It can be a welcome relief to downsize a home and simplify life for retirement. Clearing out and/or selling the family house does not merely represent the end of a chapter; it also marks the beginning of a fresh adventure.
You may be cutting expenses or addressing logistical challenges, such as stairs or long driveways. Besides, if you also move location, you might settle closer to family or to superior medical facilities. You might even trade up for kinder weather: say goodbye to bone-chilling winters. Yet there are various considerations.
Selling your house
Start by weighing the pros and cons of a big move and include your spouse and family in the discussion. On the plus side, a successful sale should hopefully generate a cash infusion, which will bump up your savings nest egg for a more comfortable retirement. At the same time, downsizing can be instrumental for paring expenses, such as:
- Reduced mortgage payments (or none left to pay).
- Lower cleaning, repairs and maintenance costs.
- Smaller utility bills.
Be aware that your property taxes might not necessarily shrink, because location and other external factors play a bigger tax role than the size of the property itself.
Next, you need a realistic estimate of the marketable value of your current home. Start by visiting a few websites like Zillow, Realtor.com, Trulia or Redfin, or by checking online tools provided by banks. Keep in mind that the numbers from these sources can be quite unreliable or outdated, and mainly offer a ballpark guesstimate. Location is so specific and prices fluctuate. Local real estate agents can produce a more targeted appraisal but are inclined to err on the high side. They may paint a glowing view if they want to attract your business.
Your financial advisers may direct you to reputable connections in your area, and local attorneys are also likely familiar with nearby real estate agents.
Some Realtors may encourage you to renovate, or spruce up a yard for curb appeal. The higher the final sales price, the higher their cut. In fact, major renovations are a pricey headache and may not justify the effort or expense. But decluttering, some paint touch-ups and a little landscape pruning go a long way. As you calculate an eventual price, do not forget closing costs, agent commissions (often negotiable) and taxes. However, if you are selling a primary residence where you have lived for two of the past five years, some tax exclusions apply: $500,000 for couples and $250,000 for singles are deductible from gains.
Be ruthless with clutter
Most families have been accumulating their clutter for decades. Retirement is the perfect prompt to sort through superfluous belongings that have outlived their functions. Storage units are expensive, running about $53 to $350 per month, so better to weed out now, before storage bills mount.
Some candidates for tossing:
- Kitchen gadgets.
- Exercise and sports equipment — take up lots of space.
- Your adult kids’ castaways.
- Furniture — sell, gift or donate it.
- Books and magazines — local libraries may accept some.
- Old files.
- Holiday decorations.
- Fine china and silverware — be honest, will you ever use it again?
- Obsolete electronics, such as VCRs and ancient computers.
- Film projectors and sewing machines.
- Duplicates of anything!
Give yourself six months or longer, tackling one room at a time. It is easiest to begin with areas like spare bedrooms, basements and attics. As you go, take photos of rooms and write down furniture dimensions.
Powerful memories
Downsizing is an emotional exercise that brings back both joys and unresolved conflicts. Take the time to enjoy happy memories as you sort. You can recruit a friend, family member or even a professional organizer to help you. The National Association of Senior Move Managers, which has grown from 650 in 2012 to over 1,100 today, can help with disposals, donations and sales. Enlist your children, too. Their participation can ward off later resentment and conflict.
Treat the entire experience positively. Focus on the benefits of a more manageable lifestyle, fewer tiresome chores and discovering a new community of friends. Talk to your professional team of legal and financial advisers well in advance for tips on making a smooth transition.
We welcome the opportunity to put our tax expertise to work for you. To learn more about how our firm can help advance your success, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.
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