The leaves are changing color, the kids are back in school and for some parents who have sent their last child off to college, their house is suddenly a much quieter place. While these baby boomers may still be getting used to the empty nest, it brings with it new possibilities.
As the home empties – either after children move out or a spouse passes away – the idea of downsizing from a traditional home to a smaller house or senior living community appeals to many boomers.
The decision to downsize can be either personal or financial. According to research by TD Ameritrade, in order to boost retirement savings, 50 percent of boomer parents are willing to live a simpler lifestyle. In addition, a quarter said they would live in a smaller house.
When deciding whether to downsize, here are a few things to consider:
- Simple: Ditching a traditional home can mean no more lawn care, snow removal, exterior maintenance, and less housework – in short, a simpler lifestyle.
- Safe: A condo or apartment can offer increased security for those traveling more often in retirement. In addition, closer proximity to neighbors to check in on one another can mean increased safety.
- Social: Senior living communities bring people together. For those who’ve seen their social circle shrink as they age, this is a great way to make friends.
Consider the emotional and potential unknown costs of downsizing
- Don’t jump to a decision right after a major life event (for example, the death of a spouse, divorce or the last child moving out) – take three to six months to adjust to new situations.
- Moving after decades in the same home has emotional and financial challenges – and involves a lot of work. Think through who can and will help in this transition as well as the time it will take.
- Smaller doesn’t always mean cheaper. Retirement living options can be pricey or have additional fees. Make sure to weigh all of the options.
- Think long-term – what happens when mobility decreases and additional care is needed? Will another move be needed? What additional costs should be considered?
- Inform your kids in advance of your plans to sell to give them “closure” in case they have emotional ties to the home of their childhood.
The following checklist can help individuals evaluate whether downsizing makes financial sense:
- Make a list of the financial pros and cons to selling your home.
- Determine the amount of equity you have in your house.
- Set a budget for repairs and upgrades to maximize the sale value of your current house.
- Decide how you’ll pay for the new home – and be aware of possible capital gains tax.
- Create a comprehensive budget for your new lifestyle vs. prior lifestyle.
- Read the fine print and understand any ancillary fees associated with your new home.
A home carries many memories and milestones for the entire family. While downsizing is a big decision, it is just one of the many considerations boomers may be faced with as they enter this new chapter in life.
For those still in the workforce this is a great time think about ramping up workplace retirement savings or sitting down with a financial planning professional to create or revise retirement income plans. Make sure to clarify the required minimum distributions and how the savings will be drawn down. An empty nest is also a great reminder to button up any estate plans with an attorney or tax advisor.
With retirement on the horizon, it is important to do everything possible to keep personal goals in sight. Luckily, free online resources and retirement checklists are available to help navigate this new adventure.
This article was originally published on The Huffington Post.