Many retirees choose to downsize as a way to save money — but they may be better off staying put, experts say

By Deborah Jeanne Sergeant

Once your children have left the nest and you’re looking forward to retirement, it may seem like downsizing should be part of the natural transitions at this part of your life. But if you want to stay in your home, you have many reasons to do so other than nostalgia.

Downsizing may not be less expensive than staying put.

“For some reason, there’s a ‘standard’ culturally that you must downsize, but you should do the math to see if it’s worth it financially,” said Leyla Morgillo, certified financial planner with Madison Financial Planning Group in Syracuse. “You might buy a smaller home, but it might not end up saving you money. There are closing costs, you might need new furniture to fit into your new house. If you’re in the same area, there might not be any tax savings.”

While those who downsize into a townhouse may not need to pay for maintenance, snow removal and mowing, there may be home owner’s association dues along with the lease. Often, these communities are in locations where taxes and utilities are higher.

There’s also the temptation to buy a nicer albeit smaller house. Even if it’s smaller, the expensive dreamhouse won’t save the retiring couple any money.

Your home may represent a significant amount of your equity. Morgillo said that it’s still possible to tap into home equity.

You should also consider if your children want your home. One way to do that is to do a private annuity with a family member, a private transaction in which the child makes payments that would provide you with income.

The reverse mortgage was overhauled in 2013. Changes in laws offer homeowners more protection, greater counseling and have reduced the upfront cost, making them more appealing. Homeowners don’t have monthly payments, but receive money from their home’s equity.

Many people want to age in place where they raised their families and have lived for decades. They feel emotionally attached to the home where they have so many happy recollections. Depending upon your future health needs, staying in your home could still work.

Randy L. Zeigler, certified financial planner with Ameriprise Financial Services, Inc. in Oswego, encourages looking into converting a first-floor room into a bedroom and moving the laundry to the first floor. A full bath should also be on the first floor.

“I don’t think people should automatically think they should be in a smaller footprint home,” Zeigler said. “There’s lots of non-financial reasons like where you want to live and where your family lives. You might need to give care to someone else, and if you reduce your home’s footprint, you might not be able to.”

Do you anticipate possibly caring for your elderly parents someday? Or, possibly having someone stay with you to provide your care. Staying home with the support of home health aides or assistance from family members is definitely less expensive than nursing home care.

It’s wise to work with a care coordinator or a service that specializes in elder care to assess any obstacles to aging in place. If you’re undertaking any home renovation projects, keep in mind future accessibility to allow aging in place.

For example, during a bathroom renovation, choose sink plumbing that comes through the wall and not the floor to accommodate a wheelchair accessible sink. Keep doorways wide enough for a walker and wheelchair. Including many of these features can add value to your home once you or your heirs do decide to sell.

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