Downsizing: A Key Decision in Retirement Planning

By Rick Fisher

This article was originally published in The Union on January 28, 2018. Click to view the PDF.

Over the past few weeks, we have had numerous discussions with some of our pre-retired and retired clients involving the decision on whether to downsize or not and—more importantly—when, where and how. 

One discussion that illustrates the dilemma involves the hypothetical couple, Jack and Joan. They are in their mid to late 70s and have been retired for the past five years. They love their home, which they built and have lived in for over 30 years. Due to recent health issues, they began thinking of possibly downsizing in the next two years.

They were concerned about two things. One, that their property was large and needed constant maintenance, which they enjoy doing, but admitted was becoming harder and harder to do as they get older. The other concern was that they were 30 to 40 minutes away from the nearest hospital.

We recommended that they start visualizing what a move would look like. First, is there a reason to move? Perhaps not financially, but the health question kept coming up. They were certain that they wanted to have a choice and not have the decision forced upon them. Given this concern, we recommended that they get serious about the process. They already had experienced health issues and knew that they could experience more without warning. 

We suggested they discuss what they would realistically accept for a possible downsize. Key issues would be location, size of property, size of house, price, etc. Once they had identified their preferences, we recommended they use the Internet to identify homes that would match. Sites like Zillow and Trulia are great resources for such research.

The next step would be to contact a Real Estate agent and get a realistic value of their current home and to start to evaluate the possible properties that they found as well as ones that the realtor suggests.

They asked since they have a 4% mortgage if they should stay because rates are now higher. We countered that downsizing meant buying a smaller, less expensive home and either paying cash or taking a smaller mortgage out. The goal is to reduce expenses, so a 5% mortgage of $150k would have a smaller payment than a $300k mortgage at 4%. In addition, they would be saving on property taxes as well. However, with the current interest rate environment, acting sooner makes sense since rates are rising and are expected to do so for the foreseeable future. 

In the end, they agreed to make the decision a priority rather than put it off until later. They would rather have the freedom to choose now, while they can, rather than wait and have the decision made for them and therefore be downsizing in a crisis situation.

If you find yourself in this situation and want to explore further, give us a call at 530-273-4425 for a retirement cash flow analysis, and discover the difference when you think beyond investments.

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. Frederick Fisher is a CERTIFIED FINANCIAL PLANNER® Practitioner, and Insurance Agent with Ostrofe Financial Consultants, Inc., with clients in 31 states. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial. 

For questions or suggestions, contact Frederick at (530) 273-4425, or, or visit Branch address: 565 Brunswick Road, Ste. 15, Grass Valley.