Down-Size Your Home, Right-Size Your Life

Down-Size Your Home, Right-Size Your Life

You are attached to your home. That is natural: Your children grew up in this home. You spent long hours with your spouse in this home. You've celebrated holidays, anniversaries and birthdays in this residence. Giving it up is no easy task.

Also, then there's the physical challenge of moving. Moving from one residence to another can be a grueling job, both mentally and physically.

However, there are times when downsizing to a smaller home makes economic sense. A smaller home can mean less maintenance and lower costs. Moreover, during your retirement years, both are important if you want to live a comfortable, stress-free life.

Moving to a smaller home

When does it make sense to move to a smaller home? When maintaining your current home is both too physically and financially demanding.

Consider the physical side first. You once needed a lot of living space in your home. You had children living with you, and they ate up a great deal of your home's square footage. However, now it is just you and your spouse. You have too much space, space that you now rarely if ever use.

Unfortunately, that space still needs upkeep. You still need to mow that large backyard that you rarely use and stain that oversize outdoor deck that mostly sits empty. You and your spouse may rarely travel to the second floor of your home, but that does not mean that the carpets up there don't need vacuuming or that the furniture does not need to be dusted.

The simple truth: It is easier to care for a smaller home. You might even consider moving into a seniors community, condominium unit or apartment. Such options allow you to forget about yard work, so that you'll no longer have to worry about how tall the grass has grown or how deep the afternoon snowfall was.

The financial advantages of moving to a smaller home are important, too. Smaller residences often come with lower property taxes or insurance costs. This can be important as you move into your retirement years. Remember, your monthly income will fall once you leave your job. You can better protect the monthly income you do receive by reducing the amount of money you spend on taxes and homeowners insurance each year.

Reducing expenses

As you debate whether it is time to move into a smaller home, you can also take steps to downsize other of your regular expenses. Again, every dollar that you do not spend leading up to or during your retirement is an important one.

For instance, once you hit retirement age, it is time to take a closer look at your insurance coverage. While you may need to add supplemental health insurance as a boost to Medicare coverage, you might be able to cut out other insurance costs. The odds are you'll no longer need as much life insurance as you grow older. If you no longer need a second car because you do not commute to work, you'll also be able to lower the amount of money you pay each month for auto insurance.

Then there's phone service. Many of us hold onto cell phone service plans that simply cost too much. Consider searching for a cheaper service. You might not need all of the monthly minutes for which you are now paying. Consider, too, whether you still need a land phone line. Many people have dropped their land lines entirely, opting instead to rely on less expensive cellular plans for their phone service.

Reverse mortgages

If you choose not to move to a new home, you might consider a reverse mortgage as another potential income stream.

A reverse mortgage allows homeowners of retirement age to access a portion of their residence's equity that they can use to pay for bills and living expenses. Retirees can do this in a number of ways. They can choose to receive their equity payment in a lump sum, in the form of monthly payments, or they can take the funds as a revolving line of credit.

Retirees do not have to make payments to the lender that provides them with a reverse mortgage. Instead, they typically repay the home when they die or sell their residence.

Homeowners, though, need to be careful with a reverse mortgage. If they die without having first repaid the loan -- typically through a house sale -- their heirs will be responsible for selling their home and repaying the loan, something that can add stress to their lives.