Director, RetyrSmart Advisory
To downsize or not to downsize. That’s the big question you should be asking yourself. Once you are through with your active professional life and are contemplating a more leisurely existence, this becomes a very big decision for you to take. But to be able to take that decision, you need to understand what downsizing really means. What is the impact of downsizing? The pros and cons of downsizing. All are key inputs as you try to answer the fundamental question for yourself.
What is downsizing and what forms does it take?
Downsizing your home means that you trade your present house for a smaller or less-expensive one. For instance, you might move over to a flat in a housing society or take a row house instead of the traditional home you are in. Or move from a larger flat to a smaller flat. Or it could be moving into another similar home but in a more affordable part of your town or suburbs. It may even mean moving into a home in a smaller town which would be more affordable.
When does downsizing make sense?
Let’s face it. At a time when we have wound up our professional commitments, we also find ourselves facing the empty nest syndrome when children who lived with us have moved on for higher studies, employment or to be more independent as their life stages progress. And we find ourselves entertaining guests at home less often. We in fact are not even staying throughout the year in our home as leisure travel, family travel etc takes predominance. In such situations we may find ourselves with more room than we need. There are rooms or areas in the house which we are not using at all.
You could argue that what about children and other family when they visit. Surely that’s a few days a year at best. Either you will all enjoy a cosy hanging around on those days or there are always neighbourhood hotels and Air B&Bs that can be used for those few days.
In some situations where you have been staying in a particular neighbourhood or large city due to your professional commitments, there is now an option to move into a smaller more relaxed suburb or town.
Another downsizing option is to move out of your home into a retirement community or retirement village or equivalent, when you find that such community living would be more beneficial to you
What are the advantages of downsizing?
The financial advantage can be significant. The difference in cost between bigger house vs flat and a smaller or the difference between a house in a bigger city/downtown vs a smaller city/suburb can leave you with a substantial profit which adds to your net worth and strengthens your investment portfolio further. This provides you even more financial security than earlier plus allows you to pursue many more leisurely activities
- The monthly costs of managing your house will be lower. Maintenance charges and property tax will be lower. Domestic help will cost less. Spends on utilities will decrease. Which means more savings compared to earlier?
- Moving into a smaller accommodation can reduce your daily chores and supervision. Less space to manage means more control and fewer headaches. This could be big plus as it will give you more leisure time which is what you really want as you grow older
- Reduced consumption. With less space you will stop acquiring more and more stuff and cluttering up your living area. Which also means lower spends and less things to look after
- Lower stress levels. More money, less spends, fewer chores, more leisure time can only mean lower levels of stress. That in itself may be worth the downsizing
What are the disadvantages of downsizing?
- You will miss the space that you had earlier. May feel a bit cramped. But you tend to get used to it over time
- When you are downsizing you will have to let go of a lot of your possessions which you may have been very used to
- Having family and/or guests over for holidays may be a little more difficult
- Depending on your move, you may be forced to forge relationships to keep your social life active. It may actually take a bit of aa hit during the time it takes for you to settle down in the new place
- You may feel a loss of prestige as compared to residing in a larger, more luxurious living space. (This is probably one of the biggest deterrents when it comes to downsizing
- Some amount of logistics pressure will be there to effect this downsizing. Finding buyers on one side and finding appropriate replacement accommodation on the other side. Market timing as real estate prices are not always in your favour. The documentation and paperwork. Disposal of possessions and moving of the retained stuff to the new place. You need to be conscious of this
On balance though, downsizing will make you more financially secure, reduce your stress levels, allow pursuit of more leisure activities and release some of the physical efforts involved. All good enough reasons to actively consider downsizing as a post retirement action point
Director, RetyrSmart Advisory