If you are seriously thinking about your retirement, you are probably also considering whether you should make this life change, and if you do plan on it, when is the right time to downsize? Unfortunately, there is no single right answer.
On a fundamental level, the time to downsize is when your present accommodation no longer meets your needs, but there are other factors to consider. What are your retirement goals? What kind of lifestyle do you hope to have? Take the following into consideration:
You may still be in love with your home and want to remain there for as long as possible, but you should ask yourself some questions:
- Do you use less than 60 per cent of your house regularly?
- Do you routinely entertain large groups of people?
- Do you use most of the items in your cupboards, storage, closet, etc.?
- Is the entirety of your house accessible to you; are you able to easily keep up with maintenance and housework?
If the answer is ‘no’ to most of these questions, then you may want to consider downsizing sooner rather than later.
When is the right time to downsize? Developing your own downsizing plan, it is important to keep in mind the ‘Big 3’: Travel, Family (grandchildren), and Leisure.
- Do you want to have the flexibility and financial freedom to travel?
- Will you be hosting family get-togethers; will the grandchildren be staying over?
- Will you be taking up any hobbies, or hope to spend most of your free time for leisure?
Depending on what your priorities are in retirement, you may be looking at something small and easy-to-maintain like a one-bedroom condo, or something larger that may take some maintaining but allows you to continue to be a hub for the family. Think about your lifestyle and how you hope to be spending a majority of your time in retirement.
Consider the financial implications:
By downsizing you increase your retirement/ travel funds, get rid of unneeded space and free yourself of excessive time and energy used on your home.
When you sell your home and move into a smaller house or condo the benefits can be substantial. Calculate the costs associated with your current home (mortgage payments, taxes, hydro costs) and research the potential costs of any smaller homes you are considering. Compare the costs and calculate how much you would save. The idea is to be able to pull the equity out of your home and have that available for you during retirement. This money can be used to help you live the lifestyle you want and reduce your day-to-day costs, drawing less from your retirement income.
Understanding the finances associated with downsizing is not as simple as calculating how much you think your home will sell for versus how much you plan to buy for. Here are some costs to include in your calculations:
Ensure you are prepared for the potential costs associated with downsizing:
- Real estate and legal fees: When buying and selling any property, take into account closing costs, land transfer taxes, real estate commissions, title insurance, etc.
- Moving costs: Costs associated with hiring movers, rental trucks, packing supplies, etc.
- Downsizing belongings: There can be costs associated with downsizing your belongings. You may opt for junk removal services, bin rentals and/or cleaning help. Depending on the size of your new home, you may also need to budget for new apartment-sized furniture. You may decide to keep certain items in a storage unit (a typical 50 square foot unit can range from $125-$200 per month).
- Condo fees: When downsizing to a condo, be prepared for monthly maintenance fees that can range anywhere from $300 to over $1000 per month.
Related expenses can add up quickly. It is a good idea to put money away in a ‘moving fund’ to cover these expenses and any other unexpected costs associated with the transition.
It is important to remember that downsizing is not downgrading. It is, instead, about simplifying and facilitating a lifestyle. Your decision to downsize will be based on many different factors – speak with a REALTOR®, financial advisor and your family to decide when the best time is for you.
If you are trying to decide when is the right time to downsize, or if you are interested in finding a property to suit your needs in retirement, feel free to call me at 416.960.9995 – I would be happy to help.