If you’re nearing retirement age, you’re probably thinking about what life will look like once you’ve stopped working full time. There are many benefits to retiring—like more time to spend on your hobbies and with people you love—but there’s also the uncertainty of living on a fixed income. One great way to save money during retirement is by moving to a smaller home. Here are some of the benefits of downsizing.
Reduce Your Mortgage Burden
If you’re still making mortgage payments after retirement, downsizing may be a good idea to lower your monthly payments, or maybe even eliminate your mortgage completely. Reducing your mortgage burden means you’ll have more funds to dedicate to other expenses.
When thinking about downsizing, be sure to consider how much equity you have in the home, what the housing market looks like at the time and how long you might stay in your new home. If you’ve already paid off your mortgage, it may make sense to stay where you are, or you may decide to make a profit off of the sale of your home.
Cut Down on Bills
Smaller homes also come with reduced utility costs. You’re paying for every inch of unused space in your home through heating and cooling, electricity, gas, water, and even internet access. The smaller your square footage, the less space you have to heat and power in order to live comfortably.
With a smaller living space, you can also cut down on costs like lawn care and cleaning services. Larger homes require more maintenance and general upkeep, so by downsizing you can cut those costs, or even eliminate them altogether.
Reduce Spending on Frivolous Items
Besides the required expenses to keep your home in a livable condition, you may be spending money on expenses like furniture, art or other home decor items. In a larger home, you’ll have room to fill with unnecessary items, but downsizing will force you to live a simpler life. You’ll have less room to decorate and fill with furniture, so you’ll likely spend less on excess decor.
Live in a Less Expensive Location
Your job may have been in or near a major metropolitan area but once you retire, you won’t be tied to that location for work. Looking for a less expensive location with a less expensive cost of living when you downsize is a great way to maximize the money you spend on a new home. Even if you’d like to stay close to family and friends, you’ll have the flexibility to look for homes that may be a bit farther away now that you don’t have to worry about a commute.
If you’re open to living in a different location entirely, you may want to do some research on locations with low costs of living. Having a smaller home in an area with a low cost of living will leave you with more funds to do the things you love and take advantage of all the free time you have during retirement.
Improve Home Accessibility
Another important advantage to downsizing is being able to buy a home that’s accessible as you get older. You may not have mobility issues now, but you may develop them in the future. Instead of worrying about how to finance a home renovation to fit your accessibility needs down the line, downsizing allows you to buy a home that’s already fit for whatever may come in the future. Look for homes with minimal stairs, wide doorways, and open floor plans.
Thinking about moving can be daunting, especially if you’ve spent many years in your current home. If you’re wondering whether downsizing is right for you, talk with a financial professional to make a plan to fit your needs in retirement.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.