VOL. 131 | NO. 106 | Friday, May 27, 2016
Rays of Wisdom
Dana and Ray Brandon
Downsize Your Expenses, Not Your Home
By Ray and Dana Brandon
Ray’s Take Millions of baby boomers are approaching, or have arrived at, retirement. Some may find themselves looking around their large homes where they raised their families and deciding they don’t need all that room anymore. The kids have grown up and moved out (maybe) and the money from a sale could really bulk up their retirement funds. It may also be time to consider a downstairs bedroom and other considerations for the next phase in life.
But downsizing isn’t always simple and may not be financially beneficial. Many baby boomers are getting a lot less than they expected for the homes they have lived in over the years. Transaction costs can be significant, so it’s not unusual to have little cash left over after selling and buying a new home. Sometimes expenses in your new home don’t fall as much as anticipated and may even rise instead. This can be especially true when moving to a retirement community with a pool, tennis court and other amenities.
There are also other considerations when downsizing. Even though there are fewer square feet to heat, mow and pay property taxes on, unless you move to a part of the country with a lower cost of living, the savings might turn out to be fairly minimal overall.
Instead of downsizing your home, think about downsizing other expenses. Trimming discretionary spending each month can go a long way toward making it possible to live out your retirement in your family home. Making small changes can make a big difference over time. Lower the cost of utilities by installing a programmable thermostat and closing off rooms you aren’t using. Reduce the number of times you eat out, travel or play golf. Get rid of your second car if you don’t truly need it.
Take a hard look at everything involved with downsizing before you make the decision to sell. By the time you factor in all transactions and moving costs it could be many years before you are realizing any savings.
Dana’s Take Downsizing the family home can take a big emotional toll. It can be stressful putting your home of many years on the market – and stressful for grown children who may be losing the home they grew up in. And if your family home is the one where yearly gatherings take place, you could lose that tradition. Staying put can also save the energy of paring down years of accumulated keepsakes and possessions.
Having recently seen the astronomical costs of living in a retirement community, staying in the family homestead and bringing in family or helpers may make more sense – financially and emotionally.
While there are both pros and cons to selling your home, make sure you’ve taken into consideration the emotional cost, as well as the financial costs, before making your decision.
Ray Brandon, CEO of Brandon Financial Planning, and his wife, Dana, a licensed clinical social worker, can be reached at brandonplanning.com.