Planning for Retirement: Downsizing

Lifestyle Goals

Once you step into retirement, your life will change. Deciding what to do with your time, including who you will spend it with and what activities you will do, are areas to consider as you work to establish your desired retirement goals. Stanford University researchers suggest that, on average, life expectancy for people reaching age 65 and older increases by three years every 25-year period. With more time to spend on activities and leisure than our parents and grandparents had, there is even more reason to look at downsizing your home, possessions, and debt.

A smaller home can reduce your mortgage expenses, lower your property taxes and homeowner’s insurance, require less cleaning and maintenance, and can help lower utility bills. Downsizing your household goods and keeping only what is needed can help de-clutter what has accumulated over time. Downsizing to one automobile from two can help you save money on automobile insurance and maintenance. Depending on where you live and on your health condition, you may not even need an automobile. Downsizing debt, including mortgages, credit cards, and personal loans, can also help ensure that your retirement income will stretch further after your wage income ends.

Financial Wealth

Many retirees have a real fear of running out of the income that is necessary to live the lifestyle they aspire to. While it is unlikely Social Security will simply run out, government intervention will be necessary for retirees to continue to receive full benefits in future years. So, for those individuals that are able, maximizing contributions to retirement plans and contributing catch-up contributions where eligible will give you more control to shape your financial wealth at retirement.

Healthcare costs are rising and while Medicare will pay for some of your healthcare costs, it doesn’t cover everything. Thus, factoring in the real cost of healthcare–especially if healthcare costs were previously paid by your employer–can help give you a clearer picture of what medical expenses will look like in your retirement years.

Downsizing your living expenses and increasing cash flow can also help those retirees that desire to travel. Setting a travel budget will help you have realistic expectations and maximize your money and your trips.

Needs change as one gets closer to retirement. For some individuals, downsizing is the optimal way to improve quality of life and cash flow. \While there is no perfect time to downsize, timing is of importance relative to the real estate market, interest rates, and life goals. Make sure you set aside time to plan for retirement downsizing so that you can achieve your lifestyle goals and preserve your financial wealth.