Looking to “downsize” to a smaller home when you retire? Follow these 7 simple tips.
I can’t tell you how many retirement-age people come to me saying, “I want to downsize my home.” Maybe you’re wondering if you need all the space now that the kids, pets, or parents have moved out. Or maybe you’re trying to decide how to keep living the good life on a reduced retirement budget. Either way, if you’re considering selling your home and buying a smaller house that’s ideal for retired life, you’re not alone.
But here’s the problem: Many potential buyers have spent their time randomly looking at houses hoping they would “know it when they see it.”
Unfortunately, that’s not really the way it works. Retirees who are looking to sell their current home and buy one for their golden years would save money and time, and likely have a better outcome, if they knew what they wanted and were able to explain it more clearly.
That’s why we’ve put together this seven-step plan to help clarify if downsizing your home for retirement is right for you and, if so, how you should proceed. It’s based around a range of knowledge from our real estate experts at Mr. Waterfront, and also a realistic 5-year financial plan. (That part’s up to you, but we can help.) Read on and get dreaming of your perfect retirement home — it’s right around the corner.
1. Ask yourself: What does “downsizing” mean to you and your partner?
First thing’s first: define what the ideal home “downsizing” looks like to you. What are your reasons for wanting to move? These could range from minimizing maintenance to cutting expenses (we call this “financial downsizing”) to changing your lifestyle — taking more time to travel and see friends and family. In essence, you are re-establishing your priorities for the next five or more years. House size is just one aspect. Housing needs to integrate with your financial plan, your work plan (if you are still working) and your leisure-time plan. Remember, you want to adapt your housing to your life — not the other way around.
2. Start with your five-year financial plan
A financial plan — usually one based around a five-year time span — should be the foundation of any major decisions about housing. Sit down with your partner and financial planner to decide on a realistic budget for travel, food, medical expenses, and housing. (“Financial planning is important because it allows you to make the most of your assets,” write Kevin Voigt and Alana Benson in this excellent guide to a five-year plan by Nerdwallet.) Without a clear idea of your budget for housing, you are planning a trip without a map.
3. Start sweating the details
Here’s a hard truth for up-and-coming retirees: “Moving to Florida” is not a plan in and of itself. To help guide your future home buying choices, consider how you and your partner will spend your time. Many retirees move to be closer to grand-kids or best friends. What would that look like? Do you want to live an hour away, or next door? If you want to live in the mountains, will you be ready to deal with inclement weather? Will you need architectural accommodations such as one-level living or wheelchair-accessible bathrooms now or in the future? How do these extra needs fit within your housing and activities budget? The blank slate in front of you demands some hard thinking about how a new home will affect your lifestyle — and you’ll thank yourself later for taking the time to think things through.
4. Now, nail down the big-picture basics.
Where can you live that fits the details you hashed out in step #3? How much do homes in that area cost? What do you need to do now to accomplish your home-buying goals given these new benchmarks? Think of this as the “recalibration” step: Things are getting real, and you can start to realistically imagine what your future home will look like.
5. Revisit your budget
This is a dangerous step. You’ll need to combine your five-year plan and housing budget with your new list of needs and details from steps 1-4. If you find yourself over budget, it’s time to take a step back and revisit your priorities and plans; what priorities are you willing to cede?
If you’re under budget, congratulations! You can — carefully! — start to look at “upgrades” that will enhance your life. These might include higher-quality finishes inside the home, or community amenities such as water access or a golf club membership.
Take all of this slow, and make sure to include long discussions with your partner and financial planner. Now more than ever, you need realistic self-assessment.
6. Write your housing spec, review, and show it to a realtor
A housing spec lists the specifications you desire in a house. This includes the number of bedrooms, bathrooms, special features in the kitchen, and any other amenities you can imagine, like a whirlpool tub or a dock.
Make the spec list as concrete as possible. Then review it after a week or a month. Use it to visualize what downsizing to a house like this will be like. Remember: If you do not know where you want to go, it is unlikely that you will be happy with where you arrive.
Finally, show your spec to your realtor. At Mr. Waterfront, we love to help a customer hone and finalize their spec sheet so we can get to work finding them the perfect home.
7. Stick with it
Depending on the market, it might take months to find the right home that matches your spec list and your budget. Stick with it. If this seems like a lot of work, just remind yourself — you have worked hard to get where you are today. You owe it to yourself to plan the next phase of your life to get the most for you and your partner. Housing is a key element of your life and can pay big dividends with proper planning. Stick to these steps and you should be happily downsizing in no time at all.