People often need to make a lot of important decisions in the run-up to retirement. For many, one of them is the decision about what to do with the family home. This begs the question: do you need to downsize your property before retirement?
The simple answer is: it will depend on your circumstances. There is no one-size-fits-all answer to this issue, but there are some points to consider when making it.
To find out if you need to downsize your property before retirement, you should think carefully about the following questions:
- Will your home be suitable for you as you grow older?
- Do you have an outstanding debt, like a mortgage?
- Will your retirement funds be enough to pay for what you need and want?
To provide you with as much information as possible, we will look at each of these questions in more detail.
1. Suitability of your home
The biggest question you need to ask yourself before you know if you need to downsize before retirement is whether your home will be suitable for you as you get older.
How easy will it be for you to live in the house as you age? Addressing this question at an early stage can make subsequent decisions much easier.
Take a good, hard look at your current home (and maybe bring in someone else with no emotional attachment to it) and ask yourself how easy it will be to manage it as you age and face the prospect of losing your mobility, or, at the very least, slowing down substantially.
These are some things to consider:
What if you won’t be able to go upstairs any more?
Could your home be adapted? Maybe it will be possible to install a stairlift if you get to this stage. It might be possible to move your bedroom downstairs. You might even already have a downstairs bathroom, or there is room to create one.
If none of this is an option, then living in your home as you grow older might become rather difficult. And not all houses can be easily adapted.
For example, period homes may be glorious in your adult years, but a massive challenge in your older ones, and it may not be possible to adapt them for independent senior living and if it is, it may involve considerable expense.
Modern homes may already be fine for those with reduced mobility, or require minimal adaptation.
What if maintaining your home becomes too much?
The bigger the house, the more work there will be to maintain it. This doesn’t just include cleaning, but also making repairs. And don’t forget your garden.
As much as you might love your garden, digging and weeding become much harder as you get older. It might be painful to think about these things, but it’s important to consider them.
While you can downsize once you have reached this point, it’s worth remembering that selling and buying a new home is a stressful process. It can be hard if you are still fit and mobile, but even more so if you have reached a stage in your life when your age forces you to slow down.
Will the location still be suitable as you grow old?
When considering how easy (or not) it would be to live in a property during later life, remember to consider the issue of transport outside your home, especially if you become unable to drive.
The distance to the nearest bus station may seem like nothing now but could become a very big deal later in life. How about parking for taxis or access for ambulance staff?
In simple terms, you need to make an objective judgement call about whether or not it will be practical to continue to live in your house as you age and if the honest answer is no then you will need to make plans to move at some point.
That point does not necessarily have to be as soon as you retire, but it might be best to make it when you are still fit and active rather than wait for circumstances to catch up with you.
This is what we did when we bought our previous home. While it wasn’t a major concern, we liked the property because, as a dormer bungalow, it could potentially be our forever home.
Only the master bedroom and a small bedroom were upstairs. The remaining bedrooms and family bathroom were all on the ground floor. That worked for our usage at the time (we needed home offices and a guest room), but it also meant as we aged we had options to move downstairs if mobility became an issue.
As it was, we ended up moving again when our circumstances changed, and we could afford our dream of living rurally. However, even our house now has a layout and location that means we could comfortably live there well into old age!
But it could also be that as you grow older you might want to be closer to family. Or you would prefer to live in a quiet village rather than a bustling city.
2. Do you still have debt?
If you still have debt, then downsizing could make a lot of sense, even if interest rates stay low. Paying off any outstanding debts, such as a mortgage, basically relieves you of one potential source of stress in retirement and, if nothing else, will limit the amount of interest you have to pay.
You will have to consider that your pension might be smaller than the income you had when you worked. Having to continue to pay, for example, monthly mortgage payments might reduce your living standard.
It could mean that you won’t be able to do the things you want to do in retirement, which would be a real shame.
If you don’t have debt, however, and your main reason for considering downsizing is to improve your post-retirement finances, then it’s strongly advisable to do your sums very carefully indeed before taking a final decision.
You might also be in a position where you simply want to know the value of your home. Knowing how much your house is worth could be a good starting point when it comes to selling your property, as you’ll know how much you could put towards your next property.
You’ll also need to be totally honest and realistic about where you want to live and what size of property you want to live in so that you can form a realistic idea of how much (if any) of the profit on your old home will still be left in your bank account after buying your new one.
Please note that “if any” was a serious comment. For example, if your plan is to move from a commuter town into a nice little place by the sea, then you may well find that a relatively small property on the coast has a similar price to a family home in a standard commuter town.
Of course, that nice little place by the sea may give you a far higher quality of life and if that is your main reason for downsizing, then the move may still make perfect sense. You just need to be clear about whether the main drive behind the move is a financial one or some other reason such as a desire for a different lifestyle.
3. Will your retirement funds suffice?
Most of us look forward to retirement, because our time will be our own. Taking up new hobbies, travelling the world and changing the lifestyle are just some of the things that people want to do when they don’t have to work any more.
But do you need to downsize your property before retirement to be able to do all these things? Well, this will depend on your individual situation. But it pays to crunch the numbers beforehand, so you know what will be possible and what won’t.
Planing for retirement is a vital step, as it will allow you to enjoy this time once it has arrived.
The most basic need you will have in retirement is to be able to pay your bills. As we have said, your pension might be lower than your salary, so you might struggle to pay for everything.
Reducing living costs is one of the biggest reasons why you might need to downsize before retirement. Not only will you be able to pay off any outstanding debts if you downsize, but a smaller house will also cost less to run.
Utility bills, council tax and home insurance are just some of the costs that will be lower for a smaller property.
But there are other reasons why your pension funds might not be sufficient. Your new lifestyle might include more expensive things like travelling or getting a sports car or sailing boat. Downsizing and thereby releasing some cash from your property can help you get the money you need to achieve the lifestyle.
If your home and location will still be suitable for you as you grow old, and you want to stay, but you could do with an extra income, why not let your house work for you?
Monetising your existing property
Equity release can be more complicated than the adverts for it might imply, but it is still an option, albeit one which is probably best considered with the help of professional advice. There are, however, often plenty of other options for earning an income with the help of your home.
Probably the most obvious one would be to take in one or more lodgers. Remember the government’s rent-a-room scheme lets you earn up to £7,500 per year tax-free (per property rather than per tenant or per property owner if you own jointly).
Obviously schemes like this can and do change, but it’s hard to see why the government would significantly change let alone cancel this one given that the UK has a massive demand for accommodation.
You might not be keen on the idea of sharing your home with lodgers, but remember firstly that there are all kinds of lodgers and secondly that although the allowance is per year you can still qualify for it even if you only let out your home for part of the year.
So, for example, if you live in a place where there are lots of language students and tourists in summer, there is nothing to stop you only taking in lodgers during the summer and having it to yourself the rest of the year.
This is what the owner of our previous home had done before we bought the property. As the house was near to a University that was popular with overseas students, she rented out a room to students and lecturers who needed it.
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Do you need to be motivated to “death clean”?
Maybe it’s not so much that you’re asking “do you need to downsize your property before retirement?”, but that you want to.
Downsizing may be part of your plan to simplify your life and to make things easier for those you leave behind. If you’re happy about this approach, then that’s totally fine, but it’s also perfectly possible to declutter without moving. In fact, it might even be easier if you’re not in a rush.
You can take time to thank each item and move it on in the right way. You may also find that the early stages of your retirement give you all the motivation you need to death clean because you will have more time available to you. Decluttering your home can open up opportunities to use space in more meaningful ways.
For example, if your children’s bedrooms are now technically guest rooms but actually junk rooms, decluttering them can give you a proper guest bedroom (which could, potentially be let) and a craft room or office, from which you could start a side hustle to bring in some extra income.
Conclusion
Whatever your circumstances, the question of do you have to downsize your property before retirement can be a tricky one. It will depend mostly on the suitability of your home and location for the later stages of your life.
Financial reasons could also be the driver in deciding whether to downsize or not before you get to retirement. Many people are looking for a lifestyle change once they don’t have to work any more.
To achieve that, whether for financial or other reasons, many decide that downsizing is just the thing. By asking yourself the three questions we have talked about, and answering them honestly, you can ensure that you reach the right decision for you.
If you think that downsizing is the right thing to do for you, then read this brilliant guide to downsizing by Age UK.
