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

Thinking of selling the 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 retirement, selling property is at the heart of many retirees’ financial plans. 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 meeting retirement shortfalls. There are often very good and practical reasons for choosing to downsize. A smaller home is usually easier to clean and has less maintenance than a larger one. Having a smaller property may be cheaper to heat, meaning you could see lower energy bills. Downsizing may also give you more disposable income to use for things you enjoy for example hobbies and holidays. And with some people developing mobility issues later in life, a smaller home, perhaps on a single level, could help, even if a wheelchair or walker are needed.

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.

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

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’ve grown accustomed 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.

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.’