Empty Nesters, Is It Time To Downsize?

You have just come to grips with the fact that all of your children have moved out. After the initial lifestyle shock (and maybe a few tears), you might be thinking “Do we really still need this big house?”

While downsizing your home can be an attractive option, you’ll want to go in with both eyes wide open. Here’s what you need to think about before calling the real estate agent.

Consider Your Retirement and Lifestyle Goals

As you approach retirement, you should consider the impact that downsizing will have on your life.

Are you moving closer or farther from your family? How will this new home change the way you spend your time and money? Are you downsizing to simply save money? Do you actually want a smaller home?

Before you start running the numbers on what this might look like financially, try to get extremely clear on what you are looking to accomplish with this move, and how it will or will not change the way you live your life and experience retirement. Having a sense of direction will help you make these difficult decisions.

Know What Your House Is *Really* Worth

People tend to overestimate the value of their homes. They become attached to the place they have lived for so long and it’s extremely difficult to get an accurate valuation without some unbiased research. Luckily, there are some simple strategies you can use to start the process today.

  1. Google Search: Conduct a simple search on Google and see what you find. Type in “What is my home worth?” and you will inevitably land on pages and pages of results with automated home valuation tools that help you find a home value estimate in seconds (living in the 21st century isn’t so bad is it?). A few popular calculators lie on platforms such as Zillow, Redfin, and Realtor.com. These tools will at least get you in the general ballpark of what your home might be worth.
  2. Local Realtors: These professionals will often provide a home analysis for little to no cost. With that said, make sure you understand that their ultimate goal is to help you sell your home and collect a commission. Many people lean on a friend or family member in the real estate business, but we suggest you get the best agent available for your type of property. This is a big-ticket item and you want a pro in your corner.
  3. Ask the Neighbors: No really, ask them. If you live in a neighborhood in which the houses are fairly similar, a recent sale can give you insight into your home’s true value. After all, these are ACTUAL sales by ACTUAL people that have homes similar to yours.

Understand The Full Costs of Moving

 While people tend to overestimate the value of their home, they tend to underestimate the cost of moving (we’re only human, we can’t help it).

Costs you are probably considering already:

  • New Mortgage Payment
  • Property Taxes
  • Homeowners & Flood Insurance
  • Real Estate Fees
  • Closing Costs

Costs you’re probably NOT considering:

  • HOA fees (typical with condo and townhome purchases)
  • Packing up your home
  • Hiring a moving company
  • Selling/donating your possessions
  • Storage Costs
  • Aging and mobility adjustments for down the road
  • Digitizing your assets (i.e. paperwork and family photos)

You may be thinking that not all of those unexpected costs are actual financial expenses. Whether it’s a financial cost (HOA fees), time cost (packing your home), emotional cost (donating assets), or introducing physical risk (trying to move without help), it’s important to understand that these are all new variables that you want to factor into your strategy.

If you have an accurate and unbiased valuation of your home and have itemized all of the associated costs, you can truly start to evaluate this decision.

The Benefits of Downsizing

Downsizing can come with significant lifestyle and cashflow benefits. Below are a few reasons for considering it.

  • Improved Cash Flow
    • Downsizing can free-up much-needed financial resources. Your retirement savings window is closing, and the added funds from downsizing could be the boost your family needs.
  • Reduced waste and maintenance costs
    • A smaller house often means less maintenance, upkeep, cleaning, furnishing, and more. These things can be stressful, and downsizing can help streamline your living.
  • Increased organization
    • Downsizing is a great decluttering-agent. Intentionally paring down your belongings can also be a huge stress-reliever.
  • Save on energy
    • Heating and cooling a large house in New Orleans can be costly. A smaller house allows you to use less energy and be more environmentally friendly.
  • More desirable neighborhood
    • A smaller house in a neighborhood you love could really improve your day-to-day lifestyle.
  • Better accessibility
    • Moving from a two-story to a one-story, for example, can be extremely beneficial as you age and help you enjoy the full benefits of your space.
  • Convenient location for later stages
    • As you age, it might be nice to have your favorite coffee shop or boutique shop within walking distance (or public transportation). This will also cut back on driving time.
  • More time for other priorities
    • When you’re not stuck sweeping a 3,000 square foot house, you have more time to spend on the things you really enjoy doing—traveling, lunch with friends, babysitting the grandkids, time with your spouse, volunteering, etc.

The Impact of Your Decision

Now that you’ve run the numbers and have a sense of what the outcome might look like, it’s decision time. Break your decision down into different action-plans.

The Why: Do you actually want to live in a smaller house? What does this move mean for you? Think about your financial, personal, and career goals. Does this move check all of those boxes?

The Retirement Plan: If your goal was to retire in 10 years, how does the decision impact that goal? Does it speed up the timeline? Slow it down? How can you be sure?

The Implementation Plan: How are you going to be sure that you complete this transition? Who is going to help you get there? Where do you lack expertise? There are inevitably things that you are missing. As the saying goes, “you don’t know what you don’t know”.

Downsizing isn’t for everyone

Downsizing isn’t a retirement right of passage—it should be a decision made with careful thought and consideration. It’s an emotional, time-intensive, and financially impactful process, and one of the larger decisions to make before retirement.

At Bienvenue Wealth, we want to help. Our internal team will work with you to successfully downsize (or decide not to downsize) your home. Book a call with us today and learn how we can transition your thoughts/ideas about homeownership into a detailed action plan.