Relocation and Downsizing in Retirement: Evaluating the pros and cons
Retirement brings significant changes for people transitioning away from a career lifestyle. Retirees have the freedom to choose how they spend their time, but also, where. Some people hope to stay in their existing homes for as long as possible, commonly known as “aging in place,” but others explore the prospect of downsizing and relocating. The driving factors behind a decision to move usually include the following:
- A longing to be closer to family
- An effort to simplify daily living
- A need to effectively manage finances
- A desire to improve quality of life
There are several positive reasons for retirees to relocate and downsize, but it’s important to have all the information before deciding. Here are some benefits a move can bring.
- Reduced housing costs—Retirees can reduce or eliminate a mortgage bill by moving to a smaller or less expensive home. Additionally, relocating to an area with a lower cost of living can improve finances and quality of life.
- Decreased utility expenses—A smaller home can reduce electric, heating, and cooling bills. Additionally, some states have lower utility costs than others. This Old House reported that Americans spend a monthly average of $643.67 on utilities. These include gas, electricity, water, internet, cable, phone, and sewer service. Connecticut, Hawaii, Massachusetts, New Hampshire, Alaska, and Maine top the charts for the highest cost, ranging between $685.73 and $751.13 per month, whereas Colorado, Idaho, Minnesota, Montana, Nebraska, Nevada, New Mexico, and Utah are among the lowest, from $520.88 to $557.77.[1]
- Simplified lifestyle—Smaller homes hold less stuff. Culling furniture and belongings and creating order leads to easier living and is one of the bonuses of relocating. Also, smaller properties do not need as much maintenance, and some communities and homeowner’s associations (HOAs) even provide lawn and snow removal services to simplify the upkeep of homes with yards, driveways, and walkways. Other low-maintenance options include townhomes, condominiums, and apartments.
- Increased accessibility—Retirees may be interested in moving to a home with few or no stairs, an open layout, and other accessible features such as a walk-in shower. Homes or buildings that are more accessible benefit individuals with decreased mobility, which is inevitable as people age.
- Added convenience—Relocating offers the opportunity to move closer to places that service everyday needs. These include proximity to a hospital or medical facility, market, post office, library, and public transportation. Living near recreational facilities and cultural attractions can also enhance the retirement experience and help retirees build community. Retirement communities, buildings, or communes may include amenities such as a pool, fitness center, or community center, and may offer classes, events, and social activities.
- Improved quality of life—Relocating can offer retirees a fresh start, with advantages that enhance everyday living such as family support or a better climate.
- Tax advantages—Some states are more tax-friendly than others for retirees, with no income tax, no tax on retirement income, or a substantial tax deduction. The most tax-advantaged states for retirees include Alaska, Florida, Georgia, Mississippi, Nevada, South Dakota, and Wyoming. Additionally, sales, property, estate, and inheritance tax rates tend to be lower in these states. [2]
There are pluses and minuses to every situation and such is the case for relocating in retirement. Some drawbacks include:
- Cost—Moving is not an inexpensive endeavor. The cost of purchasing a new home and relocating can be significant, particularly if the move is far or if the new home is not ready when the sellers leave their original home. Many retirees need to pay for movers or move assistance. Additionally, a new home may require modifications or renovations.
- Stress—An article in PsychCentral cited retirement among the top ten most stressful life events.[3] Moving is also a major stressor and leaving a home can be emotionally overwhelming for those who spent half a lifetime there and raised a family. The idea of adjusting to a post-career lifestyle in a new place with potentially different cultural norms, pace, and politics after leaving important social networks behind can be enough to make some retirees decide to stay put. Building connections and acclimating to new surroundings takes time and effort. The period in between can be lonely and isolating.
- Space and privacy—Among the tradeoffs of moving to a smaller home for a simpler life comes less space. Retirees who downsize must learn to live leaner and accumulate less. Additionally, downsizing can mean less privacy, particularly if individuals move to a retirement community, condo, townhome, or apartment. Social interaction and space efficiency are the fabric of these living situations.
- Healthcare considerations—Healthcare is one of the most important considerations when relocating. Retirees must be sure that accessible and quality healthcare is available to them in this stage of life. Getting medically established in a new place, transferring records, and maintaining the continuity of healthcare can be arduous and frustrating.
- Support— Many retirees move closer to family, but some move away from their support network for a better climate or quality of life. Being away from a support system can be difficult as people age and need more assistance with day-to-day activities.
Many factors influence the decision to downsize and relocate. It is personal and unique to an individual’s needs and circumstances. The opportunity for a simplified, improved lifestyle with financial advantages is a compelling reason to move. However, retirees should carefully evaluate the emotional challenges, space limitations, and social adjustments and be ready to persevere should they decide to relocate. A financial advisor can provide valuable insights and support during this decision-making process by assessing a client’s finances and determining whether their portfolio aligns with their long-term goals. If you are nearing retirement and deciding whether to stay or go, contact SHP Financial for a complimentary review of your finances. Click HERE today.
Sources
[2] https://smartasset.com/retirement/retirement-taxes
[3]https://psychcentral.com/stress/top-10-life-stressors-that-can-trigger-anxiety#top-10-life-stressors
