Things to consider before you downsize in retirement

Downsizing is a common goal for retirees or those planning their retirement. You may find you don’t need as much space once you’re retired if adult children have left the family home, be looking for a lower maintenance or more accessible property, or you may want to free up equity tied up in your home to fund your retirement lifestyle. Here are a few things to consider before downsizing.

Be clear on why you are downsizing

Downsizing in retirement is common, but it’s not for everyone. It’s important to ask yourself the reasons you’re considering downsizing and getting clear on your goals. Some people downsize to free up equity in their home. Others downsize to apartment-style living to enjoy less maintenance and easier access. Ask yourself these questions about your potential downsize:

• What kind of lifestyle do you want to lead in retirement?
• What kind of access or mobility needs do you require in a home?
• How much home maintenance or upkeep are you willing to do?
• Do you still want to be able to entertain family or friends, or have visitors to stay?
• Will you stay in the same area or move elsewhere?
• What are your financial requirements for a successful downsize?

Considering these factors is important in ensuring your downsize move is right for you. If you want to free up equity, what will that money be used for? If you want to move closer to family, what are the costs associated with that area?

Financial implications of downsizing

It’s also important to consider the financial implications of downsizing. While downsizing can free up equity tied up in your home, or reduce your outgoings in retirement, it doesn’t come without cost.

• Moving house can be expensive, from the cost of advertising the property and paying a real estate agent, to the expenses involved with removalists.
• If your home has been used as an investment property or as a business premises in the past, there may be tax implications when you sell.
• Purchasing a new property means buying into the current market, which will likely be different to when you bought your current property.
• You will likely need to pay stamp duty on your next home purchase. The rates vary by state.
• The property market can be unpredictable. You may expect to get a certain price for your home and end up with less. Ensure you are prepared for market fluctuations.

All of these costs could eat into the money you stand to gain from downsizing.

Despite feeling emotionally heavy, downsizing can be a very positive experience. You’ll likely be selling your home to a new family, who will make their own memories that they’ll look back on fondly. Plus, decluttering while you’re still active and able can simplify the load passed onto your family later in life.

Making a plan to downsize

If you’re set on downsizing being the right move for you, it’s time to get a plan in place. Set a timeline that you’d like to work to and begin enlisting professionals to help you get started. Real estate agents will be able to appraise your home and discuss its sale value, and a financial advisor will be able to discuss optimising your retirement finances.

If you plan to be holding onto cash post-downsize while you decide how best to use it, Bendigo Bank term deposits offer consistent and guaranteed interest, often with higher balance limits than traditional savings accounts.