Should we downsize?

Q – We’re wondering, given the cost to downsize (real estate commissions, moving expenses), if it’s wise to downsize if we won’t end up putting much, if any, money back in our pocket by doing this?

A – Downsizing is more than a "financial result right now" decision. Factors such as maintenance, the number of stairs to climb, energy costs, real estate taxes, and many more come into play. In fact, if your downsized house cost more but was smaller, less to maintain, had no HOA fees, lower property taxes, or whatever, that option might make sense because of the long-term impact.

Of course, assuming you don’t need that equity in the downsized house to support your retirement. Trust me, the more you think about all of the factors involved, you’ll begin to realize how challenging this decision can be. It's probably also true that you didn't buy the house you're living in now, thinking that it's the right house after retirement. That’s not to say you shouldn’t downsize if it’s close to a wash, but thoroughly go through all the costs, benefits – financial and non-financial – before moving forward. I’m big on assessing risk, so I would consider the opportunity to downsize also as an opportunity to reduce risk; moving to higher ground, a less wooded lot, less square footage to maintain, fewer steps, etc.

You can certainly run the financial scenarios through your budget and retirement planner to see what the numbers could be. What are the one-time costs (i.e., the move), recurring (property taxes, utilities, etc.), transaction (cash to or from savings), long-term savings (budget impacts across retirement years), and delta to current budget (state tax rates, closer to grandkids, etc.)? I can envision scenarios where downsizing to a smaller square footage or a smaller lot size for the same price still yields a significant financial benefit, but you won't know until you run the numbers.

Ultimately, even downsizing within the same town or subdivision can have either positive or negative impacts on quality of life. Your friendly neighbors may not come to visit you across town after the move. Or, you end up moving to an active neighborhood of similarly aged residents and really enjoy it. Any change comes with a potential upside and a downside. While I know there's comfort when living in the same place, not wanting to risk losing that, there is also the possibility of new adventures when moving.