Downsizing for Retirement – Deciding When It's Right
Whether you’re sick to death of work or nervous about leaving employment, retirement is a huge milestone no matter what. The more you prepare for the change, the better later life can become.
For those looking to maximise their savings and pension, downsizing for retirement can be one of the most powerful options at their disposal. If you’re new to the concept, don’t worry – it doesn’t have to be a story of riches to rags.
On this page, we’ll explore what downsizing is, how the process works, and the various options available in the UK.
What is Downsizing?
The process of downsizing involves making changes to one’s life in order to both save weekly outgoings and increase available savings. Within the context of retirement, most people do some or all of the following:
- Selling their larger property and moving into a smaller, more affordable home in order to build their retirement ‘pot’ and reduce the amount they’re spending each month.
- Selling or financing various assets to reduce commitments and earn extra money.
- Decluttering their possessions and selling off what they no longer need
- Making lifestyle changes to reduce their cost of living
When choosing to downsize in your own life, you don’t have to do everything from the list above. However, switching to a more affordable property is strongly advised for best results.
The Advantages of Downsizing
So, why are so many people considering downsizing? In this section, we’ll explore some key benefits.
Substantial Monthly Savings
One of the most obvious advantages of downsizing for retirement is the huge impact it can have on your monthly outgoings. With a smaller mortgage or rental commitment, you may be able to slash your expenses considerably.
When it comes to protecting your existing pot of savings, reducing your spending should be a top priority.
An Increased Retirement Pot
A successful downsizing sale not only ensures a lower cost of living but can also increase your existing pool of savings, especially if you’ve already paid off a mortgage on a larger house. Finding an appropriate property can be tough, but the rewards are substantial if you make the right sale.
The earlier you start planning for downsizing, the more time you’ll have to research options in your price range.
Moving to a smaller property doesn’t have to be a bad thing. Many people find they love their new lower-maintenance lifestyles. Cleaning, organising, and many other domestic tasks can become much easier in a smaller home.
This benefit is only compounded if you move into a retirement home that offers cleaning services.
A Change of Scenery
While saying goodbye to an old stomping ground is of course difficult, a change of scenery can be exactly what you need to rediscover your spark. Perhaps there’s a city or town you’ve always loved but never fully experienced – this could be your chance to try something new!
Some Drawbacks to Consider
It’s important to mention that downsizing isn’t for everyone. There are a number of drawbacks that are worth considering.
It Takes A Lot of Planning
A well-planned downsizing process can be worth the effort, but you should be ready for a fair few mountains to climb. The amount of planning involved is substantial and you’ll want to have enough time to develop contingencies in case your first preference for a new house falls through.
The earlier you start planning, the better.
You’ll Have to Say Goodbye
Many people have been living in their homes for decades before deciding to downsize and move elsewhere. Perhaps you’ve been married and even raised children in the same family home. The memories you’ll be leaving behind may be difficult to part with. Finding ways to navigate this ‘goodbye’ will be essential.
Is there a collection of ‘essential’ keepsakes that you could bring with you? Is the prospect of a fresh start enough to spur you forwards? The answers to these questions are yours alone to find.
Finding an Appropriate Property is Tough
The sad truth is that supply seems unable to meet demand for housing in the United Kingdom. This can make it tough to find the right home for your downsizing plans, which is one of the reasons why planning early is so important.
You’ll be able to draft multiple plans and contingencies, adapting to changes in the market accordingly.
How Do You Know It's Time to Downsize?
The specific time to downsize looks different for everyone. Your preferences and circumstances will determine what works best for you. That said, you might like to consider downsizing if the following applies to you:
- Your home is full of empty or unused rooms
- You’re away from home often
- Your regular expenses such as utilities are hard to manage
- You feel ready for a change
- You’re now living alone after a divorce or bereavement
- Your accountant has advised you to downsize
- You’re physically unable to manage in your current home, either due to the size of the house or access issues
To an extent, it’s worth trusting your intuition here too – researching downsizing in the first place may well be a sign that it’s right for you!
The Average Downsizing Age
The average downsizing age can be hard to pin down. While most people begin to consider downsizing as they approach retirement age, some start as early as their 40s. Our advice is to worry less about a specific age and focus instead on your own circumstances.
Your financial situation and life goals should determine your downsizing decisions, not your age.
Talk to a Professional
Whatever your goals are, we strongly advise talking with a financial advisor or accountant before making any significant financial decisions. A professional will be able to talk you through your options and will have the expertise you need to help you make the right decision.
Council Downsizing Schemes – Grants Available in the UK
If you’re a UK council tenant or Housing Association tenant, you may be able to receive support with your downsizing plans. Depending on where you are in the country, you may have access to cash incentives, decorating support, and guidance through each step of the process.
Your best bet here will be to seek guidance from your local council or housing association – the grants and support available vary depending on where you live. The housing charity Shelter has guidance on seeking grants on this page.
Consider A Retirement Home
There’s plenty of bad press about retirement homes in the United Kingdom – and it’s certainly important to do your research – but they can offer an excellent downsizing option to the right candidate. A lively social life, lower cost of living, and comfortable new home are just some of the benefits that await you.
How to Downsize – the Basic Steps
No matter how sure you feel, we strongly advise talking to a financial advisor before making any final decisions.
This section outlines the basic steps you’ll need to take when downsizing.
Step 1 – Plan
It’s time to take stock of your financial situation. Get a firm understanding of your assets, outgoings, and existing savings and use this information to start planning for the future. Consult with your financial advisor and discuss your goals with them.
This should help you get a clearer picture of the road ahead. Draft a list of real, actionable tasks that you’ll need to complete.
Step 2 – Organise
Once you know where you’d like to go, it’s time to make it happen! We advise taking a ‘little and often’ approach here. Allocate one or two days a week to declutter your existing home gradually. What can you afford to lose? Which items do you want to hold onto forever?
At the end of this process, the only things left should be what you’re taking with you.
Step 3 – Sell/ Move
The selling chain and details of your sale will determine the exact order of things here. In short, however, you’ll be divesting your assets, confirming a sale, and moving to your new home. If moving to a retirement village, your housing company may be able to help you with this process.
Downsizing might feel like a daunting prospect to the uninitiated, but you may be pleasantly surprised by the new energy it can breathe into your life.
Whether you simply want the excitement of living somewhere new or to free up funds to maximise your retirement, moving to a smaller home may be the right option for many.
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