As you near retirement, there’s so much to think about. You have probably thought long and hard about perhaps the most pressing question: Where do you want to live? And what should you do with all that stuff?
Now that the children have moved out, you realize you want to spread your wings, too. Perhaps you want to move to an entirely new nest or simply tidy up the nest you have.
Nearly half (47 percent) of Boomers who are retired have decided to stay put in their current homes, allowing them to age in place during their retirement years.1
Many of these homeowners are making their “forever” homes even better by redoing kitchens and bathrooms and — for retirees who want to embark on new business ventures — creating new home offices. In fact, people ages 55 and older spend $117 billion — over half of all home renovation expenses — improving their homes each year.1 And for those who don’t want to mow the lawn, rake the leaves, clean the gutters, and shovel the snow, they can hire someone else to do these chores.
However, there’s still a large portion of the retirement population (3 million people ages 60 and older) who want to downsize and relocate to a new home.1
If you want to downsize, here are some considerations so you can make the process as enjoyable as possible.
The decision to sell
Be confident moving forward with your decision to sell your home.
There are several telltale signs that indicate selling your home is a good option for you. Start by asking yourself:
- Do you feel overwhelmingly stressed when thinking about your home’s maintenance?
- Are you always on the go, barely spending time in your home?
- Are you spending more than 30 percent of your income on your house?
- Do you have rooms in your home that you barely use?
If you answered yes to most (or all) of these questions, it’s time to downsize.2 Lucky for you, it’s a seller’s market.
A seller’s market, just with less hype
Although the housing market is showing signs of leveling out, homeowners still have the upper hand. And they will for some time.
In April 2021, prices on active home listings had increased 17.2 percent from the previous year. Six months later, in October 2021, houses prices were up 8.6 percent from the previous year. In 2022, experts predict the annual home price appreciation will be in the range of 2 and 7 percent.3 So, while it’s looking to be a more balanced market (some experts say an annual appreciation of 3 percent is normal), homes cost significantly more than they did just a few years ago. And that’s great news for homeowners looking to sell.
Just know that the days are numbered for a house being snatched up in record time and of receiving multiple offers way over asking price. Plus, mortgage rates are expected to rise from 2.98 percent in the fall of 2021 to 3.7 or 4 percent by the end of 2022. One expert says that a 1 percent rise in interest rates decreases a person’s buying power by 9 to 11 percent.3
That said, if your house is priced right, you might be surprised with how quickly potential buyers move on it. When that happens, be ready to move yourself. Just know that smaller homes are tough to find, as older adults and first-time buyers are competing for the same ones. And it’s turning into a supply issue. According to Freddie Mac, the number of homes for sale that are 1,400 square feet or less are at an all-time low.4
You may want to rent until you find a home that fits you. (There are some fabulous new apartments being built that have all the bells and whistles.) Or you may decide to rent long-term, moving the money you made in the sale of your home to your retirement nest egg. Or perhaps more of your speed is to find a home in a retirement community in Florida, with your peers who get you, or in a college town like Austin, Texas, with young people who energize you.1
Tax implications
Know that you’ll have to pay capital gains tax if you make more than $250,000 (single) or $500,000 (married) on the sale of your home. However, you can qualify for an exclusion if your profit is less than these amounts and if you’ve owned your home for at least five years and you’ve used it as your main residence for two of the last five years.5
What to do with all your stuff
Wherever your path leads, you’re going to have to do something with all the material possessions you’ve accumulated over the years. Of course, you’ll take some with you to your new home. But if you’re truly downsizing, you’re going to have to find a new home for many of your items.
Start the process of purging well before the packing process. When sorting through your stuff, create separate piles labeled: to keep, to toss, to donate, and to sell. A word of warning: Do not let yourself have a “maybe” pile, as it will just slow down the decision-making process.
It’s inevitable that you’ll go down memory lane as you sort through old family photos and your children’s art projects and school reports. Give yourself enough time to enjoy these memories. Also, give your grown children enough time to pick up any memorable items they’d like for a keepsake. A wonderful alternative to keeping physical copies of old photos (and your once-little-one’s art projects) is to digitize them. Luckily, there are plenty of services that do just this sort of thing.
Once you’ve given yourself adequate time to reflect on (your) things, it’s time to get to work.
To keep
You have a good idea of what you need to keep: a full set of dishes and silverware, well-loved cookware, your bed, important paperwork. You get the picture. Other items that you’ll need no matter where you live is an emergency kit, a step ladder, and a toolbox with the basics. (A hammer, a level, and nails will certainly come in handy for hanging pictures.)
Also, be sure to clearly label all your boxes with a sheet of paper that lists the items the box contains (for you) and the room you’d like the box in (for your movers).
To donate
You’ll be glad to know there are plenty of places that want your gently used items. Just be sure the items you donate are in good condition. Some places might even want you to do a cursory clean or wipe down of a piece of furniture before you donate it, for example.
Here are some places to start with. (Do an online search and you’ll find a plethora of places that are looking for used items.)