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Should You Downsize Your Home Before or After Retirement?

As you near retirement, you may begin to wonder what you should do with your home. In most cases, retirees are empty nesters who are inhabiting a home much larger than they need at this point in their lives.

One of the most popular options around this time is to downsize—to sell your current home to a new family and move out, renting or purchasing an apartment, condo or a much smaller home, instead.

Downsizing can come with a lot of benefits. One of the major reasons people want to downsize is because it gives you the opportunity to save money by reducing or eliminating your mortgage, reducing your property taxes and more. This way, you won’t need to pull as much money from your investments to pay for a big house you don’t need.

Of course, there are also other benefits, such as enjoying the freedom to relocate or travel, minimizing the upkeep of a large house and starting fresh in a new place.

If you’re considering downsizing to meet your needs, you also need to think about when you’re going to do it. Should you start the process early, before retirement begins, or should you wait until retirement is in full-swing to make the change?

Downsizing before retirement

Choosing to downsize before retirement may help alleviate some financial burden once you enter retirement. If all goes according to plan, you might not need to pay as high of a mortgage, property taxes or other related expenses for the larger home out of your retirement fund. If you make a profit on your home, you can even invest that money right away, so you’re better prepared when retirement comes.

Downsizing early may also help you avoid the health effects of moving. Some retirees have a harder time packing, moving boxes and uprooting as they grow older. Nipping the move in the bud can alleviate the physical and mental toll moving can have on you later in life.

Downsizing after retirement

There are plenty of logical reasons to wait to retire before you downsize, as well. Many of these have to do with timing.

For example, you might want to wait to sell your home until the market is just right. That way, you can get the best possible price for your home and end up with more money in your pocket once you purchase a new one. If the market is bad before you retire but you attempt to sell anyway, you could end up losing money or barely making a difference in your financial situation.

Should you downsize at all?

Sometimes, downsizing isn’t the right move for retirees, regardless of whether it’s before or after retirement. Selling your home and moving might not be worth the trouble and may even cost you more.

If you are considering downsizing, make sure to include real estate agent fees, utilities, moving company costs and other “hidden” fees when calculating the cost of your new home. If the cost difference between your current home and your downsized one is negligible, there probably isn’t a point to downsizing.

Additionally, if you’ve paid off your mortgage in full, you might want to consider staying in your current home. Your housing costs are likely to be as low as they possibly can, and there are other avenues you can explore to improve your monthly cash flow if that’s one of your concerns.

If you’re on the fence about whether to downsize and when the right time to make the change is, speak with a financial planner to discuss your options and discover what the best retirement route is for you.

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