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What are the pros and cons of downsizing for retirement?

The kids have flown the nest. Yard work, snow clearing, and home maintenance are becoming chores. You have guest bedrooms that rarely see guests. Maybe it’s time to consider downsizing?

Couple packing boxes.

As you’re getting closer to retirement, you may be considering downsizing. Less space to clean and maintain might be a tempting thought, and if you can free up equity from the family home, there may be more money for retirement. So why not?

While the appeal of a smaller house to clean and extra cash in your pocket can be high, the process can be long and stressful.

Take your time. Don’t rush the decision. Ask family and friends who’ve been there, done that, and look carefully at all the potential pros and cons of downsizing, including the ones listed below.

Thinking about downsizing?

Pros

Cons

Less space to clean and maintain could mean more free time

Goodbye to the family home and many memory-rich belongings

Selling and buying at the right price may provide more money for retirement

Real estate commissions, legal/closing fees, and moving costs can add up

Considering a condo?

Pros

Cons
Simple, modern living, with new friends and a built-in social life. Some condos also offer:
  • Security
  • A gym and pool
  • A party room
  • Organized activities
  • Indoor parking

Monthly maintenance fees and unforeseen assessments (roof, windows, or other repairs)

Thinking of a smaller house?

Pros

Cons
  • Keep a yard and garden
  • Stay in your neighborhood or move closer to the city
  • Sell your cars and take public transit

Some maintenance still required

What else should I consider when thinking of downsizing?

  • Start decluttering now to help make your move easier.
  • Keep in mind that closing fees, real estate commissions, fix-up costs, and moving expenses can eat up some of your profit.
  • Spend time with a calculator, and be realistic about the numbers.
  • Ask a financial advisor to weigh in.
  • Be open to both resale and new properties to help find a unit within your budget, if you’re considering a condo.
  • Try renting first if you’re considering a smaller town, lakeside cottage, or something far from your current home for a few months or longer to get a sense of the seasons, the people and surroundings, how far you might be from the things you really love, and other important lifestyle factors.
  • Think through all your options, including renting versus buying. You may be able to invest the proceeds from your home sale and use the interest income toward rent.

Downsizing can be a big decision that comes with its own set of advantages and challenges. It’s important to consider all the pros and cons of downsizing to ensure your decision aligns with your lifestyle goals for the future. The key is to find a balance between feeling comfortable and achieving financial security in this new stage of your life.

The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.

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