If you’re planning for your retirement, you may assume that moving into a smaller home is an essential part of the process. But what looks good on paper may not work out so well in practice. Depending on your circumstances, it may turn out that downsizing isn’t the best answer for you, and you end up rethinking your living arrangements. That’s what happened to us. Several years ago, I identified a big barrier between me and early retirement: Half our net worth was tied up in real estate and wasn’t available for generating investment income.

So we set out on a complicated, multi-year journey to ensure we had a nice home to retire in, with a nice retirement lifestyle to go with it:

  1. We sold our four-bedroom house. Our empty nest was too big for two people. A lot of our money was tied up in rooms we never used.
  2. We bought a 71-square-metre, one-bedroom condo. The downtown location was perfect, at 250 metres from work, with parking, the city’s best transit service nearby and the city’s best deli downstairs. We could walk to doctor and dentist appointments and shopping, and were just 500 metres from the big regional hospital.
  3. We did something unusual. Because the condo was too small to host family gatherings, we tore down our family’s rustic, 1950s-era cottage and in its place, built a four-season, three-bedroom home. The new “cottage” became the site of our big family get-togethers. We rented it out during peak season, earning rental income.

All this freed up some money for investing, increased our income and dramatically changed our real estate holdings and our lifestyle.

Problems cropped up

Sounds pretty good, right? But after a year or two of working and living with that situation, we discovered two problems were bigger than we’d predicted:

  • The cottage was expensive and difficult to maintain. Property taxes on lakefront property were shooting up. And though the cottage was new, it needed more maintenance than we’d expected. The to-do and to-pay lists were longer than we’d bargained for.
  • We were finding we couldn’t travel freely. After enjoying the old and new cottages for years, exotic travel destinations were beckoning, while we were cutting grass, weeding and trimming trees.

Our choice: travel or cottage?

We realized that once we retired, we couldn’t keep the cottage and travel as extensively as we wanted. So we boldly undid several big steps we’d taken:

  1. We sold the cottage. That was a tough decision! Oh, the stuff we got rid of … family treasures, everyday things we didn’t have room for and rarely used things like the roasting pan for big turkeys we seldom roasted.
  2. We sold the condo. It was too small to serve as our one-and-only home, so that was an easier decision, though it had offered an appealing lifestyle.
  3. We bought a new bungalow. But we told the builder we wouldn’t take delivery for seven months.
  4. We retired, put everything in storage and hit the road. We spent four months in Europe to kick off our retirement, then we moved into our new house.

It took many moves and lots of realtor and legal fees, but we reordered our priorities and landed in a very good place, literally, for achieving our retirement goals. We have a (reasonably) maintenance-free new bungalow with a great layout that’s ideal for entertaining. We live in the lovely, interesting community of Stratford, Ontario, which is famous for its theatre and restaurants. It has a great hospital, we’re close to a premium golf course and our neighbours are a healthy mix of young families, retirees and working people.

I doubt that many of the estimated 4.4 million Canadians who will retire in the next 10 years will go through all the real estate hubbub we did. But expect to see lots of changes in your local real estate market as baby boomers create their personal ideas of optimum retirement.

Thinking of downsizing? Some points to ponder:

  • Plan to pay for new, smaller furniture.
  • Budget for redecorating and perhaps new appliances.
  • Consider how many bedrooms you need — a guest room may be vital.