A Smaller Residence Might be your Best Option

Many people are approaching the age when they must decide where they want to live when they retire. If you're a homeowner approaching this stage, you have a few options. Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors (NAR), says:

“As we see the transition of the large Baby Boomer generation age into retirement, it will be interesting to see if they move in with their Millennial and Gen Z children or if they stay put in their own homes.”

Lautz lists two options: move into a multigenerational home with loved ones or stay in your current house. Multigenerational living is rising in popularity, but it isn’t an option for everyone. And staying put may fit fewer and fewer of your needs. There’s a third option, though, and for some, it’s the best one: downsizing.

When you sell your home and buy a smaller one, you are "downsizing." Smaller homes may be better suited to your changing needs, and moving allows you to land in your ideal location.

In addition to the personal benefits, downsizing might be more cost-effective, too. The New York Times (NYT) shares:

“Many downsizers expect to improve their retirement income stream if their new home costs less than what their old house sells for. Lower utility costs, insurance and property taxes — as well as investment returns on the proceeds — can also improve the bottom line.”

One of the most important aspects of retirement is having a strong financial position, and downsizing can help.

A key reason why downsizing is still cost-effective today, even when mortgage rates are higher than they were a year ago, is the record-high level of equity homeowners have. When you move to a smaller home, you can use your equity to lower or even get rid of the mortgage payment on your next home.

So, not only is the upkeep of a smaller home likely more affordable, but leveraging your home equity could make a big difference too. Your local real estate advisor is the best resource to help you understand how much equity you may have in your current home and what options it can provide for your next move.

Bottom Line

If you're a homeowner preparing for retirement, deciding where you'll live is probably part of the process. Let's talk so you can understand your options and explore your downsizing options.

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