Downsizing… Is it right for you?
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As we get older, many of us consider downsizing, a common-sense adjustment to life’s changes. Children move away and a house becomes too big. Or it becomes difficult to maintain the house because of physical and/or financial limitations. Here are some questions to ask yourself:
Is it a good idea for you to downsize? List the pros and cons.
What is the best way to make it as easy as possible?
How can I make this benefit me the most financially?
Read on to answer all these questions and more!
Reasons not to downsize
The amount of time and effort involved. A lifetime of possessions to sort through.
The need to find a new living situation.
Emotional attachment to your house and the items in your home.
If the move is distant, loosening ties with friends and relatives.
Possible need to establish new health care resources and other resources.
The details involved in selling and possibly buying property.
Reasons to Downsize
The present house is simply too expensive to maintain. Consider your mortgage payments, heating and cooling bills, general upkeep, yard maintenance, roof repairs, need to update systems, taxes, cost of assistance, etc.
Many rooms are unused and the house feels lonely.
Downsizing could greatly increase your retirement nest egg and income.
Physical limitations make cleaning, stair-climbing, and maintaining the house difficult.
The possibility to rejoin friends and relatives who have already relocated.
Your health is still good enough to manage the downsizing process, but you anticipate that this may not be the case in the future.
You are still young enough to adapt to a new living situation and would like to enjoy the benefits of a lower-stress lifestyle.
You want to spare your children/heirs from having to sort through a house full of your accumulated possessions.
In some cases, you may want to move to a senior living community or an assisted care facility to make your life easier.
All these things need to be considered in your decision to downsize. Fortunately there are many resources available to you to make downsizing relatively pain-free. There are people and agencies to work with you throughout the entire process.
What’s involved in downsizing
Here are some steps to take:
Talk about the possibility with people you know and trust: your children and friends, professionals such as your doctor and clergyman. Talk to your financial planner. Get a number of opinions.
Make a list of the advantages and the disadvantages to you.
Investigate various options. There are many senior living communities which offer low-stress lifestyles with social and leisure activities. Their amenities may include hiking trails, tennis courts, golf courses, swimming pools, fitness centers, community centers, restaurants, clubhouses and group activities.
If you plan to move to another area or state, visit there long enough to find out what it is really like. Do some research on the new area for yourself, don’t just rely on what’s in the brochures. Talk to people who live there. Make sure that you visit when the weather is extreme to find out what it is really like.
Make a list of all the things you will have to do in order to make the change. Try to minimize the number of surprises that you will encounter.
Pare down the items in your home
Go through the items in your home and divide them into three categories:
Must Have (Financial records, heirlooms, irreplaceable items, jewelry etc.)
Would like to keep but not really essential and can be replaced if necessary (Furniture, tools, spare towels, etc.).
Definitely discard (receipts over seven years old and all the things you thought you could use some day which never comes.) Shred anything with personal information on it.
Photos and memorabilia are difficult for many people to discard because they recall fond memories and important times. Save your favorite photos in one or two albums and make digital copies of the rest. (There are services that do this.) Once digital copies are made you can pass on your collected photos and memorabilia to friends and family members.
Start thinning out your belongings at least three months before the move. Take some time each day, or one morning each week, to go through that jammed coat closet or overflowing filing cabinet. Paper is often the most difficult, so tackle it one box at a time. The same goes for photos, which require a lot of attention.
Giving away some possessions that are difficult to part with can bring you happiness. It can bring you joy to see loved ones enjoying your belongings. Invite family over and show them what you’re planning to let go of and ask them what they would like. You may be surprised at what they want. If that’s not practical, post photos of them on a family FaceBook page, and send the items to the relatives who want them.
Get help if possible! It is surprisingly hard work to load things into boxes and/or prepare them for shipping. There are people who will do this for a small hourly rate. You may find some younger family members who are happy to help you.
Furniture
Get a feel for the size of your new rooms by comparing them to rooms of similar dimensions in your present home. For instance, your new living room may well be smaller than your current bedroom. You may think you can squeeze in two sofas, but a reality check could help you realize that only one will fit comfortably.
It may be both easier and less expensive to buy new furniture for your relocation. Consider this option.
Using floor plans to prearrange your furniture before the move can be helpful. There are also some amazing computer programs that give you realistic predictions of what everything will look like in your new home. One example is https://www.roomsketcher.com, which is easy to use. Five free designs and then only $50 a year. Here’s an example:
How to sensibly eliminate things you don’t need
Try not to throw anything in the garbage. Recycle, reuse, sell and donate instead. As tempting and easy as it is to throw away wire hangers, musty clothes and shabby furnishings, be environmentally responsible and try to find a home for everything. A can of Comet with a few shakes of powder left could make someone else's sink sparkle if you don't want it; consider giving supplies to a shelter, a neighbor or a cleaning service. Or donate to a charity. The unhoused greatly appreciate donations of clothing, especially socks.
You may be pleasantly surprised at how much money you can get for some of your items. There are services in every neighborhood that will organize a yard sale for a share of the profit. There are also people who will help you sell things on Ebay and Craigslist. If you are so inclined, you can sell them yourself on the OfferUp App and other similar apps.
Another alternative is an auction house for high-end items. Sothebys is one. You could also look for reputable antique and secondhand dealers. They can buy your wares, sell them on consignment, or put you in touch with booksellers and other specialty dealers. Some dealers will come to your home, take what you don't want and even drop off the items for charity. If you can't sell an item, donate it to a charity for a tax write-off.
Emotional Considerations
The most difficult aspect of downsizing is the emotional impact. All of us have some sort of attachment to our belongings and to our homes. Attachments can involve memories, the belongings’ usefulness to us, or even just a love of their attractiveness. This can be a long and involved subject, too long for this pamphlet. If attachment stands in your way, you might want the workbook version of a book called “Downsizing The Family Home” by Marni Jameson. Published by AARP, it’s available on Amazon. 110 pages of a clear, step-by-step downsizing process dedicated to how to select items to keep, store temporarily, donate or give away.
Remember to take your time and to get help when you go through your belongings. Be prepared for some surprises, especially how hard it can be to let go of memorabilia. You have probably been in your home for a long time, and it is a huge part of your life.
Selling Your Property
Once you decide to move, you must then decide what to do with your present house. It’s likely that you will want to either sell it or rent it out. That depends on your financial needs. Remember that you may have to pay a capital gains tax if you sell, but there may also be negative tax consequences if you convert your primary residence to rental property.
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income if your file as a single person, or up to $500,000 of that gain if you file a joint return with your spouse. IRS publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.
You have several choices in selling your home. You can sell it yourself, which takes great courage and a tremendous amount of effort. You can do a quick sale to a company that makes a business of flipping homes. You will make much less than you otherwise could by doing this, but you will get a fast transaction. Or, if you wish the best possible arrangement in terms of convenience and the highest return possible, hire a good realtor, particularly one who is trained to be a Senior Real Estate Specialist.
While using a realtor involves a small commission, you most likely will net more money in the long run while saving yourself a ton of work. Your realtor will guide you through the process, do most of the work for you, and negotiate the best possible price and arrangements. Realtors with the Senior Real Estate Designation are specially trained to help people with downsizing. They understand the difficulties seniors face in downsizing and have networks of professionals to help with each step of the process. To find a specially trained realtor in your area, go to the SRES website at SRES.Realtor. Scroll down the homepage and click on “Find a Designee”.
Renting Out Your House
Being a landlord is not for the faint of heart, especially if you have never owned a rental property. At its best, renting provides a steady source of income that grows with the cost of living. At its worst, it can be a nightmare. You will want to familiarize yourself with local laws concerning rent control, landlord responsibility, the eviction process and required insurance. Do some research. Talk to other people who have experience with rental property. Another important consideration is that you may lose your IRS tax exemption. Talk to your accountant before converting your primary residence into income property.
Extra important: find a good property manager. They will expect around 10% of the gross rent for their fee. They will relieve you of most of the potential headaches. Do you really want a midnight call to tell you about an overflowing toilet?
In Conclusion
If you take the steps outlined here and decide that downsizing is right for you, remember that the downsizing process usually gets easier once you get started, especially if you keep your final goal in mind. You will be glad that you have taken this most important step. A sense of freedom can be gained by releasing yourself from stress and unnecessary burdens. It’s easier to enjoy retirement when you can focus on living!