The Downsizing Dilemma

When it comes to retirement planning, an important part of the discussion involves where you want to live.  Retirement is a new phase of life and, like anything new, it comes with uncertainty and many unknowns.  Unknowns like do we want to escape during the cold months or will we end up watching grand babies two days a week? My role as the planner is first and foremost to listen, and then to keep asking questions that will hopefully lead to productive conversations.  Often times these conversations lead to the following phrase, “Well, ideally, we would like to downsize our home sometime in the next 2 to 5 years.  We have more house than we need and it would be nice not to have all the upkeep.” Downsizing is practical, it is appropriate, and it is the reasonable thing to do, yet it is not so easy!

Today’s example:

Brian and Casey would like to retire.  They live in a 2,500 square foot house that they’ve been in for 20 years and have still have about $80,000 left on their mortgage.  They have the “privilege” of paying New York property taxes of $750 per month so their total monthly payment/cost (mortgage and taxes) is $1,500.

They would like to downsize so they start looking for some good old fashion “first floor living” options.  They soon discover there are not many ranch style houses available AND no one builds them in their area anymore.  Instead, they start looking at existing patio homes or even building a new one and that’s when the wheels start to fall off.  The 1,400 square foot brand new patio home actually costs significantly more than their current home.  In this scenario, they would have a higher mortgage payment, their property taxes would go up and on top of that, there is a $300 per month home owners association (HOA) fee to pay.  Their monthly costs go would go from $1,500 to $2,100!

This story paints a simple picture of how a seemingly practical retirement decision can backfire.  Aside from the financial aspect, the other difficult part is finding someplace that just “feels right.”  A place that makes the hassle and headache of moving your whole life worth it.  After all, you’re not just downsizing, you’re moving your home.  A home you may have watched your children grow up in or where you installed the crooked shutter as your first shot at being handy that the family still laughs at.  When you combine leaving the house you built into a home with having to pay even more money for a new smaller one, it can stop feeling so practical, so prudent and so appropriate.

Back to Brian & Casey…they decided to stay in their house longer and outsource some of the maintenance and upkeep.  In the end, it proved very difficult to replicate the comfort and lifestyle their current home provided for only $1,500 a month.  (Oh and their son may or may not still be living in the basement 😊)

If you’re a potential downsizer, do not give up hope!  Start planning earlier, be patient and be flexible as you never know when a place that feels “just right” will pop up.

Happy Friday!