Episode – 5 – Downsizing for Retirement
What does downsizing for retirement mean?
The thought that comes to mind when someone says that they’re downsizing, is that of moving into a smaller home or maybe a condo, so we have less to take care of during our retirement years. But downsizing involves quite a bit more than that. There are multiple items that require consideration.
In today’s episode, I will go over some of those considerations as well as some strategies that might help when the time comes to downsize.
Stay with me and I’ll be right back.
Downsizing for retirement encompasses a total approach to making your retirement life more stress free and financially secure. This often involves selling or moving to a smaller home, letting go of certain possessions, and cutting back on unnecessary expenses. The overall goal is to lower your financial obligations and create a more manageable and affordable living situation in retirement. Downsizing can help free up funds for retirement savings, reduce maintenance costs, and provide a more comfortable and stress-free lifestyle during our golden years. The decision to downsize also affords us a unique opportunity to explore relocation, maybe for our special interests or to be closer to family or friends.
But it’s almost impossible to fully downsize without facing a few hurdles. I know this, because my wife and I went through the process a couple of years ago. We began talking about the possibility in 2018, which was 4 years before my planned retirement. We started looking at what our housing options were going to be. We realized that to lower our taxes, maintenance and normal weekly / monthly upkeep we were going to have to give up some square footage. It’s easier said than done and we spent 2 years trying to find that perfect home, one that speaks to you as soon as you walk in. It was no easy task, so I’m thankful that we started early which gave us time to evaluate every aspect of making the move.
Downsizing possessions and reducing living expenses can help ensure a smoother transition into retirement in several ways:
By reducing living expenses, you free up more money to allocate towards your retirement savings and potentially reduce financial stress. Some areas that you might want to look at are entertainment subscription services … I won’t name any, but there are multiple subscriptions for TV and Movie services, that you might find that you can do without. Maybe buying groceries smarter and curbing the number of nights that you dine out. Just a couple of things that can add up to a healthy expense monthly. The savings from cutting out some of this can provide a sense of security and peace of mind as you enter retirement.
Downsizing possessions allows you to simplify your life and focus on what truly matters to you. It can alleviate the burden of maintaining and managing excess belongings, giving you more time and energy to enjoy retirement activities. If you are planning plan to move to a different location for retirement, getting rid of unused or unneeded possessions beforehand can make the relocation process much smoother. Having fewer possessions to pack, transport, and unpack can save time, money, and effort.
A smaller home or apartment typically comes with lower maintenance and utility costs. In most cases, depending on your area or where you move to, you’ll have less property tax to pay and lower insurance costs. This can help stretch your retirement budget and minimize the time and effort required for household chores and repairs and the sale of your existing home to move to something smaller, could result in a bit of a windfall of cash or a smaller mortgage.
When you do this type of downsizing, it gives you more flexibility and frees up space and gets rid of possessions that tie you down. This can make it easier to travel, explore new hobbies, or even live a more nomadic lifestyle if that's something you’ve always wanted to do. Travel the country in an RV, take cruises or travel abroad and explore. Downsizing creates freedom.
In summary, downsizing possessions and reducing living expenses can provide financial stability, simplify your lifestyle, ease relocation, reduce maintenance costs, increase flexibility, and enhance emotional well-being. These factors combined can lead to a smoother transition into retirement and a more fulfilling post-work life.
However, while downsizing possessions and reducing living expenses can have numerous benefits, there are some potential challenges and drawbacks to consider as well.
A big one is the cost of moving. Selling your existing home is most likely going to require that you pay realtor fees and moving expenses for professional movers to relocate your belongings. If you’re purchasing a new home, there will closing costs and deposits or other fees for utilities and HOA fees can be more money than you currently pay. You will need to lay it all out to see if it’s the right financial decision for you.
Emotional attachments are a big one: Letting go of possessions that hold sentimental value can be difficult and emotional. It may require making tough decisions about what to keep, sell, or donate. This process can be challenging. If you have grown children that grew up in the home you are now decluttering, you might want to involve them. See if there are items that you no longer have space or use for that they might want to hold on to. Sometimes it helps to get the whole family involved and times where that just want work for you. You must decide how to handle this and move past it if you’re having difficulty letting to.
Moving into a smaller home, condo or apartment means adapting to a reduced living space. It might take time to adjust to the change, especially if you're used to having a lot more room. You’ll also need to consider the storage space available at the new place vs. what you’ve been accustomed to. You will need to carefully plan to ensure that you have enough storage and functional living areas.
Moving to a new location can impact your social network. You might be further away from family and friends or need to establish new connections in a different community, so you do need to consider the impact on your social life and support systems. Downsizing will require adjusting your lifestyle and habits. For example, if you're used to hosting large gatherings or events, a smaller space might limit your ability to do so which could further impact your social life.
It's possible to feel regret about letting go of certain possessions or downsizing too much. Take time to evaluate what is truly essential and consider your long-term needs. It's important to weigh these potential challenges against the benefits of downsizing and find a balance.
Downsizing can be a tough experience to go through, but with some practical tips, you can effectively navigate the process without feeling overwhelmed or losing important items. From my experience, you will get through it, even if it’s tough, so let me offer a few suggestions:
Start early: Begin the downsizing process well in advance of your move or retirement. This will give you plenty of time to sort through your belongings, make decisions, and avoid feeling rushed or overwhelmed. It’s been my experience that whatever you’re doing always seems to take longer than expected, so starting early gives you stress-free time to get it done.
Create a plan: Develop a clear plan of action before you get started. I find it helpful to establish timeline, set goals, and establish specific tasks to help you stay organized and focused. Breaking down the process into smaller, manageable steps can make it feel more achievable.
Measure your new space: If you're moving to a smaller home or apartment, do some measuring and try and draw some diagrams whereby you can pencil in your furniture and belongings and envision how you’ll set up your new living space. This will help you determine which furniture and belongings will fit and which ones you need to get rid of. It's better to know in advance if certain items won't work in your new space.
Start by decluttering and sorting your belongings into categories. Divide them into groups such as keep, donate, sell, or discard. Be honest with yourself about what you truly need and use and consider letting go of items that no longer serve a purpose. I’m terrible at this, but it’s necessary to get rid of stuff.
Papers and photo albums can take up a lot of space. Consider scanning important documents and old photos to create digital copies. This will free up space and make it easier to access and organize your files and cut down on the physical storage area required.
Sentimental possessions can be the most challenging to let go of. Create a special category for sentimental items and give yourself time to reflect on their significance. Consider taking photos or making digital copies of sentimental items so that you can preserve the memories without the physical clutter or let them go to other family members or friends, so you can still see them when visiting in their home
If you're struggling to part with certain items but don't have room for them in your new home, consider storage solutions. You can rent a storage unit to hold items temporarily or explore alternative options like using family or friends' basements or garages. But the key word here is temporarily. I was once guilty of my inability to let go of some stuff, and it came at considerable costs by paying storage fees over more than one year. Several years, so decide and move on.
Only you can decide if downsizing is the right move for you, but once the decision is made, attack the project with determination and a solid resolve to get it done efficiently and quickly. It’s ok to take a break and step away from the process briefly but don’t let too much time go by before getting back on the project. It’s a big job and it can be an emotional roller coaster, but by starting early, having a solid plan on how you want to attack the issue, and being honest and realistic with yourself, you’ll get it done and be happy with your outcome.