Quite often, those who are retiring make the decision to downsize. Whether you’re considering moving to a smaller home or into a retirement community, downsizing can often save you money. However, there are some myths you should know about. The last thing you want is to be caught off guard by unexpected issues. Here are some common misconceptions you should consider.
A smaller house means lower living expenses.
Not so fast. This depends entirely on where you live. If you move from a rural area into a city, your expenses might even go up. Regardless of how much space you have, the cost of living is going to depend on your location. There are property taxes, potential HOA fees, and maintenance costs to consider, among other things.
Selling your house will lead to a windfall of cash.
If you’ve got a big house that’s all or mostly paid off, it’s easy to assume you’ll benefit from selling. Proceeds from the sale might not be as substantial as you imagine though. Depending on your location and how much your home has been updated, it might not sell quickly. It might also require renovations that could take a chunk out of the net proceeds.
If you choose not to make updates, you could have to instead lower your selling price.
You’ll make plenty of extra cash by selling off extra goods.
Just like with the sale of your house, you shouldn’t overestimate the worth of your excess stuff either. While selling furniture, china, antiques, and other things might bring in some money, it’s likely less than you think.
With more and more baby boomers entering retirement, there’s an abundance of collectables. This means your perceived value might be much higher than what you can actually get for them. When in doubt, however, you should likely contact an appraiser.
Downsizing is the best option for improving your finances.
While downsizing can often help, it’s not always the best way to reduce your living expenses. If you don’t have significant concerns about your current home, there are likely other options. If you like where you live, you might want to look for other ways to cut costs first.
Perhaps you could rent out a room and/or make energy efficient updates to cut utility bills.