Home ownership has long been touted as part of the American dream. But what happens when it becomes a burden? We often meet with clients who are considering whether to downsize or not. Throughout years of meeting with clients, we’ve found the four statements below often signify downsizing, or even renting makes more sense than owning a home:
1. You dread going outside and upstairs
If aging legs, back or joints bark at you every time the yard needs mowing or the leaves need raking, it might be a sign that owning a home with a yard is wearing on you. Likewise, if you find yourself living on the first floor of a multi-story home and dread going upstairs, downsizing could be beneficial. A retirement community or smaller home featuring single story living and maintenance-free landscaping might fit the bill.
2. You’re hearing echoes
A three to five bedroom home makes sense when you have school-age kids and family visiting during the holidays. However, once the nest empties, those extra bedrooms can seem like dust-collecting caves that only get used by the vacuum. While it may be emotional to leave behind the home in which your kids were raised, it can be exciting to start a new chapter where cleaning duties are replaced by long walks or trips with your spouse.
3. You’ve become a party of one
Tragically, widows and widowers are forced to adjust to life without their chosen partner. For most, this happens when the responsibility of owning a larger home may have seemed burdensome anyway. For younger spouses, downsizing may be a financial necessity if they’ve lost an income stream or been faced with medical or unexpected expenses. Often times the decision comes down to the emotion of living in the same home where memories of a deceased family member persist. Some find this persuades them to make a change while others find it impossible to leave. This is a very personal decision and may take years to make.
4. You realize owning isn’t everything
There is a persistent myth that claims renting is simply throwing money away every month. Yet, it isn’t that simple. Renting affords flexibility. Renting allows a resident to live without fear of needing to replace roofs, furnaces, plumbing or other necessities which can be debilitating to cash flow. Selling a home to rent in retirement sometimes means being able to use home equity to pay for other things such as medical care or travel. We often advise clients who are unsure of their medical status or who have checkered medical pasts to consider renting versus committing to home ownership. This is especially relevant when they may be considering a reduced home size or different geography in the intermediate term. Moving isn’t free; nor is financing.
Making the decision to move or downsize can be emotional and difficult. While many hope downsizing will create additional assets and reduce monthly expenses, oftentimes moving to a smaller home can be more expensive, especially when factoring in moving and home closing costs.
Working with a financial advisor can help you determine the financial impact of downsizing, assisting you in making an informed decision. We can model how buying a new home and selling your current home will affect your assets in the long-term, giving you the ability to make an choice that works for your goals, objectives and lifestyle. At Legacy, our goal is to take away your financial anxiety so you can enjoy the things most important to you.