Retirement means a new schedule, and it may mean a new house. A 2014 Merrill Lynch study found 64 percent of retirees age 50 or older say they have moved or plan to move in retirement.
For those planning a retirement move, some experts recommend doing it sooner rather than later. “If you wait until you’re 80 or 85, you may find you’re not able to make that decision anymore,” says Nancy Skeans, partner with Schneider Downs Wealth Management Advisors in Pittsburgh. “Someone else might make that decision for you.”
From health concerns to financial limitations, there are a number of good reasons to consider downsizing your house early. In some cases, it may even make sense to move before you leave the workforce.
[See: 10 Places to Retire on a Social Security Budget.]
Downsizing early can make living easier. Judith Chipps, a senior vice president and wealth management advisor with Merrill Lynch in Encino, California, says she finds most people prefer to live in their own home as long as possible. However, the wrong house can make that difficult. “If you have bad knees and are living in a two-story house, you may want to think about [downsizing] early,” Chipps says. A one-story home or one with more accessible features such as a main floor laundry can make it easier to age in place.
“It’s not just the stairs,” Skeans says. “It’s about the convenience and the upkeep and maintenance of the yard and all the rest.” Healthy adults should consider whether their current house will continue to be a good fit in the future as they get older. If a current house isn’t appropriate for aging in place, moving at age 60 will be significantly easier than moving at age 80.
In a worst-case scenario, moving at an advanced age can become an overwhelming prospect, resulting in a senior deciding to stay put. That often leaves the person’s family struggling to help an older relative who is living in an unsuitable and unsafe environment.
Steven Elwell, vice president of Level Financial Advisors in Amherst, New York, has reassuring news for those who can’t fathom moving to a new house before it’s absolutely necessary. “We’ve seen clients go back and forth about downsizing for years and years,” he says. “[When they do], many of them say, I wish I’d done this five to seven years ago. It would have been easier.”
[Read: 7 Tips to Live Well on Social Security Alone.]
Financial reasons to downsize now. It’s certainly physically easier to manage a move when you’re younger. There may be financial reasons to make a move prior to retirement as well. For instance, without a regular paycheck, it may be more difficult to get a mortgage after leaving the workforce. Elwell says a significant amount of savings doesn’t make the mortgage application process any easier. After the 2008 recession decimated many retirement accounts, financial institutions may be reluctant to rely on those assets to pay a mortgage.
Another reason to downsize early is if you don’t think you’ll be able to afford your current home in retirement. Skeans says people may be inclined to hold on to the house as long as possible to build more equity, but that’s a mistake. “Although the value of the home is going up every year, the money you put into it is going up every year too,” she says. Rather than pour money into maintaining a property that is unaffordable in the long run, it would be best to downsize while working and use any maintenance and property tax savings to boost your retirement fund.
Sometimes it makes sense to wait. While there are benefits to downsizing prior to retirement, people who don’t have a firm grasp on their post-work plans should wait. Without a clear picture of the future, making an early decision could lead to multiple moves and lost time and money, Chipps says. She recalls one client who ended up moving three times because she initially selected locations that weren’t compatible with her retirement plans.
To avoid that type of scenario, Chipps recommends people consider their children, health and finances as well as expected lifestyle. The problem with downsizing before retirement is that these factors can change. Waiting until retirement to move may minimize the chances of having to make multiple moves because of life circumstances. “You can think about it when you’re 65 and implement it when you’re 75,” Skeans says.
[Read: How to Tell If You Should Move in Retirement.]
When is the right time to downsize? Like many other retirement decisions, there is no right answer to this question. “I wouldn’t say to downsize specifically six months before retirement,” Elwell says. “It’s always going to be dependent on what you’re trying to accomplish.”
Workers who plan to move in retirement and already struggle to make ends meet may find downsizing now makes it easier to get financing. The transition to a new home is also likely to be physically easier when you are younger. However, for those without definite retirement plans or who don’t have a good grasp on their retirement cash flow, waiting to downsize may be more prudent.
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Prepping for Retirement? When to Start Downsizing originally appeared on usnews.com
