How Seniors Can Downsize Successfully

 Eventually, nearly every senior citizen will need to downsize. They may plan to make this change years in advance, by selling the home where they raised their family, and then purchasing a smaller house or condo. On the other hand, some seniors may be forced to downsize suddenly and unexpectedly.  For example, they may suffer a health event, be diagnosed with a disease which could leave them progressively less able to take care of themselves, or be faced with financial problems which force them to downsize.

Whether you have planned to downsize years in advance, or you suddenly realize it is something you need to do as soon as possible, it is smart to plan as well as you can, so the move goes smoothly.  

You may find it helpful to read "The Art of Happy Moving: How to Declutter, Pack, and Start Over While Maintaining Your Sanity and Finding Happiness."   (Ad) It will help you think carefully about which items to keep and how to let go of things which once brought you joy, but are no longer needed.

This week's guest post will also help you make the necessary changes in an organized manner, easing your stress, and helping you find peace with the decisions you are making. The guest post is below:

What Seniors Need to Know to Downsize Successfully

Downsizing is something many seniors decide to do during retirement. Often, living with less can be both rewarding and more affordable than staying in your current home, but the transition still comes with challenges. Here are things you need to know to ensure your downsizing experience is successful.

Let Go of Belongings in Your Own Time

Getting rid of your belongings can be complicated. Take your time and ease the process with these tips.

●     Understand and accept that you may have complicated emotions about downsizing.

●     Try methods such as the Marie Kondo technique to help you feel at peace as you say goodbye to belongings.

●      Find out where best to donate your previously loved possessions.

Consider the Current Housing Market

Evaluate how the housing market will affect your decision to buy or sell.

●     An appraisal calculator will help you estimate the value of your home.

●     Learn about the process involved in selling your home by discussing it with an experienced Realtor.  You can get suggestions which will help you sell your home, as well as get rid of your unnecessary belongings, by reading an additional article on this blog:   "Tips to Sell Your Home and Downsize or Move to Assisted Living."  It has many practical ideas. 

●     Choose whether you want to rent or own in retirement. There are advantages and disadvantages to either choice.

●     Use sites such as Rent.com to help you find an excellent rental property, if this is what you decide to do.  Consider a wide variety of possible locations and decide whether you want to live in your current neighborhood or move to a new one. If you are moving to a new city or a different part of the country, it could be wise to rent until you are sure where you want to settle permanently.

Decide What Type of Housing You Need

Choosing where to move during retirement is an essential step in the process. Think about why you are moving — and where you plan to go.

●     Contemplate how a move to a smaller home can help you save on expenses.  This could help you decide if a condo, a single family home in a new neighborhood, or a home in an over-55 retirement community is the correct, affordable choice for you.  

●     Understand what assisted and independent living offer, if those options apply.  Many of these communities offer progressive solutions, where you start out in an independent living condo or apartment, and gradually shift to receiving assistance, as needed.   In many cases, that means you can move once and remain in that home for the rest of your life, with help, should you ever need it. 

●     Make a decision on whether you want to live near family.  You may want to live near your grandchildren or your own elderly parents.  However, you also need to decide if you will want to stay in that location if your elderly parents die, or if your adult children are offered a transfer which requires them to move to a new location.  Consider your own needs before you uproot your life to move, if your only reason is to be near your family.  Make sure you are able to visit them, however.  You also do not want to cut yourself off from easy contact with them.

Whatever reason you decide to downsize, doing so successfully can be a challenge. You need to think about what items you will need to get rid of, where to move, and whether to buy or rent in your new location.  There is a lot to consider, so the sooner you start and the more time you allow yourself to make the transition, the easier it will be. Fortunately, these tips offer a great starting point for life’s next adventure.

You can find gifts for retirees and others at my Etsy Store, DeborahDianGifts:  http://www.etsy.com/shop/DeborahDianGifts

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Housing Costs Put Retirement at Risk

Your housing costs may be the biggest threat to your retirement.  Even if you have paid off your home prior to retirement, the cost of maintaining your home can remain high.  According to the Employee Benefit Research Institute, housing amounts to 43% of the expenses of retirees who are over the age of 75.

Danger For Those Who Still Have a Mortgage During Retirement

Part of the problem is the fact that most people are not paying off their mortgages before they retire.  In fact, the Consumer Finance Protection Bureau reports that about 30% of Baby Boomers still have a mortgage when they retire.  This has resulted in a higher mortgage delinquency rate for people over the age of 75.   The average person over the age of 75 who still has a mortgage currently owes about $80,000.  This can be an overwhelming amount for someone who hasn't worked in 5 or 10 years and is dependent on Social Security and a meager amount of savings.

The problem with owning a home when you are on a fixed income with limited resources is that, in addition to the mortgage, you will also have other housing expenses ... and many of them increase annually.  Among those expenses are property taxes, homeowners insurance, repairs, cleaning and lawn work.  In addition, utilities on a large home are likely to be higher than those for a much smaller property.  Furthermore, people who may have been able to do their own cleaning, repairs and lawn work when they were in their 60's, may find that they must pay to have these things done as they age.  As a result, the cost of home ownership may rise much faster than inflation.

Other Financial Risks Faced by Retirees

When housing costs are added to the fact that many people retire while still owing student loan debt, credit card debt and, sometimes, bills for medical expenses, retirees are advised to make significant adjustments to their lifestyles before they stop working.  If they don't, they risk going through foreclosure and bankruptcy later in life, when it could be even more traumatic for them.

If you are doing your best to set up a realistic budget for your retirement, you will want to read this report by the Social Security Administration:   Expenditures of the Aged Chartbook - 2010.  It contains a detailed breakdown of how people spend their money after retirement.

While you will want to read the chartbook for yourself, I wanted to mention that it shows the three largest expenses for retirees are housing, transportation and healthcare ... and those are all expenses that have been rising rapidly over the past decade.

Solutions

The solution for high housing costs is obvious.  Many financial advisers recommend that people downsize their lifestyle prior to retirement.  This may mean moving to a smaller home, condominium or townhome.  For some people, they may wish to take in a boarder or sell their home and rent ... letting someone else deal with repairs and lawn care.

Whatever you decide is the right approach for you, make sure you are taking your housing costs into consideration when you plan your retirement.

Sources:

https://time.com/money/3418195/retirement-housing-costs-threat/
http://www.marketwatch.com/story/housing-health-care-costs-are-retirement-killers-2013-03-28
http://www.ssa.gov/policy/docs/chartbooks/expenditures_aged/2010/exp-aged-2010.pdf

If you are looking for additional retirement information and ideas about downsizing, click on the tabs at the top of this page.  They will link you to hundreds of additional helpful articles.

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The Downside of Downsizing your Home

For anyone who has been planning their retirement very long, you know the importance of having a balanced budget after you stop working.  For many people, an important part of their financial planning involves downsizing their home so they are better able to balance their income and expenses.  Frequently, this is referred to as simplifying your life.  Some people, however, have difficulty creating this simpler lifestyle for themselves, and this can cause serious financial problems.

Five Pitfalls to Consider when Downsizing Your Home

Here are some of the most common problems that people experience when they decide to downsize.  By being aware of them, you may be able to avoid them.

1.  Does moving to a smaller home mean that you will be renting storage space for all those items that will not fit in your home or garage?  When my husband and I first downsized from a large home to a small condo, we rented two storage units that were 10 x 20 feet in size.  We filled those storage units with extra bedroom furniture, formal living room furniture, boxes of books, old toys left behind by our children, lawn equipment and tools we no longer needed.  We stored those items for two years until we finally dispersed them among our adult children or gave them them away.  We spent over $350 a month in storage fees for those two years, which means we spent over $8400 to store things we neither wanted nor needed.  I hope that other people will avoid our mistake. Make sure you get rid of everything you no longer want before you move to a smaller residence!

2.  Are you planning to recreate the quality of your former house in your new home?  This is another common problem.  Many retirees are purchasing smaller, less expensive homes, and then spending tens of thousands of dollars more to decorate them with luxurious drapes and plantation shutters, or remodel them so they feature granite counters, custom cabinets, designer wallpapers, and upgraded flooring.  By the time they have recreated their old home, the retirees discover they are living in less space but spending almost as much money.

3.  Another temptation some retirees need to avoid is the idea that they are saving so much money on their primary residence that they can now afford to buy a second home, an RV or a timeshare.  Their monthly obligations can quickly grow to the point where the retirees are actually spending more in monthly living expenses than they had been spending prior to "downsizing!"

4.  One adjustment that may be difficult for many couples is the crowded living space.  Couples may become irritable with each other if they feel they no longer have their own space to pursue hobbies or just get away from each other to read, nap or relax.  When you downsize, make sure that each of you will still have some private space ... a home office, basement game room, or a bedroom that has been converted to a sewing or hobby room.

5.  Finally, before you move to a new neighborhood you need to give careful thought to what you will be leaving behind.  Will you miss your neighbors?  Will the move require you to change your church, find a new book club, or switch doctors and dentists?  Would it be possible for you to avoid some of these changes by downsizing to a nearby community rather than one in another town or state?  Make sure you are emotionally ready for any changes that will result from your move so you can avoid depression and similar psychological effects.  It may help if you choose a new location that is actually closer to some dear friends or family members.  This will lessen the pain of leaving other friends and family members behind.

Before you decide to sell your current home and move someplace smaller, you will need to plan carefully and have realistic expectations.  If your goal is to save money, make sure that the changes you make will achieve that goal, while minimizing the amount of disruption you will experience.   You want to have a balanced budget, but you will also want to have a satisfying life.  This has always been important to Baby Boomers and those two goals do not need to be mutually exclusive.

Downsizing or simplifying your life prior to retirement can make a lot of sense, if it is done right. Take your time, write out a budget and make sure that both of you are comfortable with the decision and the changes you will be making.

If you are preparing to retire, use the tabs or pull down menu at the top of this page to find links to hundreds of additional help articles on a wide variety of topics.

You may also be interested in reading:

The Best Sunny Places to Retire
Do You Need a Million Dollars to Retire?
Cheap Places to Retire

You are reading from the blog:  http://www.baby-boomer-retirement.com

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