Is Downsizing Before Retirement the Right Move For You?

A couple we know – Pete and Janice – sold  their suburban home and moved to a 2-bedroom condo apartment downtown.  Downtown apartments are expensive in any city, so they didn’t recoup a lot of cash from their equity in the sale, but now they do save quite a bit on everyday expenses.

They take advantage of the gym and swimming pool in their building as well as a patio area that can be used to host larger groups for a barbeque or other get-togethers.  Condo fees pay for insurance, water, and maintenance.

Since they both work downtown they no longer need to commute and they can walk to work. Shopping is also within walking distance.  They sold both their vehicles and no longer have that expense.  They car-share or rent a vehicle for longer road trips.

Now that they don’t have the bother of driving and finding parking they have taken a renewed interest in the cultural activities available downtown.  And a hockey game is only a couple of transit stops away.

boxes packed for a move

Moving to a smaller home has helped Pete and Sandy reduce their expenses and improve their cash flow and allows them to ramp up their savings for their planned retirement in a few years.

Here are some advantages of downsizing before retirement.

1.  Home expenses are reduced

Sure there are condo (or strata) fees to consider but they cover a lot of expenses.  The only utilities we personally pay for are electricity and sewer.  Property taxes are lower and we have personal property insurance that’s similar to “renters” insurance that’s a lot less than homeowners insurance.  There are no more worries about lawn mowing and other yard work, snow removal, and the myriads of home maintenance tasks – large and small – that fill up the to-do list.

Related:  Estimating Your Retirement Expenses

Even if you move to a smaller house instead of a condo you’ll still experience reduced utilities, taxes and insurance bills and less maintenance (and no condo fees).

2.  Amenities are often more accessible

If you move to a walkable neighbourhood, or have good transit access, you’ll find you can easily give up at least one of your cars (or even both as Pete and Janice did) because you won’t have to drive everywhere.  Cost savings include gasoline, auto insurance, maintenance and parking fees.

Walking and cycling more, rather than sitting in a car hunched over the steering wheel, also does wonders for your overall health and reduces stress.

3.  Pursue a simpler lifestyle

Once your kids have moved away from home there’s no need for three or more bedrooms, and your dining room, family room and finished basement might only be used a few times a year.

You know that the more space you have, the more you tend to fill it up with stuff you don’t need.  People forget what’s stashed away in those boxes in the basement, attic or garage. 

Although I’m still having some difficulty with this, a smaller place forces you to pare down substantially. There just isn’t room for anything you don’t use on a regular basis. 

The advantage of less clutter is less time spent cleaning, tidying and organizing.  No more home maintenance taking over your weekends.

This gives you more time to pursue hobbies and other activities you might enjoy trying so you’ll have something to look forward to once you retire.

Related:  6 Things You Should Do Before You Retire

Is downsizing before retirement right for you?

Downsizing is a good way to start fresh – more money, more time, less clutter, better health. 

It’s not without it’s down side, though.  Obviously it won’t work for people who want to retire to another province or country.  But research has shown that many people who downsize like to stay in – or close to – their current city, or even neighbourhood.   That way they can still be in touch with friends and relatives, and don’t need to change doctors, dentists, favourite hairdresser, and the like.

If you’ve owned your home for a while, you might be stunned to discover that buying a new place may cost you more when you factor in upgrades, moving costs, legal and transfer fees, and new furniture.  Many people make the mistake of thinking they can sell their home and move into a cute little condo with extra hundreds of thousands of dollars to fund their retirement.  It’s possible, but make sure you have realistic expectations and determine how much you will actually net from your sale.

The initial financial gain may not be as much as you think.

Decide if you can live in less space.  One thing I had a hard time with is finding smaller-scale furniture in home stores that feature massive sectionals, and my husband would really like a 72-inch TV.

Downsizing, especially before retirement, is a big decision that takes a lot of research and consideration.  Consider your needs both financially and in terms of your desired lifestyle.

Make sure a move is right for you.

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2 Responses

  1. Vince P. Mayne says:

    The COVID-19 virus situation has added another dimension to the eventual lifestyle choices people make when planning retirement. Many retirees who have enjoyed good health have a little experience with the availability of health care and it does not make it onto the decision criteria list.

    I now know that the local hospital in the community where I retired, does not have an Intensive Care Unit. The only doctor I could find is 40 km drive.

    It is now clear that the further one moves from a major metropolitan area, health care access shrinks exponentially.

    • Marie Engen says:

      Hi Vince. That’s a good point. Before relocating you definitely have to consider all circumstances, both for now and the future. Moving to a smaller community may save money on purchasing but all the amenities might not be in place and you do certainly have to consider the availability of close proximity of health care.

      That’s why, despite all the financial news that downsizing will save you hundreds of thousands of dollars to put towards you retirement nest egg, it is not very often the case. Many people are basically doing a laterel move financially to get what they want. In our case we didn’t net a lot on our original purchase but monthly expenses are lower. It was a challenge at first finding a doctor close by – my husband has multiple medical problems – but the population here is intensely lobbying for an Intensive Care facility because of the horrible traffic to get to the hospital in the next city over. We never considered that the traffic would be worse here than in Calgary.

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