Downsizing Your Retirement Expenses

As people get closer to retirement, priorities change. The financial resources spent on home improvements and the time and energy necessary to maintain a full-sized home often become a little more of a burden. As kids leave the house and launch into their careers and start building their own families, there’s often a bunch of unneeded space.

The final 10-15 years of our working careers usually mark a time period when it’s time to ramp up efforts to save to make sure our retirement savings will be enough to retire with confidence. That’s why the idea of downsizing is a good one to start early.

Perhaps the biggest potential advantage to downsizing is it can save a lot of money. Selling a larger home – possibly one that still has a mortgage – in favor of a smaller house or condo that’s completely paid off can save potentially tens of thousands of dollars in interest payments over time while still building equity. The earlier you start the planning process, the better. Here’s a checklist of considerations in downsizing various aspects of your life:

Before taking action, get advice first. Downsizing should be viewed as a holistic process, a chance for a check-up of your overall finances while identifying things, expenses and habits in your life that you can change. It’s helpful to set up a plan to eliminate debt and move on to a check-up of savings, investments and estate matters.

Downsize potential health issues. It’s probably no surprise to realize that out-of-pocket and premium-based health costs will be cheaper over time when we take steps to better maintain our overall health. Make weight and other personal health maintenance issues a new priority as you move into your pre-retirement years.

Plan for a bridge-to-retirement career. You might be ready to retire from your company but not really ready or financially independent to completely exit the workforce. There is nothing wrong with a retirement devoted to travel and leisure activities but that isn’t the reality for most Americans. If you think you won’t be able to afford to quit working completely or if doing nothing will eventually drive you or your spouse insane, consider getting some career coaching or take a strengths-based personality test to help you find a fulfilling bridge career. Take time to do some research now that will help you prepare for a new full- or part-time career for after you retire from your present job.

Start thinking about your retirement destination and consider new places to live. Retirees today do not necessarily have to move to predictable retirement destinations. Work-from-home solutions allow many people to continue their working lives and education from anywhere. For many people, the ideal combination might involve cheaper real estate, desired weather and activities, travel options and access to quality health care.To start the brainstorming process and hone your expectations, use resources like U.S. News & World Report’s online “Best Places to Retire” selection tools and try to work in some vacations to your top picks.

Create a network of friends and family to support the planning process. It’s really important to discuss not only your expectations for later in life with your family members but also their feedback on what they consider good ideas for you. There may come a day when you need to rely on others for help, and it would be a good idea to identify how realistic that is. Also, if you’re talking about downsizing certain assets or property that might have been in your family a long time, you might want to discuss that with others who might be impacted by that decision.

Start taking baby steps to retirement. Give yourself a year to go through each room in your home and prioritize what you’re really going to need if you move to a smaller place. Make a list of what you hope to give to friends and family members and what you’ll donate or trash. Develop a recordkeeping system that fits you so you won’t forget any decisions you’ve made along the way. Also, you might want to set up a separate area for family photos and other keepsakes that have high emotional value and have a fair and balanced system for who will get what either when you move or when you pass away.

Don’t wait too late to get started with your downsizing project. Downsizing often comes with a few surprises and unforeseen costs. When you do move, chances are you will need to invest in some new household items or possibly furniture to match new surroundings. Try to avoid going overboard with this. Thoughtful downsizing should prevent a lot of spending for stuff you’ve already chucked.

Take time to define what “retirement” means to you. In order to make the right downsizing decision, you need to have a clear understanding of your life goals, values, and vision for the future. By taking a holistic approach to exploring your alternatives, you will be able to more clearly define what financial freedom truly means to you. Who knows? Downsizing retirement expenses may also provide you with a path to get to that retirement destination sooner than expected.

 

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