Choose Between Senior Care Or A Downsized Home
Should you downsize to a smaller house thats easier to maintain or move into a retirement home? Many factors play an active role in this decision, including your health, neighbourhood, savings and whether youll need assistance and companionship. A smaller home is a more independent choice but you have to maintain it and your lifestyle. On the other hand, a retirement home is more of a community where dedicated staff help you to take care of your bills, personal needs and even groceries.
What To Do After You Downsize
After you’ve sold your home:
- Try renting for a while If you’re having trouble deciding where to live, rent in a new area to see how you like it.
- Invest the proceeds Consider investing any extra money into an income-producing asset. See how to invest to explore your options.
- Get help if you need it Government services like the Commonwealth Home Support Programme can help you to live independently and assist with daily tasks like shopping, cleaning, personal care or home maintenance. See aged care for more options.
You may be able to contribute up to $300,000 from the sale of your home to your super. See downsizing contributions into superannuation on the Australian Taxation Office website.
Be Cautious About The Amount Of Money You Spend On Travel
It is common for retirees and those approaching retirement to have a list of places they want to see. If your time will be much more flexible in retirement, you may want to shop around for deals as certain times of year are less expensive to visit some areas. If you can drive to a destination rather than fly, you may want to save money by taking the scenic route. You can also research free museums, landmarks, or other areas along the journey.
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How To Downsize Faqs
How do you downsize and simplify your life?
Start by decluttering. Organize your possessions into categories of items you want to keep, sentimental items, and things to sell or donate. If you have sentimental items you want to give to loved ones, make a point of mailing them the gifts or giving them the next time youre together.If you need help with selling or donating, contact local charities or consignment shops. They may be able to pick up the items for you or tell you whether theyll accept what you have. From there, set limits for yourself on any new purchases. You may want to create guidelines for deciding what to bring into your home so you can break old patterns.It can also help to let family and friends know youre downsizing and taking a more minimalist approach to possessions. This may encourage them to give you consumable or experiential gifts, rather than more household items youll eventually need to sort and give away.
How do you declutter and downsize?
Hecm For Purchase At A Glance
Eligibility requirements for a HECM for Purchase loan include:
- All borrowers on the loan must be 62 or older
- The home must be your primary residence
- Sufficient funds for the down payment
- The home must be a single-family residence, a multifamily property with a maximum of four units, or a condo or manufactured home approved by the U.S. Department of Housing and Urban Development and the FHA
- Completing a HUD counseling course on the terms and obligations of the HECM for Purchase loan
- Ability to afford property taxes, homeowners insurance, maintenance and upkeep, and any relevant homeowners association fees
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Impact On Age Pension Or Government Benefits
Your eligibility for the Age Pension depends on the:
Your home is not included in the assets test. When you sell your home, the proceeds are exempt for up to 12 months if you plan to use them to buy, build or renovate another home.
The proceeds are ‘deemed’ in the income test they are assessed as income from financial assets. This may affect the amount of government benefits you get.
See Age Pension and government benefits for more information.
How Our Downsizing Experts Can Help
Our downsizing experts can help by providing you with a market appraisal so you can fully understand how much your home could sell for, and what the current market is like for properties similar to yours in your area. Why not start by giving our instant valuation tool a go?
With branches all over the UK, our downsizing experts can help advise on smaller properties you may wish to buy too, even if youre looking to move to a different area. Call your local Leaders property experts on .
Make Downsizing Part Of Your Overall Retirement Plan
Housing is one of the biggest levers you have for achieving a secure retirement. For most people, their home is more valuable than their retirement savings.
As such, you want to make sure that you have a retirement plan that enables you to model your downsizing options.
The NewRetirement Planner lets you try out different relocation possibilities and immediately see how it impacts your finances now and into the future. You can model downsizing now or at some point in the future. You can also change your monthly expenses for different time periods in retirement.
Downsizing For Retirement: What To Do Before And After You Retire
Many people choose to downsize for retirement. Now that the kids are grown and you simply dont need as much space, downsizing is a great way to boost your retirement fund and make your living situation more comfortable. But what is the best way to do it? And where do you move after you downsize? Consult our expert advice below to find out.
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Whats Your Current Financial Situation
Preparing for a move is a great reason to reassess your overall financial situation. Here are key factors to consider:
- When you plan to retire
- How much money youll make each month from your retirement savings
- What your current expenses are, and how much you can afford based on your expected retirement income
- Whether or not youll need a mortgage, which could eat up a big chunk of your monthly retirement budget
Its important to map out different scenarios based on your expected longevity and worst-case scenarios, as this affects how much youll have to live on.
Why You Should Start Downsizing Now
Downsizing is something that you may want to start before you must. Downsizing is a task that takes much longer than youd expect and has plenty of serious benefits such as saving you time, saving you money, and if you decide to sell your things can even make you some extra spending cash!
Downsizing before you must is often referred to as pre-downsizing, and can offer strategic physical, emotional, and financial benefits. Here are a few of the most prominent benefits of downsizing early:
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Starting Early Highlights How Much Downsizing You Need To Do
If youve ever started on a project that you thought was going to be a molehill only to realize its a mountain of work, then you know how some tasks can sneak up on you. Its so easy to forget how much is in our homes and downsizing can be a much bigger task than one may think. For example, if you have filing cabinets filled with years or decades worth of information, simply sorting through paperwork can be a challenge. You may want to start downsizing early so that you have more than enough time to sort through all the things that youve accumulated over the years.
Downsize Contributions To Upsize Your Super
According to a Start at 60 survey, more than 80 percent of Starts at 60 readers own their homes outright, with 56 per cent owning properties worth more than $500,0002. Of course, if youre happy with your income, thats a great safety net to have.
But if youre unhappy with the amount you have to spend in retirement, selling your house, buying a less expensive property and using the cash to boost your super balance and thus your income, could make sense.
Those who sell their main residence and satisfy the eligibility criteria may contribute up to the lesser of $300,000 and the amount of the proceeds to their super as a downsizer contribution. If both member of a couple are eligible and the proceeds are $600,000 or more, the downsizer contribution can be up to $600,000 . Downsizer contributions are not assessed against other contribution caps.3
It may also be more tax-efficient than using the money to invest outside super, Bryan Ashenden, BTs head of financial literacy and advocacy, points out.
If you cant get it into the super environment, then youre looking at investing in your own name and youll be paying tax at your own marginal tax rate, he explains.
But if you can put it into super and then move it across to a pension, then youre going to be in a totally tax-free environment.
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What Will It Cost To Sell Your Home And Buy Another
Many retirees have bought and sold property already, but it may have been a while ago for some. Its a good idea to refresh yourself with how the process works, and all the extra expenses and fees involved:
- Realtors commission The fee youll have to pay your Realtor is typically 4 percent to 6 percent of the sale price.
- Closing costs Depending on the real estate market you live in, you may need to take care of some closing costs on top of your agents fee.
- Home inspection and repairs Buyers want a thorough home inspection before signing on the dotted line if any structural, electrical, or plumbing issues come up, you may have to cover those expenses.
- Mortgage payoff If your loan has a penalty for paying it off early, youll have an extra expense to contend with. The sum you make from selling the home will mostly go into paying off the current mortgage.
- Capital gains tax When you sell a home for more than you paid for it, that counts as a capital gain and might need to be reported on your federal tax return. Most homeowners are eligible to exclude up to $250,000 of profit from their main home from tax, as long as they havent used the tax break on another home sale within the past two years. This is where it pays to keep good records: If you invested in home renovations, these expenses could help reduce your tax.
Retirement Downsizing Tip #: Go Digital
They say a picture is worth a thousand wordsand thats why you need to get snapping. For all of those memories that you dont want to forget but just cant afford to store anymore, you can always take a picture . To make it easier to peruse these pictures whenever you want, you might set up a digital organization system first. Create files for each year, or each child, or perhaps by holidays. Whatever makes the most sense to you.
Virtual pictures may not feel as tangible as the real thing, but the nice thing about having all of this organized is that it makes it easier for you to go through all of your memories whenever you want without having to take down heavy boxes. And you might even create some sort of project or slide show with all of your photos, or use a digital frame.
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Why Is Downsizing After Retirement A Good Idea
Its completely understandable that you might struggle to make a final decision. After all, people are emotional beings and, right now, you have all sorts of emotions tying you to your current home. And it certainly seems like we get more emotional as we age. However, the years that come after retirement might be accompanied by certain health concerns and problems. Thats why you might not have the luxury of continuing to live in a two-story house. There are many reasons why you should downsize after retirement, including:
- Youll be able to travel more, as a big house also comes with a lot of costs and expenses.
- Less-stressful life is on the horizon after moving into a smaller house after retirement.
- Youll have less upkeep to worry about, as its much easier to take care of a smaller house.
In other words, youll be able to have a much simpler life by moving into a smaller home after retirement. Thats why you shouldnt waste a minute longer, but go and look for the perfect home to move into, as well as heated storage Boise in which to put your extra items, and be on your way to a brand new and exciting life. Thats what this upcoming process should be an adventure.
How To Downsize And Plan For Retirement
As you inch closer to retirement there are probably many questions as to how to downsize when you retire. Your goal of to downsize when you retire is to simplify, get rid of what you dont need and have a plan so as you move forward you can have the best retirement ever.
In retirement, you should have to have no worries related to money. If money is an issue you will need to temper your expectations, make more money or downsize to create the funds you need to do what you want.
You want to be prepared as best you can so that you can do the things you want to do and enjoy your well earned time after 30-40 years of hard work.
There are many things to consider when you retire and how you approach them can affect your retirement in several different ways, below are some of the best steps to consider when downsizing for retirement.
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Age Pension And The Assets Test
As weve said, your home isnt counted, but everything else is, including your furniture! 8
Assuming youre a homeowner, these are some important numbers. A single person can have up to $270,500 in assets and receive the full pension. Between $270,500 and $558,250, a part-pension is payable, and after $588,250, the eligibility to receive any Age Pension cuts off entirely.
A couple can have combined assets worth $405,000 and receive a full pension, between $405,000 and $804,750 for a part-pension, before it cuts off entirely at $804,750.9
If your assets are between the thresholds, making you eligible for a part-pension, youll need your calculator to work out what payment youll receive. Once your assets reach the lower threshold, your pension starts reducing by $3 per fortnight for every $1,000 worth of assets you own above the threshold.
Putting that differently, if youre already assessed under the assets test, every $1,000 in extra assets will reduce your pension by $3 per fortnight, or $78 per annum.
If youve got a mathematical bent, youll have worked out by now that the reduction in Age Pension is 7.8 percent of excess assets, so $100,000 of investments above the threshold will reduce the pension by $7,800 a year, even if those investments arent earning anywhere near that rate of return.
Get Your Property Valued
Weve all heard plenty of stories from friends and family about the money theyve made on their house sale, but its important to do your own research. Your location, home, the time you are selling it will all have an impact on the valuation of your property. Check out recently sold, similar properties on websites such as realestate.com.au or domain.com.au. You can also call a couple of your local real estate agents most of which can give you a free, no obligation, indication of your properties value.
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Tips On How To Downsize For Retirement
Many of us over 50 already thinking about how to downsize for retirement and where to live for the rest of our lives.
However, downsizing can be a scary word.
The first reaction is to feel that downsizing means leaving the big house where you raised your kids and create priceless memories. Saying goodbye to a place youve called home for decades will be difficult for every family.
But you may want to make a change when the kids moved out and you realize there are only two of you living in that big 4-bedroom house. Getting closer to retirement is a good time to start evaluating what is important in your life.
For many people downsizing also means reducing the cost of living, saving money and adding more to retirement funds.
Whether you want to save money, simplify your life, or be able to travel more, downsizing can be good for retirement living. Check out our tips to see if downsizing is the right choice for you.
Retirement Downsizing Tip #: Find Joy
Youve heard that whole thing about whether or not an object brings you joy? Eh, its a bit played out but its not wrong. This isnt just retirement downsizingits a tip for anyone trying to learn how to downsize your home.
So. With your memories protected, its time to go through the stuff you dont use anymore. Stop holding on to something that you used once, years ago, and might have a need for again one day. Or that old sweater you hate and never wear that an old friend gave to you. Give your friend a call instead and put the sweater in the donate bin. Dont worry, it feels good to donate things. If you arent using something, dont you want to give someone else the opportunity to appreciate it?
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