Downsizing in retirement MIGHT be a terrible idea- OR the BEST decision EVER! Let’s look at the pros and cons of downsizing your home in Tampa Bay, especially if you’re heading towards retiring. “Should I downsize my home in retirement?” is a question we get often, and maybe you should do it- or do it SOONER! There are a lot of things to consider when making this decision and I want to make sure you have all the information you need before moving forward. If you want to get started by finding out what your home is worth, we can help!

Downsizing at the end of a career

More than anything you might be looking at ending a very long chapter of a successful career. Many report that when you’re not settled with that, it’s harder to seriously look at the finances and planning of it, so decisions might be needed there and a great financial planner and estate planning attorney can help. Then making a list with target dates and necessary tasks might flow much more easily.

Housing considerations when downsizing

What to consider in terms of your housing needs?

As Suzie Orman recently discussed on her Facebook page:

The decision of where you will live in #retirement can transform your retirement outlook from worried or slightly nervous to confident and happy. My hope is that you will move this decision front and center to retirement planning. Waiting to see what will happen is not kind to you. Delay will just make decisions harder…

Why does delaying make it harder?

There are a lot of reasons why downsizing in retirement might be a terrible idea at first glance. For one, it can be incredibly stressful to try to downsize your life after years of accumulation. You might think it will be difficult to let go of sentimental items and memories that are attached to them,

Also downsizing in retirement might be a terrible idea if there’s no plan. It can be financially more challenging than some people think, and it can take a bit to get your ducks in a row.

For many people, the cost of living is a source of financial stress- with current inflation everyone can relate to this right now. Housing costs, transportation expenses, and the price of food can all add up quickly, leaving little room for savings or other discretionary spending.

What a blessing it is to make informed decisions about the important aspects of your life.  As an occupational therapist for many years, I’d recommend you make the decisions before decisions have to be made for you, or worse, without your involvement.

People who live in rural areas often have very limited access to necessities (groceries, medical care, pharmacies, etc.) they are unable to drive. All the online delivery services can help, yet not being able to get out and be around people can be isolating. Services in some areas is very limited. Please think about these things when you are planning. If the nearest trauma center is a flight away from you, that can get expensive.

Life after an Unexpected Loss

If you share your home with a partner- would you be happy staying there in the event of a bereavement? Would a move be needed at the same time as dealing with the loss? I’ve literally listed homes in these emergency situations when a spouse has just died, and it’s not the easiest time to be making big decisions, sorting belongings and packing.

Downsizing to Florida

In a recent Kiplinger’s article Moving to the Sunshine State could save you a lot of money in taxes. Florida, one of our 10 most tax-friendly states for downsizing in retirement, as Florida has no state income tax. That means no state taxes on Social Security benefits, pensions, IRAs, 401(k)s and other retirement income. It also has no inheritance tax or estate tax.

But snowbirds would need to show that you spend more than half the year—183 days—in Florida., and on their website they detail Steps for Retirees to Prove Florida Residency.

There are pros and cons to living in the Sunshine State too!

Downsizing to reduce living expenses

One way to reduce living expenses is to downsize to a smaller home or apartment. This can save money on rent or mortgage payments, as well as utility bills. Additionally, downsizing can lead to a simpler lifestyle, which can help to reduce the cost of living even further. For example, fewer possessions mean less need for storage space. Also, a smaller living space is easier to keep clean and organized. If you’re looking to reduce your living expenses, downsizing may be worth considering, it can be a great way to simplify your life and reduce your monthly expenses. However, it can also be financially devastating if you’re not careful.

Selling the home you lived in for years

When you are downsizing, you’re typically selling your current home and buying a smaller one. If your current home is in good condition and you’ve stayed on top of maintenance and upgrades over the years, you’ll likely get top market value. What we also see are owners who have not done these things, either due to lack of funds, lack of insight, or more commonly, they were just HAPPY.

But with what they net at closing affording a home that’s likely newer and in top shape such as in Esplanade at Starkey Ranch, or Del Webb at Bexley, can take all the money they net on the sale. And even if you do have equity, downsizing can still be expensive, since you’ll likely have to pay for movers, new furniture, and other costs associated with setting up a new household. Don’t get caught by the hidden costs of moving that every buyer should know. Many of the newer communities also have a Homeowners Association and some ALSO have a Community Development District (CDD), so be sure to understand the expenses and what they include.

Property Taxes

One thing many people forget is property taxes which can be a SERIOUS expense if you’ve been in your home for a long time your taxes may be so wonderfully low that your cashflow has no room for the new reality post move. Why -downsizing is a terrible idea when it costs more in taxes than your entire home budget!

Do your homework on other things like solar panels, which may appear to be a great investment into retirement yet in reality, you need to understand the pros and cons too.

So before downsizing, be sure to do your homework and calculate whether the financial savings will be worth the upfront costs. We can help with that.

Now you know Why downsizing in retirement might be a terrible idea for some, yet it may be the best decision for others and planning ahead can make all the difference. So, if you’re now considering the unexpected benefits of downsizing your home, and you want help, reach out-  It could end up being the best thing. Only you can decide what’s right for you, and we’re here to help as you work through the decisions.

Video Chapters: 

0:00 Why downsizing is a terrible idea -Who should downsize and when? Time to rethink the plan? 

0:20 Should I downsize my home? 

0:35 Downsizing WAY before retirement? Afford college! 

1:10 Does your lifestyle still work FOR you? 

1:22 Juggling career decisions. 

1:50 Team members to have on your team. 

2:09 Delay will just make decisions harder… 

2:40 ALL that stuff, the location, and the finances- considerations. 

3:15 Move TO Florida? Taxes and more? 

3:50 Snowbirds and residency. 

4:10 Benefits of a smaller home. 

4:43 Home condition, and moving costs. 

5:45 Property TAXES- sticker SHOCK. 

6:15 Preparation- start now.