According to a Bankrate survey published in 2023, 56% of those surveyed stated that they are behind on their retirement savings. This includes 37% who say they are significantly behind on their savings. While it’s easy to be stressed about what the future holds if you’re included in this group, you could downsize in retirement to improve your situation.
Benefits of Downsizing in Retirement
Reduce Expenses
When you downsize in retirement, many of your house-related expenses will decrease. These include:
- Property taxes
- Property insurance
- Mortgage payment
- Home repair and maintenance expenses
- Utilities
- Possibly HOA dues
What does this do for your budget? In some cases, people who downsize save hundreds or thousands of dollars each month. This is money that you can directly allocate to your retirement savings.
Without this additional savings, you may may be able to avoid working two jobs as you prepare for retirement. You could also eliminate the need to get a part-time job in retirement.
Minimize Cleaning and Maintenance
Moving into a smaller house comes with other benefits, including reduced cleaning and maintenance tasks. If you’re gearing up for retirement, this may not be a major bonus point for you. However, as you get older, things like vacuuming a 3,000-square-foot house are increasingly challenging. Mowing the lawn on a half-acre or acre-lot could wear you out for the next few days.
Often, older adults decide to buy a smaller home with a more attractive layout. This may be a one-story home, a home with safety feature already in the bathroom and home without numerous steps leading up to the front door. Moving into a condo has additional benefits, such as not having to care for the lawn or the exterior of the unit.
Enjoy a Better Lifestyle
Based on your current retirement savings and income projections, you may feel resigned to have a less-than-ideal retirement. You may dream of having a nice space to garden in or living near a golf course. Limited savings and income in retirement eliminate your plans for a desired lifestyle.
When you downsize before or during retirement, however, you can live on less money. This may enable you to bolster savings before your retirement date and to enjoy a better lifestyle in your golden years.
Travel
After spending decades of your life working full-time or more-than-full-time hours, you may be ready to see the world. Maybe you want to tour Europe, see Machu Picchu or visit the glaciers in Montana before they melt.
Even if your travel plans are closer to home and less glamour, keep in mind that even a week-long road trip to the next state over could cost a significant amount of money. Then, consider the fact that you likely don’t want to take one road trip a year. Your extra savings in your budget could be applied to travel.
Retire Sooner
If you’re behind on retirement savings, retiring before you’re 70 or older may seem like a fat dream. However, when you downsize, two things happen to your budget. First, you can save more money before you retire. This may directly enable you to bump your retirement date forward.
Second, your lower expenses from downsizing mean you can live on less money. Somewhere between saving more and living on less, you may be able to retire a year or two sooner – or more in some situations.
When to Downsize for Retirement?
If you’ve fallen behind on retirement savings, downsizing as soon as possible may be a smart idea. When you dramatically reduce your housing-related expenses by downsizing, you can increase your retirement savings accordingly.
For many people, downsizing in retirement includes relocating to a more affordable location with a lower cost of living. However, before relocating to another city, compare the cost of living with the salary that you might earn in the new location (if you are still working.) It’s also important to review relocation and real estate purchase costs.