2023 is the year to downsize and there’s still time to sell your home so you can free up capital and live a more relaxing lifestyle.
However, if you have been in your home for many years, it can be difficult to know where to start, particularly when it comes to dealing with the property and legal professionals who will help you with the transaction.
This guide will help you form a plan to downsize in retirement:
The benefits of downsizing in retirement
To start with, why downsize?
There are two main reasons to downsize in 2023:
- Make life easier: If you are getting older and the kids have flown the coop, you might not need a large house anymore. The upkeep of a large place can be tiring and time-consuming, and if you have numerous rooms that are barely being used anymore, why keep putting in the effort to maintain them? Likewise, is it still worth maintaining a large garden that is barely seeing any use? Why not move somewhere smaller and easier to manage?
- Make life more affordable: The other big reason, especially with the current cost of living issues, is to ease your expenditure. Even if you have paid off your home, the cost of maintaining a large property can be excessive and may be more than you can afford to spend any longer. By selling, you will also have capital to enjoy your retirement with.
So downsizing can make life easier and cheaper. That's why so many older Australians are downsizing this year to the extent that it is being seen as a trend. There is also the fact that it is currently possible to put up to $300,000 of the proceeds of your home sale when you downsize into your superannuation fund with no tax repercussions.
Figure out what you need to downsize
Once you have decided downsizing is right for you, it’s best to work backwards.
That means first figuring out where you want to be and what kind of home you need, then working on a plan to make that happen.
In understanding what you need from your new home, you should start with the following:
- How many bedrooms will you need?: You may still want an extra bedroom or two for guests or to set up as an office or hobby room.
- Do you still want a garden?: A lot of people enjoy gardening, so it still might be worth your while to find a property with a small garden. On the other hand, if you are ready to forget about dealing with lawns and gardens, you might consider buying an apartment. There is also the sweet spot of a garden apartment.
- Will more than one bathroom be necessary?: If it will only be you and your partner most of the time, a one-bathroom home will probably do the job. On the other hand, having an ensuite and a guest bathroom can be handy.
- Where do you want to move to?: Where to live is a big decision. After selling your home, you might be able to move to a more central urban area. It might afford you the opportunity to live closer to amenities like shops and hospitals, which might make life easier as you age.
The other options in regards to location are somewhere closer to your children and grandchildren, or a place somewhere in the country.
Finally, you have to choose whether you want to live independently or if retirement village will suit you. Both have their advantages and disadvantages in terms of community, privacy, access and cost. You may need to speak with a financial advisor to find out what suits your financial as well as your personal circumstances.
Sell your home
Before you buy a new place, it makes sense to sell your existing one. This way, you’ll have a clear budget and time to search for the perfect place. When you sell as part of the downsizing process, you can request an extended settlement so you have time to find an apartment, townhouse or retirement unit.
There are several steps involved with the selling process when you downsize. These include:
- Have a valuation - Meet with some real estate agents - Decide if you will sell via auction or private treaty - Create a timeline - Declutter and clean your home - Arrange necessary repairs, paint work etc - Engage a conveyancer (your real estate agent can recommend one) - Work with your agent to list the home - Arrange viewings and inspections - Negotiate with buyers (your agent will do this for you) - Sign and exchange contracts - Prepare to move
This looks like a long list but don’t worry, your real estate agent will guide you through the process to sell your home and downsize. You can even ask about buyers agent services to help you find and purchase your next place.
The experience to downsize doesn’t have to be stressful if you pace yourself and find professionals who are caring and empathetic. Best of luck with this big change.
IMPORTANT: It is worthwhile talking to a licensed financial planner to understand the implications based on your individual circumstances and needs.