for Convenience Purposes

Our older years tend to have us focusing on the things that matter most. Few can say that family isn’t high on their list of priorities, and plenty of mature homeowners do consider relocating to be closer to those they love most. Downsizing your home could provide you with the perfect opportunity to relocate to be close to family, so it won’t necessarily mean having to choose between a space you know, and one you don’t.

5. Downsizing Means Being Able to Make a Cash Purchase on Your Next Residence

It all depends on what your financial and mortgage situation are — but one outstanding benefit to downsizing is that you could potentially find yourself in a position to secure your next property with a cash payment. With the opportunity for a straightforward and fuss-free settlement, downsizing for retirement might present the perfect opportunity for you to easily secure a new ‘forever home’ that’s better suited to a more mature set of lifestyle needs.

Relocations and Downsizing Are Never Easy, But There’s Always Help To Be Found

As with most decisions to do with homeownership, there’s hardly a ‘one size fits all’ solution to recommend. However, being in the real estate business has taught me that it’s a ‘people business’ at the end of the day, because your needs as a homeowner are what count the most towards your decision.

If you have been considering downsizing for retirement, but are not sure where to begin, you’re always welcome to call me for a consultation at 0407090087 or why not get an appraisal? I’d love to help you get to the next stage in your real estate journey!

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Article by Melinda Kirby

Melinda Kirby is a confident and motivated Sales Consultant at Ray White Rockhampton who understands the importance of strong relationships in achieving exceptional results.

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