Is it time to downsize your home?
Consider the impact downsizing may have as you near retirement.
Tired of city life, Kerri Fivecoat-Campbell, 47, and her husband Dale Campbell, 50, moved from their three-bedroom house in Kansas City, Kan. to a small cottage they built in the Ozark Mountains of Arkansas in 2007.
When Campbell unexpectedly spent eighteen months underemployed, the pair was relieved they'd lowered their housing costs. The lower housing expenses helped them get through a difficult time, and now, they say, they're better positioned to save for the future.
In addition, says Fivecoat-Campbell, a journalist and author who also blogs about their smaller footprint, "We don't have as much stuff to worry about or as much to clean."
Instead, the pair are working to save more for retirement and enjoying hiking, fishing and canoeing instead of doing yard work or home maintenance.
Financial implications of downsizing
- If you sell a larger house and move into a smaller one, your mortgage payments should drop.
- Downsizing could lower your property taxes and maintenance costs.
- When you move, consider a state with low or no income tax. "Retirees usually draw from some taxable accounts, whether they're Individual Retirement Accounts, 401(k)s or pensions, so lower state income tax may be beneficial," says Joe Swanson, a financial representative with Principal Life Insurance Company.
Health and lifestyle impacts
Many Baby Boomers downsize when their children leave home.
- Mobility. Even if you're healthy now, you may want a home without many stairs in case you face health issues in the future.
- Community. "You may want to find a place that has other people of similar interests, and maybe of similar ages," says Swanson.
- Climate. If you've always yearned for a different climate, now's the time.
Downsizing often means shedding some belongings, which can be difficult. Here are a few ideas to help make it easier:
- Consider holding an estate sale and devoting the proceeds to retirement savings.
- If you and your spouse can't agree on what to keep, allow each other a few "freebies."
- Avoid paying storage costs for items you can't make fit in your new house. Stored items typically get thrown out later.
- Consider giving younger family members items you no longer need.
Make sure you're on track to retire when you want
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