4 Downsizing Mistakes That Will Cost You | RuralMoney.com
4 Downsizing Mistakes That Will Cost You | RuralMoney.com
Assuming That Smaller Means Cheaper
Downsizing is sure to make your life easier in retirement; and you’ll have smaller bills, a smaller yard, and less to worry about home maintenance.
Or will you?
Downsizing can simplify life in retirement, but it’s not always a guarantee.
If you want to downsize successfully, these are the top mistakes you need to avoid.
Selling your sprawling country estate, buying a condo in the city, and pocketing a few grand for your nest egg sounds like the perfect way to launch your retirement.
Unfortunately, that dream may crash and burn when you see what those downtown condos cost.
For seniors moving from rural to urban areas, downsizing a home can actually upsize their costs.
Before you change your mind about downsizing, remember two things.
First, you don’t have to move into a big city to enjoy convenient retirement living.
A tight-knit small town is great for senior living and far more affordable than a metropolitan center.
Second, the list price doesn’t always represent the true cost of a home.
For example, homes in Palmetto sell for 2.2 percent under list price on average.
If you’re paying cash for a home, you may be able to negotiate the price even lower.
However, it may be harder to get the upper hand in a more competitive market.
That’s why buyers should pay attention to home prices and market data when deciding where to buy.
Becoming House Poor
You’ve found an area that fits your budget and you’re ready to make an offer on a home.
But are you confident you’ll have enough to live on after paying for your new house?
Paying for a home in cash might eliminate your mortgage payment, but if you don’t have enough saved for retirement, it could leave you “house poor.”
When determining if you have enough to live on for retirement, include all your expenses, including property taxes (which are likely to rise) and health care expenses (which average $285,000 for a couple).
Even with a mortgage, seniors can go overboard on their home.
Sit down and make a budget to avoid saddling yourself with a house payment that doesn’t leave enough for daily living and unexpected expenses.
Buying a Fixer-Upper
If you want to save on housing, buying a fixer-upper seems like a smart choice.
In exchange for a little sweat equity, you can save thousands on your home and design to your personal tastes.
Unfortunately, fixer-uppers are full of hidden problems that can send your remodeling costs skyrocketing over the original estimates.
You could absorb unexpected costs like that when you were working, but it’s harder now that you’re on a fixed income and can’t make up the loss.
Fixer-uppers also aren’t practical for older homeowners.
Soliciting estimates, hiring and coordinating contractors, and overseeing work is a lot to take on for anyone.
When you’ve just finished downsizing, tackling a whole-home remodel is utterly overwhelming.
Not Accounting for Accessibility
You shouldn’t take on a project house, but you may need to do some renovating to get your new house ready for senior living.
While it’s possible to find homes that are mostly barrier-free — think step-free entries, first-floor master bedrooms, and accessible showers — few homes have every single feature a senior needs.
Assess any prospective home for accessibility and make a list of modifications needed if you opt to buy.
Common home modifications for senior buyers include installing grab bars, replacing door and cabinet hardware, and installing extra lighting.
Doing this research lets you know the true price of a home and stops you from biting off more remodeling work than you can chew.
Downsizing can be a financial boon or burden depending on how you approach it.
If you dive into the downsizing process without doing your research, you could find yourself house poor or in a home that’s unsafe for senior living.
While downsizing can be a great choice for older adults, it’s important to consider all the costs before making your move.
