A lower maintenance home isn’t the only reason to downsize. The financial benefits can also add up.
Research by the Curtin Economics Centre found 16 per cent of 55-64 year olds and one-quarter of households aged 64-plus have already downsized. Among those that had not yet done so, 80 per cent would like to downsize in the future.
Not surprisingly, the most common reason to downsize was to live in a smaller home that is easier to run. This gels with survey results from Downsizing.com.au that point to much the same motivation.
But it’s also important to consider the financial benefits of downsizing.
Dispelling the “cost outweighs the benefit” argument
At downsizing.com.au we occasionally come across commentators, who argue that after downsizing, the funds left over from the sale of the family home can render retirees ineligible for the age pension – based primarily on the assets test.
Sure, this may be the case for some wealthier Australians, who already have significant investments including superannuation assets.
However, recent research National Seniors Australia (NSA) dispels the image of older Australians as wealthy.
15% of retirees still have a home loan
The NSA study found that one-quarter of 75 to 79-year-olds had already exhausted their retirement savings, and almost a third of Australians aged over 80 were in the same boat.
Worryingly, 15% of retirees still have a mortgage. Yet over eight out of ten retirees are home owners.
This highlights the availability of home equity as a resource for empty nesters to tap into.
Downsize to grow your super
NSA also found that regular and constant income is a key goal for Australians in retirement. Thanks to new reforms that allow home owners to make downsizer super contributions worth up to $600,000 (as a couple), empty nesters who downsize can cut the costs (and effort) of home maintenance while growing their nest egg, and still enjoying a new lease on life.
It adds up to a sensible argument for downsizing, with financial rewards and lifestyle benefits for empty-nesters who are open to moving on from a home that was well-suited to their past – but which could be a millstone in the future.
Amanda Graham is the Co-Founder and Co-CEO of Downsizing.com.au