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Downsizing A Home Should Be On Retirement Planning Table

Retirement planning should, but often doesn’t, include what an individual or a couple plan to do with their house, as a recent article in The Wall Street Journal points out.

Single-family home
Single-family home (Photo credit: Wikipedia)

“For most people, their house is their biggest asset,” according to the story by Tom Lauricella. “It’s also their biggest expense. But when it comes to retirement planning, a house often falls to the bottom of the list involving changes in later life. There are plenty of reasons for that inertia. Emotionally, it’s hard to let go of a home filled with memories. Moving is a hassle, and downsizing to a smaller home isn’t always the cash bonanza some might expect. As a result, many wait until well into retirement before moving to a smaller house or apartment.

“But for many retirees, it can pay to downsize sooner rather than later.”

While the author admits the financial benefits to making the change, especially when compared with the hassle involved, may be relatively modest, even that can help making for a more financially comfortable post-work lifestyle.

“Some of the reluctance stems from the idea that trading a house with a paid-off mortgage for a rental or a condominium with maintenance or association fees will lead to higher monthly costs Lauricella writes. “That can be a mirage, says Lawrence Glazer, a financial planner at Mayflower Advisors in Boston.”

“In a home, the expenses are hidden,” Glazer is quoted as saying. “It’s maintenance, a roof, a boiler, heating and landscaping.”

Glazer also advises against keeping a home because it can more readily accommodate visits from children and grandchildren.

“Rather than clinging on to a three-bedroom and paying for the maintenance and heating, it’s cheaper to put [relatives] up in a hotel room,” he told the writer.

“Trading for the more visible costs of a rental or condo can help with planning, notes David Schwartz, chief executive at advisory firm FCE Group in Great Neck, N.Y.,” according to the Journal article.

“You know what your fixed costs are going to be,” Schwartz said.

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