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Five things to consider if downsizing is part of your financial plan for retirement

4 min read 7 Mar 23

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Thinking of selling your family home and moving to a less costly property to provide money for retirement? If so, you’re not alone. When it comes to funding life after work, selling property can be an effective move. Recent research found that around 1 in 3 (30%) of those surveyed said they would downsize to live in a smaller property with lower costs to meet a shortfall in retirement funds.*

Of course, downsizing doesn't just have to be about freeing up money. There are often very good and practical reasons for choosing to do so. A smaller home usually requires less cleaning and maintenance than a larger one. It may be cheaper to heat, meaning you could benefit from lower energy bills. Downsizing may also give you more disposable income to use for things you enjoy. This could be hobbies or holidays, for example. And with some people developing mobility issues later in life, a smaller home, perhaps on a single level, could make a big difference.

Before deciding whether to downsize as part of your financial plan, it’s useful to look at the pros and cons closely. This is a big decision, so you should check that moving to a smaller home will give you the financial benefits you need and suit your lifestyle in retirement.

Sources:

*Retirement Revisited Report, M&G Wealth, October 2022, p17

Here are five things to consider:

  1. Have you planned carefully how much money you think downsizing your home might give you? Have you factored in all the moving costs and fees involved in selling and buying or renting? Aim to get a few quotes from an estate agent so you understand the costs involved.
  2. Property prices can experience crashes, and you could end up trying to sell and buy in a difficult market. This could mean you end up getting less than you’d hoped for your property and have to spend more than you’d like on a new one. Sought-after property hotspots can be expensive too. You may want to contact an estate agent who can tell you how much your property might be worth and what you’ll need to spend for a new one.
  3. If you’re moving to a smaller home, be sure that it’ll provide all the amenities that you're used to. And if not, will losing those features impact your retirement lifestyle?
  4. Renting a property can sound like a good option. But it could mean moving frequently and paying high rents, as prices have increased considerably for tenants with rental properties in short supply. If you’re thinking of renting, have you checked prices in your area? The monthly cost of renting may be more than you think.
  5. Selling and buying property can be stressful. There's a lot to organise, and your home could be on the market for a while. Then there's the logistics of moving day, as well as dealing with solicitors. For some, it's hassle worth avoiding, especially at this point in life.

With all these things to think about, it may be worth looking at your overall plan to see if downsizing makes sense, or if there are other actions you might take that would help with your financial planning in retirement.

Speaking to an adviser is one way you can get a clearer picture of what your current retirement savings look like, where property might fit into your plans, and how much you may need to save to get the kind of retirement you want. If you don’t already have a financial adviser you can find one that’s right for you.’

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