Is Downsizing the Answer?
Around 23% to 25% of people in their 50s and 60s are thinking of downsizing, according to original research conducted by the Australian Over 50s Living & Lifestyle Guide.
This is a big jump from just 12 months ago when estimates were around 15%. The increasing trend to Downsize is not a surprise, given a better understanding of the benefits that Downsizing could deliver. Depending on your personal circumstances, it could be the answer to both upgrading your lifestyle and having more funds available for your older years or to use in a new business or venture.
Freeing Up Your Time & Money
For those who have had families, the children may have left, the garden may have become an increasing burden, and the size of your house could see you spending too much time cleaning and maintaining, instead of taking time to do what you enjoy. Perhaps downsizing is the answer?
The idea is to reduce the time you spend looking after your property and free up the equity in your home to finally do the things you enjoy.
Downsizing can free up a substantial amount of equity in your home, part of which can be used to buy your new home and the balance invested, kept for a rainy day, or used to improve your lifestyle.
New Downsizer Superannuation Provision
New superannuation rules that came into effect from 1 July 2018, also make it easier to invest the proceeds of Downsizing in your superannuation fund. The ‘Downsizer’ superannuation contributions provision may allow you to boost your super savings by up to $300,000 if you are aged 65 or over and selling your home. That applies to your partner too if he or she is also over 65. However, you should get independent professional advice that takes account of your specific circumstances and restrictions if you are thinking of taking advantage of these new provisions.
At one time, downsizing simply meant moving into a smaller home. Although this is still an option, in recent years, a number of alternatives have emerged, such as retirement villages, over 50s resorts and a variety of apartment living concepts. If the financial aspect is a priority concern, it is worth bearing in mind that land lease arrangements or manufactured homes offer substantial savings from stamp duty.
Another cost advantage in considering downsizing is the ongoing cost of maintenance. Staying in a home that you are not using fully, could cost you a great deal in energy, maintenance, and water bills. When the house had children in it, the consumption and need were there. Now that the numbers have shrunk, your outgoings may not have reduced in line.
Upgrade Your Lifestyle
Beyond taking advantage of a nest egg built up in your house equity, another aspect to consider in Downsizing is an improved lifestyle.
Many baby boomers are used to city living or would love to try it. They may have lived many years in suburbia but now want to be close to amenities such as the best restaurants in town, the theatre and other facilities that were hard to get to from suburbia. If urban living is your lifestyle choice, then apartment living has a lot to offer for retirees because prime city landed property is simply not available or would make the costs prohibitive for continued city living. Apartments have a smaller footprint than landed property and are therefore affordable in excellent locations.
Another alternative is a retirement community, whether it be a retirement village or a lifestyle resort. These communities can be the perfect solution to reduce the stress and effort of maintaining a large home and also provide a ready-made social community and network. Communities are very often set in idyllic surroundings with excellent leisure and dining options.
Bigger is not Always Better
When considering the decision to move from the family home or not, there are many factors to consider on the emotional and social plane. Big homes can be isolating, especially if they were once full.
Do you get to see your loved ones where you are? Is it easy to get to medical centres, shopping, and community events? Your home should be close to the people and things you love. Often times the family home was close to the things that were important to the family unit, but once the kids have left, the things that once were driving factors for your location are no longer relevant. In spite of these advantages, downsizing can be a very emotional decision.
Your family home is filled with great memories – Christmas celebrations, birthdays, anniversaries, graduations, laughter, and time spent together. But remember these are your memories and they will go wherever you do.
At the end of the day, whether you are going into a smaller landed home or an apartment, if you downsize it should be for your own personal and financial freedom.
Downsizing could be an invaluable gift of time – to do what you care about, instead of looking after a house that may no longer be needed.