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Find All The Necessary Information To Reduce Stress When Downsizing.
Knowing when it’s the right time to downsize your home can be a difficult decision. Here are ten signs that can help you to identify that it’s time to sell your home.
When do most people downsize their home?
According to an AARP survey, 77% of adults over the age of 50 prefer to age in place by staying in their current homes, but some empty nesters and retirees may consider downsizing. The National Association of Realtors® states that the “silent generation” (people aged 74 to 94) comprises 24% of all buyers looking for smaller homes.
However, it’s the Baby Boomer generation that sold their homes at higher rates in 2020 than any other age group.
It’s not just older generations that should consider downsizing.
There are 10 signs that indicate it’s time to downsize.
1. Your monthly housing expenditures have exceeded 30%.
It is recommended by the U.S. National Housing Authority, established in 1937, that you should not spend more than 30% of your monthly income on housing. Spending more than 30% of your income on housing is considered a financial burden by the U.S. Department of Housing and Urban Development (HUD). Paying more than 50% of your income on housing is considered a severe burden.
If you suffer a significant drop in income, such as through retirement, salary cuts, or job loss, you may find yourself in one of these categories. This is a sign that you may need to move to a smaller place with a more affordable mortgage. It is important to plan ahead for this possibility. Seniors who want to avoid getting a part-time job to make ends meet need to calculate how much house they can afford in retirement.
However, be aware of the short-term upfront costs involved with moving. There may be repairs to be made on the home before selling, moving expenses, closing costs, and upgrades on the new place. You may also need to buy new furniture to fit your smaller space, and you might want to hire a moving company to do the work for you.
In the short term, these expenses may exceed your predetermined budget amount, but in the long term, downsizing can reduce monthly debt and increase monthly cash flow. Downsizing before retirement can help pay for many of these costs.
2. Your monthly budget leaves little leftover cash
As people approach their retirement, they often dream of being able to travel and enjoy their free time. However, if you’re using up most of your savings to pay for your housing expenses, you may need to consider downsizing to a more affordable option. By planning ahead and downsizing your living space five to ten years before retirement, you can save a significant amount of money each year.
For instance, moving to a home that costs $100,000 less than your current one could generate $3,000 in income from the proceeds and save you $3,250 in housing costs annually. Over five years, you could accumulate an additional $31,250 in savings, and over ten years, that doubles to $62,500 – money that can be put towards your retirement fund.
3. You’re feeling overwhelmed with home maintenance
As people grow older, one of the primary reasons they decide to downsize is to get rid of the burden of maintenance. Tasks such as minor repairs, painting, lawn mowing, and snow shoveling can be time-consuming, and may not be compatible with a relaxing retirement lifestyle. Furthermore, these activities may become too physically demanding for seniors.
Hiring external help for mowing, painting, or handyman services can be prohibitively expensive.
If you sell your home while it’s still in good condition, you can save money on preparations because it shouldn’t require major repairs. Additionally, you’ll save years’ worth of maintenance expenses.
4. Your home no longer fits your needs
Many seniors prefer to continue living in their homes as they age, a concept known as “aging in place.” However, as they grow older, they may face various challenges that make it more difficult to stay in their homes. These include:
- Stairs that are hard to climb or descend
- A steep driveway that increases the risk of falling
- Large walkways and long driveways that require shoveling snow
- Mowing the lawn becoming too challenging
- Cabinets or storage spaces that are difficult to reach
- Too many windows that are hard to keep clean
- Landscaping that requires high maintenance
- Bathtubs and showers without grab bars
It is common for senior citizens to desire a one-level house that has wide hallways for easy wheelchair movement, no-step entrances, walk-in showers with a bench, and is located near hospitals, clinics, and public transportation. Many homeowners wish to move from their current “two-story monster house” to a single-story house.
However, finding affordable housing that meets these requirements is challenging, especially for the 43% of older citizens living with mobility issues. According to the most recent statistics from 2011, only 3.5% of homes in the US have these amenities, and only 0.9% have electrical controls that are easily accessible by wheelchair users. Therefore, it is essential to plan ahead.
5. You’re the oldest resident in your neighborhood
Moving to a retirement community not only saves you money but also has a significant social benefit. Staying in your home for a long time can lead to isolation and loneliness, which affects over 25% to 60% of older Americans. Aging in place in family neighborhoods can also cause seniors to feel isolated as families tend to keep moving in, making the neighborhood younger.
A senior living community can provide you with a social network, transportation, activities, support, and security, which can enhance your quality of life and prevent depression-related health issues. Downsizing to a retirement community can increase your happiness by allowing you to meet more people from your generation. These communities offer amenities such as tennis courts, billiards rooms, woodworking shops, classes that teach you how to knit, and clubs that play cards and board games.
However, communities that provide these activities, amenities, and services often come at a higher cost, so it is important to determine what your budget permits before making a decision.
6. You want or need to convert your home equity into income
It’s worrisome that more than half of older workers have saved less than $50,000 for their retirement. To make ends meet, some seniors use their home equity by opting for a home equity line of credit (HELOC) or a reverse mortgage. However, homeowners should be cautioned that this isn’t an infinite source of funds. They should consider converting their home equity into a “stream of income that will last the remainder of their life,” as Kennedy puts it.
One way to do that is to downsize to a less expensive home. For instance, if you’re currently paying $4,200 a month on your mortgage, which includes principal, interest, taxes, and insurance, downsizing to a smaller home 10 to 15 years before retirement could save you up to $40,000 annually in housing costs.
7. Your career or family no longer ties you to your location
More and more employees have been able to work remotely from home since the start of the global pandemic, freeing them from the need to stay in a specific location. This has provided several advantages, including the ability to live wherever they want.
Parents whose children have left home are no longer tied to preferred school districts, making it possible to consider a wider range of locations for a new home in a less expensive neighborhood.
Homeowners may not need to downsize, but they can choose to relocate to a more affordable location where homes are less expensive, and where property taxes, utilities, and sales tax are lower.
8. You’re not using all the property (unused rooms or amenities)
As children grow up and move out, their bedrooms may be used only for occasional visits. However, you still have to maintain and pay for them, including cleaning, heating, cooling, insurance, and property taxes.
If you’re retired, you may not need a home office or features like a game room, home theater, swimming pool, exercise room, fire pit, or three-car garage. Although these amenities may be great selling points, they may not suit your retirement plans or lifestyle.
9. You want to be closer to family
Many retired Baby Boomers often choose to relocate to areas closer to their adult children. According to the National Association of Realtors®, this group is the most likely to move the farthest after selling their home. The trend of living near family began even before the pandemic, and continues to prevail.
Although Baby Boomers are known to relocate close to their families, the Silent Generation is the group most likely to buy a home near family and friends, with 53% of them opting to do so.
Jones says that “the tipping point” for such a move is often grandchildren. When young adults find it challenging to afford their first house, they may leave the state, and their parents follow to be closer to their grandchildren.
While some seniors are relocating great distances to be near their grandkids, others are downsizing to a condo or senior community in their current city. This move allows them to travel and visit family while still enjoying different locations.
10. You want a lifestyle change
The housing realm offers an array of choices for seniors. The advantages of age-restricted communities have been previously discussed.
Life sometimes thrusts changes upon us, altering our routines. Those facing physical limitations or medical needs can explore independent living communities, assisted living setups, and nursing homes, where tailored assistance is available.
Divorce can reshape housing needs, prompting a shift from a sizable house to a more affordable abode. Some seniors opt to reside with their adult children, yielding mutual benefits like childcare and reduced housing expenses. An alternative is senior home-sharing, fostering camaraderie and cost-sharing.
Alternatively, certain seniors embark on a “gap year” or more by living in an RV, perhaps satisfying their wanderlust. This budget-friendly choice grants them the freedom to relocate as they please.
Remember this: downsizing applies beyond seniors. Choosing a smaller, less costly home with reduced upkeep allocates resources and time for other pursuits. Working fewer hours, hastening mortgage repayment, and trimming financial obligations may be possible. Funds can then fuel travel, dining out, learning experiences, or new hobbies.
Practically speaking, downsizing could bolster emergency (or retirement) funds. Environmentally conscious individuals can appreciate the reduced fossil fuel consumption in smaller homes.
Simplifying life and shedding the burden of maintaining a large home may be appealing. This, coupled with financial gains, spurred the tiny home movement.
What are the most common downsizing mistakes?
Exploring the idea of downsizing can be a positive move, but it’s crucial to navigate the process wisely. Here are some common pitfalls to steer clear of:
- Lack of Strategy: Before selling your home, chart your course. Define your goals and break down the steps needed. Avoid the misstep of closing escrow without securing a new dwelling. One solution is linking the sale of your home to finding a new one.
- Misjudging Costs: Be mindful of the expenses tied to a new home and the move itself. Home prices have risen by 11%, diminishing the value of your dollar. The average cost of moving within 100 miles hovers at $1,400.
- Overestimating Home’s Value: Elevated market prices don’t automatically mean your home is worth more. Avoid the trap of overpricing; various factors shape your home’s value. For a rough estimate, refer to 123SoldCash’s Home Value Estimator.
- Neglecting Closing Costs: Closing costs typically range from 2% to 5% of the house’s sale price. Calculate these costs beforehand using 123SoldCash’s Closing Costs Calculator for a clearer picture.
- Overlooking Tax Implications: Complex capital gains tax rules can catch you off guard. Seek advice from a CPA to anticipate potential tax liabilities.
- Hasty Sales: In a competitive market, homes sell rapidly. Yet, holding off a bit longer might yield better results by capitalizing on the competition.
- Procrastination: Delaying downsizing might lead to missed savings, especially if the market is unfavorable or limited options prevail. Act before reaching a crisis point.
- Premature Downsizing: Emotional readiness and practical circumstances matter. Downsizing isn’t always cost-effective. If smaller living spaces are costly, it might be wiser to wait.
- Rushed Transitions: Major life changes are emotionally taxing. Allotting ample time for contemplation and the downsizing journey can alleviate the burden and enhance the experience.
If the signs point to downsizing, put an expert in your corner.
Assessing downsizing involves delving into its financial, emotional, and practical dimensions. Your judgment on whether it’s suitable and the optimal timing carries weight. Jones emphasizes this is a personal decision, not dictated by the market’s pulse. “Selling when you’re prepared” holds merit, yet familiarity with the merits, demerits, and available resources is paramount.
Should advantages tip the scales over disadvantages and you’re poised for action, drafting a comprehensive plan is pivotal. Seek out additional planning pointers here.
Enlist guidance from your real estate agent for real-world insights. Leverage 123SoldCash’s Agent Match, a valuable tool connecting you with a top local agent backed by data from numerous transactions. This expert can facilitate your downsizing journey when the time aligns.
“Now Not Less Important”
How to Help Parents Downsize and Make a Smooth Transition.
Downsizing is a significant life event, especially for parents who are transitioning from a larger home to a more manageable living space. It’s a process that requires careful planning, emotional support, and practical steps. In this article, we’ll explore strategies to help parents downsize effectively, ensuring a smooth transition that minimizes stress and maximizes comfort.
Understanding the Need for Downsizing
Assessing the Situation
Before diving into the downsizing process, having an open conversation with your parents about their reasons for downsizing is essential. Understanding their motivations will guide the rest of the journey, whether it’s due to retirement, financial considerations, or simply wanting a more manageable home.
Setting Realistic Expectations
Help your parents set realistic expectations about the downsizing process. Explain that while it might be challenging emotionally, it’s an opportunity to create a living space that suits their current needs and lifestyle.
Creating a Downsizing Plan
Room-by-Room Assessment
Begin by assessing each room in the house. Create a checklist to categorize items into three groups: keep, donate/sell, and discard. This step-by-step approach makes the process more manageable and prevents overwhelm.
Prioritizing Sentimental Items
One of the most challenging aspects of downsizing is dealing with sentimental belongings. Encourage your parents to keep items that hold the most emotional value and find creative ways to honor those memories without cluttering their new space.
Downsizing with Efficiency
Decluttering Strategies
Help your parents declutter using effective strategies like the KonMari method or the 90/90 rule (if you haven’t used an item in the last 90 days, reconsider its importance). These techniques streamline decision-making and ensure that only essential items are kept.
Digitizing Memories
For sentimental items that are taking up physical space, consider digitizing them. Scan old photos, letters, and documents to preserve memories without adding bulk.
Optimizing the New Space
Space Planning
In order to make the most out of the new space, we need to optimize it. This means we should make sure the space is being used efficiently and effectively. We can do this by rearranging furniture, decluttering, and checking if we need any additional storage solutions. Once we optimize the new space, it will be more functional and enjoyable to use.
When moving to a smaller home, space optimization is key. Help your parents plan the layout of their new space, ensuring that furniture and belongings fit comfortably without overcrowding.
Multi-Functional Furniture
Invest in multi-functional furniture that serves multiple purposes. For instance, a sofa bed can turn a living room into a guest bedroom when needed, maximizing the utility of limited space.
Ensuring emotional well-being support
Emotional Support
Downsizing can be emotionally taxing. Be there to provide emotional support, listen to your parents’ concerns, and remind them of the positive aspects of their new living situation.
Focusing on the Future
Shift the focus from what’s being left behind to the new experiences and opportunities the downsizing journey will bring. This perspective can help your parents embrace the change more positively.
Helping parents downsize is a compassionate and practical endeavor. By understanding their needs, creating a solid plan, and providing emotional support, you can guide them through this transition smoothly. Downsizing is not just about reducing possessions; it’s about creating a more intentional and comfortable living space that enhances their quality of life.
1. What’s the best time to start the downsizing process?
The ideal time to start is when your parents express the desire to downsize, allowing ample time for planning and decision-making.
2. How can I convince my parents to let go of sentimental items?
Suggest taking photos of these items to preserve the memories digitally, making it easier to part with the physical objects.
3. What should I do with items my parents want to donate or sell?
Consider organizing a garage sale or donating to local charities. You could also explore online platforms for selling valuable items.
4. How can I help my parents adjust to their new surroundings?
Encourage them to explore the new neighborhood, join social groups, and focus on the activities they enjoy to help them feel more at home.
5. Is it possible to downsize without causing too much stress?
Yes, by planning well in advance, breaking the process into manageable steps, and offering unwavering support, downsizing can be a less stressful experience.
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