We recognize that there will come a time when we will need to move to more age-appropriate lodgings. Our best guess is that time will arrive around age 75, for us. A that age, the stairs in our home will become a challenge. We have three flights of stairs, counting the basement, covering four levels. The upper stairs are plenty wide, but the basement stairs, leading to the laundry (and wine cellar) are tight. I am already finding it disconcerting to come down the stairs with my ever-present reading glasses perched on my nose. More than once I've had trouble finding that last step.
So a move seems inevitable, and we are planning for it. But there are some important pitfalls in downsizing that must be carefully considered.
The first in my mind is financial. We do not consider our house a financial asset. It is where we live. It is where we keep our stuff. It is not a piggy bank. We have been fortunate enough (I like to think we have been smart enough) to have sufficient financial assets so that, with luck, we will not need to monetize the equity in our house just to survive. Whether lucky or smart, we are blessed. So, when we DO sell and downsize, we can, if we wish, put much or all of the resulting equity back into living facilities and to maintain our preferred lifestyle. Just on one level instead of four. When we are ready, we may choose to put our equity into a continuous care retirement community (CCRC) such as we have written about in earlier posts. These facilities usually require a substantial up-front deposit, often well in excess of $100k. Possibly much more.
Many elders and elder wanna-be's, however, are relying on home equity to supplement Social Security and other retirement funds for living expenses. In this case, sale and downsizing may be a must. This requires very careful planning. Having to sell when the housing market is depressed can be devastating, so flexibility in timing is important. Also necessary is a realistic expectation of how much equity can be monetized after investing in another place to live. Don't forget, if you sell it, you still need someplace to live!
A smaller home may not result in lower expenses. Most people do not move that far from their pre-retirement home (there have been studies about this), so there may not be that much difference in basic living expenses. Food, utilities, even property taxes - the valuation on the new house may be more than the old if it is a newer construction. And without the comfort of the old place and the old stuff, you may be seeking more entertainment and activities away from your new, boring home.
For me, the most frightening financial pitfall is trying to sell a home after already having committed to buying another or moving to the CCRC. Having two places to live is beyond our abilities, financially and emotionally. Best to sell first, even it if means living in a rental for 6 months or more. In fact, living in a rental for 6 months in the community where you think you want to live will give you a chance to see if you really do want to live there. A trial marriage, if you will, with full privileges but no long term commitment. Not a bad strategy, in my humble opinion.
The second pitfall is stuff. You got it. What ya gonna do with it? The collection of animal shaped cream pitchers. The cow collection (don't ask). The eight boxes of holiday ornaments and decorations. The 200 pound band saw in the basement. What if the new kitchen does not have enough counter space for the espresso machine. Or enough wall space for the paintings. You can't just leave this stuff on the curb or give it to Goodwill. Maybe an estate sale will help, but don't expect to get a lot for the cows. And be prepared for the trauma of disposing of so many of the markers of your life. Things are tied to the events, places and people in our lives. They can have deep meaning.
There are, of course, people you can pay to help you with downsizing. Moving consultants. Downsizing consultants. Psychiatrists.
Now, for some good news: for those of us with no adult children to provide long term care, there are no adult children to argue about wanting you to keep the house they grew up in or the sofa they have been storing in your den.
So, for the clientele of this blog, here is another bullet point for your planning documents. Think about the implications before you are too feeble to think about the implications. Plan. Organize. Downsize with caution. Be well, and prosper.
Michael
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