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Downsizing for retirement

Practical tips for empty nesters

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.)

Home improvement stores and donation centers

Do you have a dresser, coffee table, couch, miscellaneous building materials, paint supplies, and even a sprinkler that need a home? There’s a good chance your local Habitat for Humanity ReStore will take them. Located throughout the country, these stores use the profits from the sales of donated items to help build, rehabilitate, and repair homes in your community — all while keeping reusable household items and building materials out of landfills. Be sure to keep a record of what you donated for your tax records.

Thrift and secondhand stores

Oftentimes, the proceeds from the clothing, jewelry, games, and housewares that you donate will assist those in your community who have needs related to employment, shelter, food, and emergency relief. Some thrift stores even partner with local nonprofits. Donate your items to an organization that aligns with your giving goals.

Supply a wardrobe

If you are about to retire, you can transition most of your professional attire out of your wardrobe. If it’s nearly new and only gently used, donate it to an organization that outfits women and men with clothes that empower and inspire, enabling them to thrive personally and professionally.


Have enough books to fill up all the Little Free Libraries in town? Consider donating to your local library.

Librarians are always looking to stock their shelves with good books. Because government funding, grants, and monetary donations can be in short supply, be a good neighbor and unload some of yours at your local library. Just be sure to call ahead to find out the guidelines.

Food banks

You probably don’t want to schlep heavy canned goods and unopened boxes of cereal, grains, and other shelf-stable foods to your new home. Instead donate them to a local food bank. Make sure to check expiration dates before you do.

Animal rescue and shelters

Have you saved lots of old sheets, towels, and blankets over the years? Instead of tossing them, check to see if local animals in need could use them. The items are perfect to use for their bedding and bath time.

To toss

Recycle whatever you can. Of course, there are some household items that you just can’t give the ol’ heave-ho. Old and broken TVs and cell phones, half gallons of paint, and other potentially harmful substances need to be discarded properly. Check your local requirements.

To sell

Online marketplaces are all good options to utilize. You also might consider holding an estate or tag sale. A professional estate sale agent will typically take between 25 and 50 percent of the total earnings.6 It can be worth it if you have a lot of stuff to get rid of before your big move.

Making the most of your new space

One of the reasons why you want to move is to have less space to care for, which is liberating. However, it’s still a smaller space, one you’ll need to get used to. Things like pocket doors and a 4-seater dining room table will certainly buy you some space. Also, swapping a big desk for a wall-mounted desk (with shelving located on the wall just about the desk) will still allow you to pay the bills or write a letter — but more efficiently.7 Mirrors, multifunctional lighting, zones, and lighter colors are also good ways to give your home with a small footprint some breathing room.8

Get started on downsizing today. Then, once you make the big move, you’ll have a nest built just for you.

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1. Dychtwald, Ken; Morison, Bob. “Where to Live in Life’s Third Age.” Forbes, July 21, 2020.

2. White, Jordan. “5 signs you’re ready to downsize your home.” HousingWire, April 2, 2021.

3. Yale, Aly J. “4 Signs the Housing Market Is Finally Starting to Cool.” Money, November 12, 2021.

4. Carpenter, Julia. “As Boomers Downsize, Competition Grows for Simpler—But Not Always Smaller—Homes.” Realtor,November 1, 2021.

5. “Topic No. 701 Sale of Your Home,”, November 4, 2021.

6. "In Good Taste,", March 3, 2020. 

6. Mendelsohn, Hadley. “These 27 Small Space Design Ideas and Tricks Will Truly Maximize Your Areas.” House Beautiful, March 23, 2021.

7. Geerts, Sheryl. “Must-Know Downsizing Tips for Your Move to a Smaller Home.” Better Homes and Gardens, April 14, 2020.


This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.

DOFU 1-2022