In the first part of our retirement series, we shared some thoughts on transitioning to retirement.
Now let’s turn our gaze to one of many effective retirement strategies – downsizing.
Now the children have left home and possibly even the grandchildren are grown up, we tend to not need all this space.
Moving to a smaller place is not only beneficial for this stage of life but also an effective way to access capital locked away in your existing home.
However, it is not as simple as it seems. So let’s look at both the pros and cons of downsizing to a smaller abode.
Pros of Downsizing
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Cash flow
Selling your property and buying a smaller and cheaper property can free up cash that has been stored as equity in your property. You can then use this for your next purchase or to invest.
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Maintenance
A smaller home means less time and money spent on maintenance and more time to enjoy your retirement.
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Fewer costs
Again, a smaller property means fewer costs for ongoing upkeep, bills and rates.
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Making use of the hot property market
The Australian property market is at an all-time high, making anyone looking to offload property likely to be sitting in a very pretty position. Profit from the sale of your property can be used to improve your retirement lifestyle with access to available cash.
Cons of Downsizing
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Less space
As much as we all enjoy fewer costs resulting from smaller property, it does mean just that – less space! It may take some time to get used to your smaller surroundings.
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Impact on age pension
Downsizing, and therefore accessing the equity in your property can affect your pension payments. So it is important to meet with a Financial Advisor and discuss the pros and cons, along with the financial implications of selling your home.
Are There Alternatives to Downsizing?
Yes!
Selling and downsizing are not your only options.
You can look at increasing your cash flow by renting out a room in your existing home.
Or if this is not for you, you can look at converting your home to dual occupancy. Many Aussies are looking into this option to remodel their existing property into dual occupancy, especially those on larger blocks.
We always recommend you seek professional advice before acting on any future financial decisions as they may have an impact on your Age Pension. If you are considering downsizing but want to look at how it will impact your retirement plans, contact our team to see if this strategy is right for you.
