Senior couple packing up their kitchen

Even in retirement, housing costs can continue to be one of your biggest expenses. If you’re nearing the big day, own your home, and are looking for ways to help lower your costs or boost your retirement nest egg, consider downsizing. Here are four reasons why moving could be a good choice for your retirement. 

More manageable living space

With the kids out of the house, the big family home may seem like too much to heat and maintain. Looking ahead, you may want to find a space that is simply easier to move around in, with fewer stairs, for instance. On top of any savings from lower utility bills and upkeep, you could gain a smaller homeowners insurance premium since you’ll have fewer square feet to insure.

Generate future retirement income

Selling your current home could help you generate retirement income by investing the funds from the sale. One option is a Share Term Certificate (STC). An STC offers a higher dividend rate than a traditional money market account over a fixed term.

An STC ladder allows you to automatically keep reinvesting. You can purchase several certificates with staggered maturity dates on a monthly or annual basis. As each certificate matures, you can either reinvest your funds into the ladder or use the funds immediately.

Lower monthly payments

Going into retirement mortgage-free is ideal. You want to have as little debt as possible in your later years, since your income will likely be reduced. If you’re still paying off a long-term mortgage, selling could help you free yourself of that principal and interest.

If you’ve built up equity in your home or own it outright, the proceeds from selling your existing home could be used to pay cash for a smaller and less expensive place, eliminating a monthly mortgage payment altogether.

A new mortgage might make sense if you’d like to preserve your cash on hand and can still afford payments. A retirement calculator can help you determine whether your current level of retirement savings will cover your expected future monthly expenses. If you do decide to finance another home, consider a Fixed-Rate Mortgage or Adjustable Rate Mortgage (ARM), whichever has a monthly payment that will remain affordable for you. To save on interest costs and pay off your mortgage faster, make extra monthly payments.

Reduce your tax burden

A smaller home could mean a smaller property tax bill and more savings. County and state property tax relief programs are available for qualified individuals, including seniors aged 65 and older. If you choose to move, compare the property tax rate you currently pay to the rates found in areas you may choose as your new home. Even with comparable tax rates, a smaller home could mean a smaller property tax bill and more savings.

Explore the possibilities for suitable housing in your area or where you want to live, and check out the costs to see if downsizing might be a good move for you.

The advice provided is for informational purposes only.

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