Life is full of different changes, and as we age, retirement is one of them. Unfortunately, many people retire and move into a smaller home as they can’t afford to live in a big home anymore. Of course, as with anything, there are benefits and drawbacks to downsizing a home too.
If you are getting close to retirement and wondering about downsizing your home, you are in the right place. Here is what you must know about it.
Living In Your Current Home
You need to assess whether you can afford to live in your current home without compromising your finances. During retirement, you will have retirement investments and income from Social Security. You will need this money to pay for current home expenses, such as:
- HOA (homeowners association) fee
- Home insurance
- Mortgage (if you have on)
- Property tax
We recommend that you don’t take a lot of money out of your retirement account quickly. After all, you don’t want them to get dry in no time. The key is to cover the current home expenses while maintaining a suitable retirement withdrawal rate.
Improving Your Retirement Savings Account With Downsizing
If you want more financial security with your retirement savings account, you can always sell your current home. If you can sell and get a more affordable property, you can fully pay for your new home without a mortgage. Because of this, you can take the profits from your old home and add it to your retirement savings account for better financial security.
Is Downsizing Feasible For You?
Moving into a smaller home sounds more affordable, but that is not always the case. The price of the smaller home depends on many factors, such as the location. For example, if small homes are only available in an expensive area, you will not save money by downsizing.
That is why it is crucial to look around and scour options before making an informed decision. You must look for an affordable option that ensures you receive a profit so you can improve your retirement account.
Handling The Maintenance Of Your Current Home
Handling maintenance tasks of a big property is not easy. It requires money, time, and effort. As you age, such maintenance tasks can become difficult.
So, if you can’t handle the maintenance of your home, it is best to move into a smaller home. That is because you don’t want to deplete your retirement accounts by incurring such expenses. Your decision to downsize must take this factor into account.
Final Words
That is everything you must know about downsizing your home as you get to retirement. Of course, not everyone wants to downsize, and your decision will also depend on many factors. If you think you are happy in your current home and can afford to keep it, then you don’t need to downsize at all.
On the other hand, it is best to downsize if you want to cut down on expenses. It will ensure you have enough financial security to live a comfortable retired life.