Retirement planning is not just about building a pot of financial assets to ensure you do not suffer a drop in your quality of life. It is also about deciding when to downsize your home to avoid the risks of having to do so when unexpected events force you to act. So, when is the right time to downsize?
Many older adults postpone the decision to downsize for too long. Our homes are not just an investment. They are a store of memories. They are where you watched your children grow up, where you celebrated birthdays, graduations, marriages and quality time with grandchildren. They are filled with family heirlooms and fond memories. Such emotional comforts of your home are always so hard to surrender.
While we all face different life-stage triggers or obstacles, the financial landscape is forever changing. The financial implications of downsizing can change substantially if you leave it too late. Besides the stress of moving home, one has to consider the cost of maintaining old properties at a time of high inflation and higher interest rates.
A recent report by UK real estate agent Savills suggests that the number of downsizers active in the housing market increased by 53 per cent in 2023. Another estate agent, Property Acquisitions, recommends downsizing when you are in your 60s.
When the children leave home, it is time to start thinking about moving. Too often, many leave it too late when a predictable but ill-timed event like a sudden illness forces them to take immediate action. The latest cut-off point recommended by the property experts is 70 to 75.
For many older adults, freeing up cash is the primary motivator to downsize. We are often unaware of the expense of maintaining a large 30- or 40-year-old house. Banks have repeatedly tried to develop equity release schemes to help with retirees’ cash flow challenges. So far, this has not been a popular option.
One test that indicates whether it is the right time to downsize is reflecting on the space you have stopped using in your home. Rooms that are locked up and have to be dusted and cleaned every week, playrooms formerly used by the children that are now used as stores, and large garages/workshops full of rarely used tools are indications that downsizing needs to be considered.
Despite the glut of new properties that have flooded the market in recent years, very few properties tick most of the boxes that those considering downsizing consider essential
Most people need something to happen to galvanise them or be presented with a suitable alternative. If such triggers are absent, the lack of a plan can freeze them into inaction.
Triggers to consider downsizing are various. The homes where many older adults live are not easily accessible for those with mobility challenges. Some retired people are asset-rich but cash-poor, so spending thousands on adapting their homes is not an option. Weighing the cost of adopting versus the cost and stress of moving is something to consider. The cost of installing a stairlift can reach €10,000, and adapting a bathroom to make it more user-friendly for older persons could cost the same amount.
Other older adults may want to help their children find the money for a deposit to buy their first home. Getting on the property ladder today is almost impossible for many low-income families, even if both partners have jobs. Downsizing to a smaller property could release tens of thousands of euros that will be useful to help children get into the property market.
With many older adults still enjoying good health, some may want to make their travel dreams a reality. After long years of coping with work-related stress, some leave the rat race behind them and retire early. They want to release enough cash by downsizing their homes to fund frequent foreign holidays, often to exotic destinations.
One obstacle to downsizing is the lack of suitable homes for older adults. Some homeowners argue there is no point moving if they cannot find what they want. Despite the glut of new properties that have flooded the market in recent years, very few properties tick most of the boxes that those considering downsizing consider essential.
Moving to a more practical home or location can be achieved if enough time is allowed to survey the market. Unfortunately, leaving the decision to downsize too late often results in more stress and fewer options.
Deteriorating health and the loss of independence that it implies could well mean that rather than downsizing, one has to consider selling their house to fund the cost of living in a care home.