Downsizing is a common tactic adopted by retirees to improve their financial situation.
- Retirees will have to make a choice about downsizing their home, which has both advantages and disadvantages.
- Personal finance expert Suze Orman says homeowners may want to sell before they retire if it saves them money in the long run.
Retirement comes with many important lifestyle changes. When you are about to leave the labor market, you will need to decide if you want a change in your housing situation to be part of it.
For those who own their home, selling it in retirement can make a lot of sense, but not in all situations. Since it can be difficult to decide if moving is the best option, owners may wish to consider Suze Orman’s opinion when making their choice.
Suze Orman has some advice on downsizing in retirement
On her blog, finance expert Suze Orman acknowledged that aging in place, or staying in a current home, is a popular goal among people who are retiring or planning to leave the workforce soon. She understands that many people have memories associated with their home and therefore may not want to leave.
And, in some cases, she thinks it’s okay to stay put. Specifically, Orman said she was in favor of staying home in retirement if:
- Your mortgage will be paid off before you retire.
- You are 100% confident that you can cover property taxes, maintenance and insurance now and in the future.
- You can cover these costs from guaranteed sources of income, such as Social Security, retirement benefits, an employer-sponsored defined benefit pension plan, or an immediate annuity.
In other situations, Orman suggests selling a house and downsizing before officially retires.
The reason: Moving house can often free up money that can be used for retirement savings. If homeowners can sell the larger, more expensive property they lived in before retirement, they can use the profits from that home to buy a smaller home they can hopefully live in without a mortgage.
Owners who are still working but decide to downsize before retirement may also be able to save more if they sell early. Doing so can free up money that can be invested to build a retirement nest egg.
Of course, there are also other reasons for moving. As Orman points out, downsizing can allow retirees to find somewhere easier to move to if their mobility becomes limited. This could include a property with no stairs. Or they can opt for a home that doesn’t have as much upkeep and maintenance, so they can free up time and money and not worry as much about maintaining a property as they go. they age.
Should we listen to Orman’s advice?
Orman’s advice has a lot of merit. If you’re not sure you can afford to buy your home in retirement, moving before you spend too much can help you avoid draining your nest egg too quickly.
Ultimately, however, everyone will have to weigh the value of staying in their house full of memories with the financial drawbacks. If keeping your home will destroy your retirement security, then selling is a no-brainer. But if you fall into a gray area where you could keep your home but could end up with more savings or lower costs if you sell, you need to decide whether you’d rather sacrifice other ways to stay in your property or you are downsizing. could be the best choice to improve your retirement life.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are, interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.