Should you downsize when you retire?
When you retire, you’ll experience many changes – should one of them involve your home?
The issue with downsizing is one that many retirees will consider. If you’re open to a change you could find that moving to a smaller house, a condo ran apartment may make sense for you.
Let’s Consider Some of the Advantages of Downsizing:
You could save money.
Moving to a smaller space could lower your utility bills and upkeep cost.
You could save effort.
A smaller home will mean less maintenance and cleaning.
You could de-clutter
Over the years, most of us accumulate more possessions than really need. Downsizing gives you a chance to de-clutter. And you can do some good along the way, too, because many charitable organizations will welcome of your items.
You could make money.
If you’ve had your home for many years, it’s certainly possible that it’s worth more — perhaps a great deal more — than what you paid for it. So, when you sell it, you could pocket a lot of money — possibly without being taxed on the gains. Generally, if you’ve lived in your home for at least two years in the five-year period before you sold it, you can exclude $250,000 of capital gains, if you’re single, or $500,000 if you’re married and file taxes jointly. (You’ll want to consult with your tax advisor, though, before selling your home, to ensure you’re eligible for the exclusion, especially if you do own multiple homes. Issues can arise in connection with determining one’s “primary” residence).
But downsizing can also entail some drawbacks. First of all, it’s possible that your home might not be worth as much as you had hoped, which means you won’t clear as much money from the sale as you anticipated. Also, If you still were paying off a mortgage on your bigger home, you may have been deducting the interest payments on your taxes — a deduction that might be reduced or lost to you if you purchase a less-expensive condo or become a renter. Besides these financial factors, there’s the ordinary hassle of packing and moving. And if you’re going to a much smaller living space, you may not have much room for family members who want to visit or occasionally spend the night.
So, as you can see, you’ll need to weigh a variety of financial, practical and emotional issues when deciding whether to downsize. And you will also want to communicate your thoughts to grown children or other family members who may someday have reason to be involved in your living space. In short, it’s a big decision — so give it the attention it deserves.
Read more articles from VOM Magazine here: https://www.veteransoutreachministries.org/vom-magazine/