Are you thinking about downsizing in retirement? Many people talk about how much less living in a smaller home might cost. But I’m here to tell you that emotions have as much to do with the downsizing decision as finances.

Now that we’re both retired, my husband and I have decided to downsize and leave the city. And here’s what I’ve discovered: Making the money decisions is actually pretty easy. It’s the emotional stuff that can make downsizing difficult.

When should you downsize your home?

There are many reasons why you might consider downsizing, but on average, the reasons tend to take two forms: practical and financial. Some common reasons Canadians downsize are:

  • Their home is too big
  • To reduce maintenance (i.e. house and yard work)
  • To pay off their mortgage
  • To lower monthly bills (i.e. heat, hydro, property taxes, etc.)
  • To move closer to family
  • They’re snowbirds and don’t need a large house for only a few months per year
  • They need money to fund their retirement

When did I know we needed to downsize? The day I realized our family home of 24 years had twice as many toilets in it as people. Not to mention too many bedrooms, sitting rooms and eating areas. If we didn’t have dinner together, we could go an entire day without seeing each other.

Having agreed that we have more house than we need, our next discussion was two-fold:

  1. What kind of home did we want?
  2. Where did we want it to be?

How much smaller should your new home be?

The whole point of downsizing is to live in a smaller space. But how much smaller? Here’s what I think: You want to downsize enough to make it worth the effort, but not so much that you feel cramped. Unless money troubles are forcing you to downsize drastically, I think a 25-33% reduction in space is reasonable.

If you already live in a small space, downsizing might not be an option. You can still declutter as if you were moving, though, to make your home feel bigger. You could also consider moving to a similarly sized home, in a less-expensive community.

What don’t you need when you downsize – and what can’t you do without?

A lot of that discussion comes down to what your priorities are, and what you’re used to. For example, our ensuite bathroom started as a nice frill. But with the new reality of 3 a.m. calls of nature, it’s now more like a must-have.

How much private space do you need? Our current house has a semi-open floorplan, and I often retreat to the living room to read in peace and quiet. Many newer homes are even more open. If there’s no separate living room, I think I’ll need quiet reading and writing space somewhere. With a bedroom for us and for overnight guests, that leaves a third bedroom for my hobby room. My husband wants a garage for his own space and hobbies. Then there’s the kitchen. For 24 years, I’ve had the luxury of a big kitchen. Our next one doesn’t need to be quite as large. But I’d like it to be roomy since I spend so much time there. All told, this is a downsize for us – moving from a 5-bedroom home in the suburbs.

Don’t forget that downsizing looks different for everyone.

How do you get rid of stuff while downsizing?

Parting with possessions can be hugely emotional. But say you’ve got 25% less floorspace to work with. That means you need to sell, donate or toss roughly 25% of your belongings to fit into it. 

How do you decide what goes and what stays? I suggest looking ahead, rather than looking back. For instance, will you host the entire extended family for the holidays again? Perhaps you’ve already passed that responsibility to the next generation. If not, maybe now’s the time. If so, you might not need that giant dining table or dinnerware for 20 people.

In the process, try to ignore your inner voice and urge to keep everything sentimental. I did keep some things with sentimental as well as practical value. But I gave away everything that we really didn’t need or want anymore.

What kind of home do you want to buy?

Detached? Semi-detached? Condo townhouse or apartment? They’re even building bungalow townhouses these days.

We decided to look for another detached house with a little backyard for gardening. Right now, we’re both in excellent shape. But what about in 10 or 15 years? That’s why we’re looking to buy our first bungalow. Again, we’re looking ahead. There’s a downside to this, though. A newly built bungalow can cost more than a two-storey with the same square footage from the same builder. That’s because the foundation, which is the most expensive part of the building, is bigger. Resale bungalows tend to be pricier, too, due to high demand. But for us, it’s worth it if it means we only need to move once.

Where do you want to live in retirement?

Are you looking for a completely new town, city or even province? Maybe you want to have two smaller homes in different locations to mix things up? A smaller home in the same neighbourhood might be right for you. Whatever your motivations for downsizing, again, think about the future – and what you may need as you age.

For us, it’s all about family. We want to live close enough to help our daughter with childcare. And she wants us nearby so she can help us when we get older.

Aging can affect your choice of location in many ways:

  • Health care. Is there a good hospital nearby? Can you find a family doctor?
  • Transportation. Do you have to drive everywhere, or is there transit? Is anything within walking distance? In time, you may not want to drive as much, or even at all after dark.
  • Accessibility. Even with one-floor living, you may eventually need to widen doorways or install a walk-in shower.
  • Lifestyle. Do you want to live among other older folk exclusively? For a monthly fee, an “adult lifestyle community” can provide amenities like a clubhouse, gym or pool. You’ll need to build that expense into your budget. I just spotted one with monthly fees of $330.

Who can help you plan your downsizing?

First, talk to your advisor. 

Don’t have an advisor? Find a Sun Life advisor today.

Find out how much (if any) of your home equity you’ll need to help fund your retirement. Your advisor can help you structure your retirement income so your savings last as long as necessary. As well, though it might sound odd at your age, ask about life insurance. The right policy can help your children cover the costs they may face if they inherit your home. A good advisor will pay close attention to your emotions as well as to your finances.

Sun Life advisor Trevor Theobald, CFP,® CLU,® CHS™ often works with downsizing clients. “There is no one ‘normal’ situation,” he says. “Our goal is to help provide guidance on both the emotional and the financial side of downsizing. People downsize for all sorts of reasons. Sometimes they need the net proceeds of the sale for their retirement plan. Sometimes they want to be closer to children or grandchildren. Sometimes their home is just too much house. Whatever the reason, people are still moving away from the home where they likely raised their families. This is why ensuring that enough time is spent discussing both sides of the decision is so important.”

Next, talk to a trusted realtor. Get a realistic idea of what you can sell your house for. And find out what the house you want may cost. Your realtor can also advise what you need to do – and not do – before listing your house for sale. For example, we’re not touching our tired kitchen. But we are painting, cleaning and decluttering.

Finally, talk to your financial institution. Find out how much mortgage you qualify for, if you need one. Ask about bridge financing, if your purchase will close before your sale does. Be aware that without employment income, it can be very difficult to get a mortgage at all. That’s despite what your current house is worth, or what other assets you have.

I’m hoping this will be our last move before we move to a retirement home. As such, we want to get it right. It’s our chance to get some of the things we’ve always wanted. And we can get rid of the things that have bugged us for years. Wish us luck!

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This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.