As you approach retirement or your kids finish school, downsizing is a term that begins to frequently arise. Though it’s a life-changing decision that takes significant consideration, making the move from the family home to a space better suited to your new life might be just the spark your retirement needs.
There are many reasons why people make the decision to downsize. You might be an empty nester looking for a change, you might want to unlock equity to enjoy in retirement, or you might simply want something better suited to you. People often tell me they just don’t want the maintenance of a garden or a big house anymore!
Whatever the reason, downsizing can be overwhelming. However, once you have made that decision and are ready to start the process, there are some things you can do to make the move less daunting.
Plan for the long term
Late in November changes were made to superannuation, that many people haven’t noticed. Before the 1st of July 2017, a couple can put up to $540,000 each into super or up to $1.08million in total under the bring-forward rule. Downsizing could help you take advantage of this. For more information check out the recent Sun Herald article Clock ticks on to $1million super deadline.
The subject of finances is often one of the first to come up when discussing downsizing. As well as the typical moving costs such as stamp duty, agent commission, marketing costs and removalist fees, what other impact can downsizing have on your finances?
Shereen Churchill, a financial planner at ITL Financial Planning, says, “Downsizing to free up capital is a great way to fund your retirement lifestyle. For example, the money could be contributed to superannuation, invested in a diversified portfolio of shares, property and fixed interest investments and used to provide you with a tax-effective retirement income stream.”
However, she explains, “It’s really important to seek advice regarding your particular circumstances and consider things like your short, medium and long term objectives, superannuation rules, the impact on the aged pension and any future aged care plans.”
“Downsizing to free up capital is a great way to fund your retirement lifestyle”. —Shereen Churchill.
Prepare for the move
One of the big advantages of a smaller living space is that it also means a simpler life. However, before you can enjoy the freedom of a reduced footprint, you need to decide what to take with you – and that means decluttering.
Unless you are prepared to store items that fall in the ‘just in case’ category, decluttering experts recommend keeping only the bare minimum and items that you truly love. Think about what you can pass onto the family as heirlooms. For other items, see if they can be donated to charity or sold to a local antiques dealer.
Dusting off years of accumulation certainly brings up memories, but many also find the process of decluttering their home to be liberating. But don’t wait until your home is for sale; start the process as soon as you’ve made the decision to move.
“Dusting off years of accumulation certainly brings up memories, but many also find the process of decluttering their home to be liberating.”
Deal with downsizing early
The very thought of moving can be daunting, from the immediate stress of the move through to the potential for longer term emotional impacts. If you generally struggle with big changes, do not hesitate to ask for help and support early on in the process.
Try to stay positive. Leaving a home where you have lived most of your life is no easy task and you may find that involving your entourage, especially those excited for you, can be reassuring. If it’s the logistics that are concerning you, you can always hire someone to help out. This could be a financial planner for those with money on the mind, or an interior designer to style your new property and show you made the right decision.
It is important to properly come to terms with your downsizing decision, as it’s a move not easily undone. Talk to friends and family. Give yourself time to process the information and be comfortable with the change. By carefully preparing to downsize, you will be able to make your decision with greater clarity and peace of mind. You may then be ready, and excited, to move onto the next stage of your life and find for yourself the many benefits downsizing has to offer.
As a local real estate agent, with an in-depth understanding of Mosman, Cremorne and the Lower North Shore area, I fully understand the challenges of downsizing. I can help make the journey even easier by assisting with the sale of your current home and finding your downsizing dream close by.
“By carefully preparing to downsize, you will be able to make your decision with greater clarity and peace of mind.”