According to AARP, for the next 18 years, baby boomers will be turning 65 at a rate of about 8,000 a day. This means that a large portion of American homeowners will be reaching retirement age and will have to start thinking about the next phase in their life. Part of this next phase may include packing up their large family homes in favor of spending their ‘empty nest’ years enjoying a newfound freedom. When you think about the combination of approaching retirement and your children are off on their own, it may not be necessary to keep so much space. Many couples may have a disproportionate amount of their wealth stored in home equity. Downsizing can be a useful way to convert some of this wealth into liquid financial assets to be used for other expenses. Downsizing can also provide the opportunity to sort through belongings and get rid of things that are no longer needed. Are you ready to make the move? Here are 9 downsizing tips to consider.
Have a plan –
Think about what kind of lifestyle you want. Do you prefer an urban setting? Or do you need a yard? Do you want to be part of a community that offers lots of activities and amenities such as golf courses and swimming pools? Or are you a more independent type who seeks out opportunities on your own? You should investigate your options and not limit exciting new possibilities. If you’ve raised your family in the suburbs and don’t want to leave, you could start looking at newer condominium buildings that are close to shops and restaurants. Living in such an area can provide a similar lifestyle to the city while still remaining in the suburbs.
Consider a short distance move –
Not everyone wants to move to a warm-weather destination, such as Florida. Many downsizing Boomers would rather stay in their current location. Remaining in the same vicinity would be ideal if you want to stay close to your children and their families. This would make visiting your family easy and holiday gatherings less stressful without the hectic holiday traffic.
Age restricted –
Before moving, you should decide if this next move will be your last move. You should consider whether or not you want to live in a neighborhood with younger families or people who are closer in your age bracket. Whether you want to move into a neighborhood with people your own age who share similar interests or a neighborhood with an eclectic community of people, the decision is up to you and your personal preference.
Look for universal design –
A house should be accessible to those of any age or ability, with features such as wide doorways and flat thresholds. This may not seem important to vigorous Boomers, but it could be an issue in the years ahead. Will you still be able to live in the home as an 80-year-old? Advanced planning in this regard can help ease the transition for health and physical changes in later life. A single-story house may be ideal. Other important features to consider: slip resistant floors, lever door handles, and reinforced bathroom walls that can support grab bars. Another consideration is indoor air quality. Clothes dryers, bathrooms, stoves and fireplaces should vent outdoors.
The downsizing phase of life usually means you won’t be earning as much money as you did when you were younger. What are your sources of cash? How long will you work? How much can you expect from social security payments, or a pension? Will investments generate enough income to cover expenses? Many Boomers think they’ll sell an expensive house and buy a cheaper in hopes of saving money.
Consider a mortgage –
The American Dream may be to live mortgage free, but it often makes sense to have a mortgage, even a small one. Assuming you make a profit when you sell your current home, the proceeds can be invested and used for future living expenses. If you sink all the proceeds from the sale of your house into a new house, you may not be able to generate enough cash to cover expenses. Renting could make sense, too, if rents are less than the cost of owning.
Watch the taxes –
Many Boomers consider moving out of state to places like Florida that have no income tax, in order to lower their overall tax bill. But don’t forget other hidden costs, such as travel back and forth to visit family. Also, you may be eligible for a tax free gain on the sale of a house. Any gain, up to $500,000 for a couple, is tax free. “It is one of the most generous provisions in the tax code,” says Bob Meighan, vice president at Turbo Tax, a software tax preparation company in San Diego, Calif.
Make a smart move –
Before the move, focus on how you want to live. Think through your new lifestyle and which items will make that possible. If you’re moving to a community that provides outdoor maintenance, you won’t need the shovels and lawn mower. Think about using the extra room in the new place for the hobby you’ve always wanted to start, instead of saving it for guests who rarely visit. Look forward, not back.
Downsize thoughtfully –
If you’re selling a house, you’ll probably spend time de-cluttering the place so it looks good for prospective buyers. But don’t stop there. You can sell unwanted items on craigslist or eBay, have a garage sale or even give items away on the website Freecycle.org. Remember to save family treasures that can’t be replaced. If you don’t have room for all the treasures, give them to family or friends who can appreciate them.
In the end, choose what matters to you at this stage of life by knowing more about who you are and who you are not. If you are not ready to move again, then walk that direction. Talk with yourself and your partner about what roles you will play in making a downsize happen. Pull up those resources you need to enjoy the life you are heading towards. If you have decided that it is time to move, contact your local real estate agent at Homesale Realty. Cheers to embracing the idea of changing the scenery and designing a new stage set for your future!