Everyone thinks of owning the largest houses and most expensive cars when they are starting to build their careers. You probably had the same ambitions too. Over time, you probably traveled, accumulated lots of furniture and art, and changed many goals to suit your needs. However, as you approach retirement, it’s important to simplify your life, look for an estate planning attorney and start to downsize as you approach retirement so you can reduce costs and eliminate labor-intensive maintenance tasks like home and lawn care. Along with getting more time and making life much easier, here are some reasons why you should downsize as you approach retirement to save money.
Starting Early Gives You an Idea of How Much You Should Downsize
Have you ever started a project you thought was very simple and ended up realizing there was a lot of work involved? If so, then you know how some tasks can easily sneak up on you. You are probably so used to your home that you forget how much is in it. As such, downsizing may turn out to be much more of a task than you anticipated. If you have a home office with filing cabinets filled with years’ worth of information, going through the paperwork to find out what’s important and what’s not can be a huge task. This is why you may want to start downsizing early. That way, you will have more time to sort through everything that you have gathered over the years.
You’ll be surprised that most of the space in your current house is used up by things you don’t even need. There could be lots of used equipment, used tires, and more. Once you get rid of these things, you may be left with lots of space you don’t need. You’ll also have fewer things for the movers to carry when you go to your smaller home. Residential moving services charge depending on how many things you have, so having fewer belongings is a plus.
Your Health Is Better Now Than in the Future
Downsizing can be a huge task, both mentally and physically. As such, it generally makes more sense to do it while you are still physically fit. While it may not sound like fun to sort through every tool in your garage and boxes in the basement, it’ll be easier now than later. Downsizing is a long process. If you start now, it’s better to focus on the more difficult things. If you complete the heavier stuff while you are still able-bodied, you’ll only need to handle a few things later on. You’ll literally thank yourself later. Also, as you start downsizing early, you can start saving money early while you can still work for it. When you are young, you can even take on an extra job. If you couple that potential with lesser responsibilities, your retirement will be in safe hands.
Avoid the Pressure of Deadlines
Retirement is like a deadline. By the time most people realize they are about to retire, there’ll be so much pressure to put their affairs in order that being productive becomes a challenge. This is one of the most important reasons to downsize as you approach retirement. Saving money is not easy, and if you plan to retire in the near future, you will need lots of it. As such, starting to downsize as you approach retirement early will help you avoid the pressure of deadlines. You’ll figure out most of what you need to know way ahead of time.
For instance, you can start looking into your possible monthly expenses, where you will live, and what items you will need. That way, you will also have an idea of how much you need to save monthly so your goals can be met. If you decide to start doing these things in the future, you won’t have a lot of time to plan properly and start taking action. This will put you under unnecessary pressure that could have been avoided. So, start now. Figure out what needs to go to create more room to save. If possible, you can even move into a smaller space ahead of time so you can spend less and have more time to plan your future.
Think of It as Rightsizing
The whole idea behind downsizing as you approach retirement is to capitalize on where and how you live to support the lifestyle that best works for you. For instance, you can sell your current home and buy a smaller one. You can also move to a neighborhood that’s less expensive. Some people may choose to sell and move into rental units. Some will also renovate and use the extra living space to earn money by renting it out. That will give you some additional retirement income.
The reason why you should downsize when it comes to your home is simple. Most people think of their home as an asset. But what you don’t realize is that in retirement, a home tends to become more of a living expense than an asset. You will have a fixed income but still, need lots of money to run your home. Apart from that, the cost of running your home won’t be fixed. Random repairs can pop up, and no one plans for those. In fact, the cost of running your home has the potential to increase beyond what you can manage. As such, what matters more when you retire is not the size of your home but the cost of running it. Downsizing reduces the cost of running your home, especially if you move into an apartment. There are no yard maintenance costs, roof repairs, and other things like that. You should avoid having your dream home turn into a money pit that stops you from enjoying life.
If you had more than one car and you are moving to a smaller home with limited space, that’s a chance to make money. Decide on the one you want to keep and sell the rest to a used car dealership. On the other hand, you may also want to downsize your car. There are lots of used cars that are cheaper to run. You just need to do your research into car options and how to get a used car loan.
You Can Make Money Downsizing
Wondering how that will work exactly? Well, it’s quite simple. In recent years, the prices of homes have risen significantly in a lot of areas around the country. As such, if you downsize as you approach retirement, it’s possible to walk away with an impressive sum of money. This is one of the most important reasons to downsize as you approach retirement. Furthermore, the sale of your primary residence is usually not subject to capital gains taxes for the first $250,000 if your taxes are filed under single taxpayers and $500,000 for married people or those who file taxes jointly. If you’re not sure how much capital gains you may pay, find out from your tax preparation service.
For you to be exempt from paying capital gains tax, you need to have stayed in your home for no less than two of the past five years. Also, the exemption is only allowable once every 48 months at your primary residence. There are so many things you can do after you sell your home. For instance, you can buy a smaller one or move into an apartment. This will reduce your living costs, and you can contribute more towards your retirement savings.
Downsizing Helps You Save More
Even if you are done paying for your mortgage, a home can’t be run without money. You will need to pay for things like insurance, property taxes, and maintenance experiences. By moving into a smaller home, your maintenance and insurance costs will decrease significantly, and so will your property taxes. This will allow you to save more money for retirement. There are lots of options when it comes to downsizing. You can move into a condo or just a smaller home. The improved cash flow you get from this decision will allow you to contribute more money toward your retirement accounts.
As you age, you generally become more susceptible to accidents and illnesses. This is one of the most important reasons to downsize as you approach retirement. Accidents and illnesses can cause you to become incapacitated. As such, you need to ensure that you have enough money to cater to your health needs. Just as you do all that you can to avoid accidents, it’s also wise to stay prepared in case something does happen. One of the best ways to prepare is to downsize as much as possible. This will also help you avoid burdening family members and caretakers.
Starting the downsizing process early will give you full control over everything. You will have more potential to earn and save enough money for retirement. For instance, if you identify the items you no longer need ahead of time, you can start selling them gradually as opposed to selling them in a hurry. If you take too long to start selling the things you don’t need, you will end up getting less money for them. Some people usually hire companies to help them liquidate things in bulk. And as you might imagine, that means less money. They will not bother to get lots of money for your items. Also, any company that helps you sell will charge you a significant premium for their services. Downsizing also ensures that you don’t end up paying the local moving service tons of money to move you to a new home.
Are you looking forward to traveling when you retire? That’s a great idea. This is one of the most important reasons to downsize as you approach retirement. Traveling can be a wonderful experience. It introduces you to new experiences and relieves stress. The majority of people who travel find that keeping up with the maintenance needs of their homes while away can be a nightmare. From the extra money spent paying house sitters to security systems added to prevent something from happening while away, lots of people who plan to see more of the world when they retire should definitely downsize.
The best way to go about things if this is your plan is to move into a condo, townhouse, or smaller home. You can even opt for a tiny home. This will reduce the cost and hassle of maintaining a larger home. Having a smaller space to manage will definitely give you peace of mind while you are away. As you might imagine, it also helps you save lots of money as well. In fact, if you need more money to embark on the adventures you have always wanted to go on, downsizing early is the way to go.
Downsizing Gives Your Options
This is one of the most important reasons to downsize as you approach retirement. If you have been in your current home for a while, it’s highly likely that the home has increased in value. This is especially true if you are done paying off your mortgage. A fully paid-for home that’s well taken care of can sell for lots of money. When you sell and buy a smaller home, you will be left with a lot of equity. You can use this money for whatever you want, including planning your future. Having lots of cash means you can purchase your new home as a cash buyer. This gives you a quicker chain and the ability to live mortgage-free.
When you downsize, you don’t only save money, but you also free up a significant chunk of time as well. Imagine having no yard to maintain. That means more time to do the things you really like, which will greatly improve your quality of life. Downsizing also means you get to choose a property that’s more suited to your needs as you age. Instead of having to fight the stairs and risk falling and dealing with limited accessibility, you can take your time to find a property that works for you. There are lots of homes that are built with older occupants in mind. You just have to find a reliable real estate agent to work with.
Chances are you have worked very hard to get where you are in life. This can make it difficult to downsize as you approach retirement. To make things easier, start having conversations early with your financial partner. This will help you adjust your lifestyle as you approach retirement. You can consult your financial partner about the best methods to prepare and plan for retirement. Together, you will be able to create an action plan that’s tailored to meet your needs. There are lots of financial planners who can help you achieve financial freedom by creating a plan that shows you how to save the income you need for retirement. If you are ready to start taking steps toward retirement, you can look for the best financial planners and estate planning attorneys around you for advice.