- January 30, 2019
- Posted by: Ethica Private Wealth
- Category: Blog
When preparing for retirement, finding ways to make more money and increase your retirement pot can often be at the forefront of your mind. By doing just a little bit of research, you’ll probably be overwhelmed by the number of tips and tricks you find to help you to get ready for retirement. Some blogs will focus on investment, some will focus on managing your pension and some will advise you on what to do with your property when you retire.
A lot of people will tell you that downsizing is the best way of freeing up cash to pay off debts or add to your retirement fund. For some, downsizing can be a smart money move that will help you to secure a better quality of life in retirement, but downsizing isn’t for everyone. In this article, we’ll take a look at the pros and cons of downsizing your home to help you to be better informed when making the decision.
Pros of Downsizing Your Home
1. No Mortgage
If you’re heading towards retirement and you’ve yet to pay off your mortgage, downsizing offers a real opportunity to get rid of your mortgage payments once and for all. Often, mortgage payments are one of the biggest monthly expenses you’ll have and getting rid of them before you retire can ensure that you have a more comfortable lifestyle when you do. Obviously, some people will need to take out a new mortgage on their new property, but it’s likely that the mortgage payments will reduce significantly if you downsize.
2. Extra Cash
If you’re one of the lucky people that has spent a lot of money on mortgage payments throughout your lifetime, then you may be in for a nice injection of cash if you downsize. When downsizing, you’ll need to account for the money you still owe on your mortgage and the cost of buying a smaller place, but it could be the case that there is money left in the pot after all this. This is an ideal outcome for retirees who are looking to inject some cash into their retirement fund.
Read More – How To Build Your Retirement Savings Quickly
3. New Opportunities
Whilst large family homes often hold a lot of memories, downsizing can be an opportunity to begin making new ones. For most retirees, retirement is a unique opportunity to try new things in their life, step outside their comfort zone or fulfil their dreams.
Whether you choose to live in a totally new country, a one bed flat by the beach or a caravan, being free from the responsibilities of a large house and a mortgage can help you to achieve your dreams. It can also offer a chance for you to move closer to loved ones or friends who you hope to share your retirement years with.
Read More – 6 Desitnations Where Your Retirement Savings Can Go Further
Cons of Downsizing Your Home
1. Less Space
One unfortunate downside of downsizing is the fact that you may have less space than you did before. This can prove to be a problem for people that love having large parties, hosting friends or having the grandkids over to stay. If you’re thinking about downsizing and still want to have guests, you could always consider buying a place with a guest room, or is in an area that’s close to affordable accommodation options.
It can also be hard to reduce the number of possessions you own to fit the size of your new home. For people that have lived in a large place for 20-30 years, getting rid of all the furniture, decorative items and general clutter that has accumulated can be a struggle, and can often take weeks or months to complete.
2. Emotional Attachment
One of the hardest things about downsizing is leaving the home that you have lived in for a long time. This is one of the main reasons retirees choose to stay in their large expensive homes once they retire. In truth, a house often becomes more than just bricks and mortar if you have lived in it for a long time, and it can be very hard to let go of all the memories that you have created there.
If you’re finding it hard to make the decision to move due to emotional attachment, it can be helpful to discuss the prospect with family members and your children, as they will often give you the reassurance you need to make the tough decision.
3. Stress of Moving
When you get to retirement age, too much stress and anxiety can be hard to deal with, and often, moving house can cause this. In a recent survey of 2000 adults, almost 61% of people placed the stress of moving house at the top of their stress list, rating it as being more stressful than getting divorced or starting a new job.
Whilst this statistic can seem off-putting, the benefits of downsizing could outweigh the temporary stress of moving. If you do decide to move, making sure you have support from your family, friends and financial advisors should help you to complete the move without too much stress and hassle.
Downsizing can be a great option if you think its right for you
Downsizing and selling your home comes with a few possible negative elements, much like many things in life. However, if you feel like downsizing is right for you, it could prove to be a great financial decision, and it could significantly improve your quality of life during retirement.
If your keen to find out more about how downsizing your home could benefit you in retirement, why not book a 2-Hour Free financial planning consultation with the team at Ethica Private Wealth Specialists to get advice about making the decision.