Retirement downsizing, isn’t it a perfect plan? Move to a smaller place, probably in a more comfortable or posher locality. Have some liquid cash, reduce the stress of maintaining your home and have an easy life. However, let’s just hold on for a moment and ask ourselves: Is everything so rosy as it seems?
This is the opposite of what we’ve observed over the last 37 years. First off, even if it’s much smaller, you can’t always assume that the house is immediately in “move-in” condition. My aunt said to me once “there is no such thing as a move-in ready home” as there is always something you would like to do to make the space your own. The process of making a space more personal comes with its own set of expenses. Then there is location to consider. A small house in a prime area? Don’t let that price tag fool you; You will be re-setting your real estate tax bill.
For example, James and Emma had planned to downsize from their four-bedroom family home. What was their dream? They thought of living in a small two-bedroom cottage located in one of the nice parts of town. What actually happened? It needed work—lots of work. By the time they had customized it to fit their desires; they had spent beyond what was budgeted for and also now have higher property tax rates in their new home. They expected to reduce their expenses by moving to a smaller place and ended up with less house and more costs. Certainly, there are many reasons why downsizing may be a good option. But our view is simple: don’t do it to make “ends meet” as that rarely works. Instead, plan proactively so that you can have your desired life in your desired home.
Now that we’ve looked at some of the number pitfalls in retirement, let’s spend our next article looking into another common pitfall, but this time, one that is outside of strictly finances.