By DAVID HOUCK
Qualifying Broker
Atomic Realty

DOWNSIZING – Many older Americans are choosing to go smaller and downsize when retiring. Moving is a stressful experience, at any age, and downsizing for retirement carries unique challenges. Downsizing involves letting go of 60 to 80 percent of the belongings that took you decades to accumulate.

DOWNSIZING ADVANTAGES

Saving money is one of the primary reasons people downsize in retirement. Less expensive housing is an easy way to increase your budget and your retirement savings.

Some financial advantages of downsizing in retirement include:

1. Selling your home will possibly result in a windfall of cash. This can boost your savings and increase your retirement nest egg;
2. Selling your home can increase your cash flow. The extra money from downsizing can be spent slowly increasing your available monthly cash flow;
3. A smaller mortgage. If your current home isn’t paid off, a new home with a lower monthly mortgage payment can give your budget room to breathe; 
4. Less cleaning and maintenance for you. A newer home will likely need fewer repairs. less cleaning, and have lower upkeep costs than an older home; 
5. With a newer, smaller home, if hiring out work, you probably won’t spend as much money hiring help to take care of the property; and
6. Lower Utility Bills: Smaller spaces and fewer rooms mean lower utility costs. If you’re moving to a home with newer windows or energy efficient appliances, you may save even more.

RETIREE BE AWARE – PLAN YOUR FUTURE HOUSING 

1.  Do you want to obtain your new home by taking out a mortgage, paying in cash, or renting? Evaluate your options.
2. If you are thinking of taking out a mortgage, talk to your lender BEFORE you retire. It may not seem logical but generally lenders make loans based on your INCOME, NOT YOUR SAVINGS. While you may have plenty of savings, once retired you may have very little income. A lender may be hesitant to loan to you because your income is too low. This is particularly relevant if retiring prior to collecting social security or if social security will be your only income.
3. If you retire and have lots of cash but no income you may find yourself forced to spend a chunk of that cash on your new home or as rent. It may be difficult to find a bank to loan to you. If you are just moving the equity in your current home to the new home that works as well but be aware that money will be “locked up” until you sell the new home. This may defeat one of the financial purposes of downsizing.
4. If you have a lot of equity in your home but little other cash, you may want to look at “reverse mortgages”.  We at Atomic Realty are not lenders so please contact a lender and do research on if these work for you.  
5. Renting – If you retire and want to downsize but are not 100 percent sure the house is the last redoubt, perhaps renting makes sense. Many of us want to move close to family. However, if the kids move or you lose other family members are you sure you want to stay there? If not, consider renting. If you have retired but do not want to spend that large cash amount you receive from your old house, renting may be a good option.

Watch for our next articles that continue to focus on downsizing.

David Houck is the Qualifying Broker for Atomic Realty, with 40 years’ experience, a BS in math and physics and a doctorate in law. For more details on these issues and free selling and buying tips see AtomicRealty.net