Many retirees consider downsizing, but changing locations doesn’t always result in an ideal outcome. You might find unexpected financial and emotional challenges after making the switch.
Here are some of the most common misconceptions about downsizing during retirement:
— Selling will provide a substantial windfall.
— A smaller place will reduce living expenses.
— Everyone in retirement should downsize.
— Downsizing is the only way to boost your finances.
— The extra space won’t be missed.
— Selling household goods always brings in extra cash.
Selling Will Provide a Substantial Windfall
If you have a large home with no mortgage or you have paid off most of your mortgage, it’s easy to think the proceeds from the sale will be high. But putting up a “for sale” sign doesn’t always guarantee a quick bid.
“It may be harder to sell your house than anticipated, especially if it hasn’t been updated in a while,” says Roger Young, a certified financial planner and thought leadership director at T. Rowe Price in Owings Mills, Maryland. You may need to update bathrooms or install new flooring to make the home more attractive to buyers. These costs will reduce the net amount you receive when the home sells.
If you don’t invest in updates before selling your home, you may have to reduce the sale price, resulting in a lower windfall than initially anticipated.
[READ: How Much Should You Spend on Aging in Place Renovations? Retirees Weigh In]
A Smaller Place Will Reduce Living Expenses
If you’re leaving a rural setting for an urban one, real estate prices may be steep, even for places with less space. Condominiums or apartments may include additional service fees, such as yard maintenance, pool or golf course access or a homeowners association fee.
Renovating or building a new home could incur more costs. “If you’re building a new home, be wary of costly change orders that can increase the price dramatically,” Young says. Customizing the kitchen or upgrading the carpet can lead to a higher final payment.
Be sure to check property taxes in the area you plan to live. Since these vary in different parts of the country, you could end up paying thousands of dollars more for property taxes in the new, smaller place.
[Read: The Most Tax-Friendly States for Retirees]
Everyone in Retirement Should Downsize
While most retirees consider moving at some point, it’s important to evaluate your situation before making a change. “If you don’t have financial or health concerns about your current home, there may not be a reason to downsize in retirement,” says Tony Drake, founder and CEO of Drake & Associates in Waukesha, Wisconsin.
You might be more comfortable in your larger home, especially if you’ve lived there for years. If you enjoy hosting frequent dinner parties or card groups, staying in a larger place might be more reasonable.
Downsizing Is the Only Way To Boost Your Finances
If you want to reduce your living expenses, you might be able to do so without leaving the larger place. Start by brainstorming ways to cut costs. If a landscaping service kept up your lawn during your working years, you might now have the time to care for the yard yourself. If you install a smart thermostat, you can program your desired temperatures throughout the day. When you travel or are gone during the day, you can adjust the temperature setting to save on energy bills.
Additionally, consider exploring creative ways to generate revenue with your space. “You can use your current home to create some extra income by renting out a room,” Drake says. Ask your children and grandchildren, as they may have friends looking for a place to stay. Those who live in the extra room might even help with strenuous home maintenance chores, saving you the cost of hiring a company or contractor.
[Read: Guaranteed Income Strategies for Retirement]
The Extra Space Won’t Be Missed
Switching from a 4,000-square-foot home to a 900-square-foot one can be a big adjustment. You may encounter certain issues in tighter spaces, such as not having enough bedrooms for visiting grandchildren or limited room to display family heirlooms. Instead of drastically scaling back on size, you might be happier in a more manageable space that is still large enough to entertain. “If family or friends live out of state, it is not uncommon for retirees to downsize to a home that still has enough room so everyone can stay together, even if it only happens a few times per year,” says Kristin McFarland, a certified financial planner and president of Darrow Wealth Management in Boston.
Selling Household Goods Always Brings in Extra Cash
If you plan to sell extra furniture, antiques or china to help cover moving costs, be careful not to overestimate their value. As more Baby Boomers retire, the supply of antiques and collectibles has surged, bringing down the price of some of these goods. “For items where the perceived value is sentimental and age-based over function, it may even be difficult to donate certain items,” McFarland says.
If you have unique pieces but aren’t sure of their value, evaluate them before having a garage sale. “Consider consulting an appraiser and exploring options to donate or sell fine collectibles or antiques,” McFarland says. You may find they are worth more or less than you originally thought.
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6 Downsizing Myths to be Aware of in Retirement originally appeared on usnews.com
Update 06/27/25: This story was published at an earlier date and has been updated with new information.
