Is downsizing your home an option for you in retirement?

By the time you retire, you have probably collected a considerable amount of home equity and downsizing can be a way to tap into that valuable cash.

Downsize your lifestyle – not your life

When your kids left home you probably had big plans for those unoccupied bedrooms – like the art studio you’ve always wanted, a sewing room or a play room for the grandkids.

But it’s a fair bet those rooms have barely changed and now you may be wondering if you really need all the extra space.

Downsizing can be a way to harness the home equity you have built up. But it’s a big decision and you need to be sure it is the right choice that helps you scale back your life without scaling back your lifestyle.

Let’s look at some factors to consider.

1. Where would you like to move to?

When you’re not in the workforce, your choice of location is no longer dictated by proximity to work. You’re free to explore a change of scenery or even relocate overseas.

This opens exciting possibilities, although you may want to remain close to family or friends. This certainly makes a long distance relocation something to think through carefully. If you’re heading off to a new location, investigate whether the area has clubs and organisations to help you make new friends and become part of the community.

2. What sort of property are you looking for?

Along with the location, plans to downsize should cover the type of property that is right for your needs – both now and in the future.

Some of the factors you may want to look at are the ease of maintenance of the property, how many stairs it features and whether doorways are wide enough to accommodate aids such as a walking frame. Single level living is often a plus for seniors.

3. Does it stack up financially?

On paper at least, downsizing can seem like a great way to free up extra cash. But you will need to pay for a new home and this brings a range of buying and selling costs which can eat into the sale proceeds of your current home.

There are ongoing costs to consider too. Moving from a house into an apartment can mean a lower maintenance style of living. Be sure to look into strata levies though. The more facilities an apartment complex offers, the higher the levies you are likely to face.

4. Have you considered your emotional needs?

There’s a lot of family history tied up in our homes and you shouldn’t discount the emotional attachment to your place. Think through the decision to move very carefully and discuss it with your family. The last thing you need is to make a decision you’ll regret.

Investing the proceeds from the sale of your property

Give some thought to how you will use the funds remaining from the sale of your old place once you have purchased a new home.

One possible strategy is to use the money to make a non-concessional (after tax) contribution to your super fund.

While investing the proceeds from the sale of your property into your super is one potential strategy for you to consider, your financial adviser can discuss other strategies that are tailored towards your situation and goals.

Disclaimer:This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in April 2017. © Copyright 2017