You’ve finally arrived and can retire after a lifetime of sacrifices and hard work professionally, it’s time to relax, travel, pursue hobbies, and visit grandchildren. But retiring also implies downsizing so that things are more manageable including your finances because your retirement check won’t be as large as your former paycheck.
With longer lifespans, a pension, social security, and savings will rarely match a previous full salary, and this can mean added financial pressure. To reduce pressure financially, it’s advisable to begin downsizing immediately upon entering retirement by looking for ways to reduce monthly expenditures.
For some retirees, choosing to go small is not a question of choice but necessity, and even when it is not mandatory, it often is a wiser path to follow. Most downsizing begins with your home, but multiple necessities, such as home insurance and auto insurance, offer specific products for senior citizens. There are multiple opportunities for a senior discount for homeowners’ insurance.
You can also look for an insurer that offers an average insurance bundle including car and home insurance. As part of downsizing for retirement, these are just a few of the things that seniors can benefit from.
Downsizing is daunting, but don’t allow the thought to overwhelm you. Undoing a large home and selling it for a smaller solution has a cost both economically and emotionally. The need to sell a home, find a new one and then move all your possessions is complicated. There’s no way around this.
Determining your reasons for moving is the perfect beginning of the process. Common reasons include
Be clear on your reasons for moving and evaluate the pros and cons so you feel good about your decision.
When selling your home for retirement, get information about taxes and how they may affect any government benefits you receive. Both the IRS and some states apply capital gains tax on any difference between what your home cost and what you are selling it for.
When you sell your home it will increase your income, so a sudden influx of cash may disqualify you for disability and Medicaid. Consult a legal or tax professional to assist you.
When beginning your strategy for downsizing, begin by deciding on these aspects of your move:
All these considerations need to be fully discussed with a spouse or immediate family for your support network. Any children should be involved in the process for support and to prevent potential conflict later.
The principal reason for downsizing in retirement is to save money. Some important financial advantages of downsizing include:
However, note that selling a home and moving doesn’t come cheaply. Before making the move get estimates from:
So, you’re moving and now you need to downsize your actual possessions, and this may be the task that proves to be the most overwhelming. What do you keep and what do you give away?
Know that downsizing will be physically exhausting and an emotional rollercoaster. You’ll be wading through a lifetime of memories, and that’s okay. Downsizing also requires time, so the sooner you start, the better.
You may want to do it in a month but six months to a couple of years is a better estimate and will allow you time for adjustment and for managing physical exertion. Allocate time weekly to work on downsizing and begin with spaces or rooms you no longer use.
Consider a storage unit if you can’t part with all of your possessions but remember to budget the cost. In the end, you are parting with a considerable chunk of life, so exert discipline to get the job done, but do so gently.