With the volatility of today’s housing market in Canada’s most in-demand cities, the idea of selling your home and finding another may seem overwhelming. However, there are plenty of benefits, especially if you are a savvy baby boomer planning your retirement.
Both the real estate market and your personal circumstances will come into play when deciding whether to downsize now or wait until later. By considering your personal needs in addition to the real estate forecast, you have the best chance at making the right move at the right time.
When Should You Downsize?
Downsizing Early in Your 40’s and 50’s
Are you taking an early retirement because you are selling your business or are being offered a generous benefits package at your current job? Going ahead with a downsizing move at this point can make it a little easier to cope with, especially if it coincides with your children leaving home.
Making the transition earlier in life is also a smart move if you are concerned about future illness. Early onset Alzheimer’s and Parkinson’s diseases are often detected in homeowners in these age groups, and your parents’ aging experiences can give you a clearer idea of what you can expect in your 60’s and 70’s. The challenges of moving while still in good health will reduce the stress of doing it while dealing with chronic health problems.
Meeting Age Requirements
You may decide to wait until you are at least 55 or 60 if you are looking at moving into an adult lifestyle condominium. Some townhouses and condos offer age restrictions which provide seniors with well-equipped housing near amenities like shopping centres and hospitals.
It is likely worth staying in your current home until you have reached the required ages, unless you want to take advantage of the high resale prices caused by the recent surge of demand for residential space in places like Toronto and Vancouver.
Putting Off the Move
Finally, you might find it best to wait until you are well into your 60’s to finally downsize. This gives you several more years to deal with estate planning changes, tax issues, and the necessary property repairs necessary to achieve the best return when you do decide to sell. Aim to accomplish the process by earlier than later.
Even if you live well into your 70’s and 80’s, you will not want to deal with the late nights and physical challenges of packing and unpacking. Although there are services to help seniors move, not everyone can afford to use them. Another perk is that settling into a new home while still in your 60’s also gives you the opportunity to become an active member of the neighbourhood. Of course, it is never too late to make a move, no matter your current age. Downsizing can be just as liberating to a family still in their 20’s as it is for seniors and baby boomers.
✢ For more information on timing your move read: When is the Right Time to Downsize?
De-Cluttering: The Tough Part of Downsizing
As people age, they often find themselves in an unnecessarily large home. A house with three spare bedrooms, a media room and a den can be nice, but most seniors do not need that much space. Mobility issues are common for seniors too and can be another reason they move to smaller homes.
In fact, this trend of moving to smaller homes is so common that it is often referred to with a nearly universally recognized term – “downsizing”.
Moving to a smaller home should be simple, but many seniors find the de-cluttering aspect overwhelming. Use this guide to help you decide what to keep and what to dispose of, as well as ideas on how to get rid of these items, when it is time for you to downsize.
The Emotional Impact of Downsizing
The idea of moving to a smaller home that is more comfortable and manageable for you should be uplifting. When you consider the fact that you will be able to put some extra cash away for a rainy day, or use the money to send your grandkids to college or go on an extravagant vacation, it is even easier.
What is problematic for many people is disposing of belongings that they worked hard to buy over the years. People know that possessions are just “stuff”, but it can be hard to watch those belongings disappear right before your eyes.
What you need to do is focus on the final outcome: your improved quality of life. More “stuff” does not equate with a better life. In fact, more belongings can mean more headaches when it comes to cleaning, staying organized and doing day-to-day tasks around your home.
You do not want to spend your days dusting tchotchkes, do you? Of course not! You want to be out there living life and doing things you enjoy.
What Do I Keep?
Downsizing does not mean getting rid of items you use on a regular basis. If you love to bake, do not part with your bread maker simply because it takes up space. You obviously should not dispose of belongings such as pieces of clothing you wear on a regular basis or useful furniture either.
Items with great emotional importance are things you will want to keep. The mug your child gave you for Mother’s or Father’s Day can continue to put a smile on your face for years to come. The coffee table which is a family heirloom should be packed for the move with your clothes and essentials. You will learn how to decide which possessions are important.
Items that you have not used in the last year, and cannot imagine using in the next year, would be ideal to let go of. Other “extra” belongings, such as the spare Christmas tree stand or the “probably dead” car battery, also need to go.
Here is a summary of things to consider keeping:
- Heirlooms – Over the years, you may have accumulated quite a few family heirlooms. Keep only the ones that have the most personal value to you. Perhaps there is another family member that would appreciate receiving something with family history?
- Photographs – Be honest, you probably have too many photos in your house. Photographs are special and they serve as a reminder of loved ones and good times shared, but not all photographs need to be kept during a move. If you want to go a step further and get rid of clutter, there are photo scanning services available that can put all your images on USB sticks or memory cards. This way you can set up a few digital photo frames around the house and have slide shows of all your favourite images.
- Important Documents – It is a good idea to get rid of as much paper as possible (it creates a lot of clutter), but be diligent in your organizing. Make sure that you keep all of your important documentation. Anything to do with your finances, personal identification, certificates, licenses, etc., should be kept and stored in a safe and secure place.
I Hate Throwing Items Away!
A lot of people hate throwing away items that they paid money for. Simply tossing these belongings in the trash seems both like a waste of money and environmentally irresponsible. There are many alternatives to putting possessions in the trash.
You could have a yard sale and use the money raised to help pay the movers. Donating items to charitable organizations can be a tax write-off, as well as keep good working products out of landfills. Family members might be able to use some of these items too, so remember to ask around.
Downsizing is an ideal option for many people, and belongings should not stand in your way. Whether you sell or donate items, or give them to family or friends, you can take everything that really matters to a smaller home.
You will likely find that having a more manageable home creates more time for all the exciting activities you really enjoy, just as many other seniors have already done.
✢ For more on de-cluttering read: 5 Types of Belongings you should be Sorting through Carefully
Downsizing As a Senior – To Rent or To Buy?
When downsizing, the question of whether to rent or buy is a difficult one and those who are drawing close to retirement age should think carefully about it. By the time most Canadians reach retirement age, many have been homeowners for a number of years, and yet the answer is not the same for everyone in the rent vs. buy debate. Making this decision involves evaluating the benefits and drawbacks of both selling and renting in light of your personal situation. Listed below are some factors that can help you make your decision:
The Costs
If you are moving after retirement, you must look at the costs associated with your new home. One way to compare the cost of renting to the cost of buying is with a home-price-to-rent-ratio. You calculate this ratio by dividing the purchase price of a home by the yearly cost of renting a similar home. If the result is less than 15 this indicates low home prices, which means buying is a better option.
A result that is more than 15 but less than 20 indicates that renting is probably the better option. If the result is 20 or above then renting is definitely the better option. As the ratio increases, you will need a higher spike in housing prices to make the purchase price worth your while.
According to the Organization for Economic Cooperation and Development (OECD), Canada has the third highest home-price-to-rent ratio behind Belgium and New Zealand.
The Financial Benefits
This high home-price-to-rent ratio means that it may not be feasible for all retirees to be homeowners. If you are wary of the costs that go with homeownership (such as maintenance fees and property taxes), then you may see renting as the better option.
However, many retiring seniors have other priorities. They may be looking for an investment and building equity in real estate makes the purchase of a property an attractive investment opportunity.
Some retirees plan to sell their home and rent while using the money from the sale to form a part of their retirement nest egg. However, the stock market is not necessarily a safer investment option when compared to real estate. In both cases, the wrong decision could cause serious financial troubles later on. If you are considering this route, it may actually be wiser for you to sell your home and buy one with less yearly costs instead of renting.
The Downsides of Renting
Most retirees who are considering renting, intend to sell a home where they have already paid off the mortgage. They are now moving to a place where they will have to pay rent. They may escape the necessity of paying their own property taxes, but their landlord’s property taxes and other expenses are included in their rent.
Your Lifestyle
While some retirees prefer to spend their newly acquired free time travelling, many others want to have their own home. They want to feel rooted and settled in a community more than they want to save money. This is common when they have been living in their own home for most, or all, of their adult lives.
The items above should factor into your decision; however, it is important to keep your own financial state in mind. Pay attention to all the risks and costs as you contemplate this chapter of your life.
✢ For more on renting read: Should I Sell My House And Rent When I Retire?
Would you like more information on downsizing your home in preparation for retirement or a lifestyle change? Please call me at 416-960-9995, complete the form or email me to get in touch directly.
