The Best is Yet to Come for Downsizing Seniors
To the well-ordered mind, growing older is not a disadvantage, but rather, an opportunity—an opportunity for change and for growth, and especially, an opportunity to live the life that you’ve always wanted. With an empty nest and retirement in hand, it’s a good time to just be, as well as time to move towards the next chapter. How well you spend this time will inevitably dictate how well you’ll live out your golden years. It’s important, therefore, to keep your eyes on the prize and be informed enough to make the right decisions. Let’s get started.
With downsizing, you have the option of selling your home in favor of a smaller one that demands less from you and is more suited to your changing needs. This can be a viable option as you are allowing what is possibly the biggest investment of your life—your home—to work for you and take care of you in your old age. Financially, Dave Ramsey points out this can be a major boon, since you can potentially pad your retirement savings and pay off other debts.
Before you do any of that, however, you still need to determine if you are going to get your money’s worth. As a general rule of thumb, you need to err on the side of prudence and find out how much homes are currently selling for in your area. For instance, last month homes in Pahoa typically sold for $205K. Make some comparisons, looking at properties with the features you want and in the location that suits you, and keep in mind what your current home might sell for when the time comes.
Some homeowners decide to put their property up for rent. This has the potential to be lucrative, since you can ensure a healthy cash flow to supplement your income and keep you in the lifestyle you’re dreaming about.
On the downside, this does require quite a lot of commitment from you. Disease Called Debt explains that being a landlord means being in charge of maintenance and tenants, as well as staying on top of expenses like property taxes, insurance, and mortgage payments, which might be deal-breakers at this stage in your life. It’s a lot of responsibility to take on, as well as the ongoing expenses.
Another option is to hire a property manager to tackle the duties, but of course, that’s one more expense. If you go this route, find someone experienced in your location, and take a look at the properties they currently manage and see how you feel about the quality and professionalism.
Selling your home or putting it up for rent are common choices, but there’s also the possibility of keeping your home in the family by passing it on to your heirs. This does seem like a logical and natural choice, especially for sentimental reasons. However, this may not be fiscally sound.
Be aware that there are some tax consequences in gifting real estate, and that if you’re not careful, you could end up passing on a large tax burden to your children, or incurring one yourself when you gift the house. Not only that, you yourself don’t get to enjoy any ROI on your property, which would be a pressing consideration if boosting your retirement income is a priority. Sometimes it’s best to discuss the particulars of this sort of concern with an attorney, just to ensure you know the impact of your decision.
The Next Chapter
Downsizing can be daunting, which is why it’s important to put yourself first in this next chapter of your life. After all, who better to uphold your best interest than you? At the end of the day, it all boils down to staying true to both your needs and desires. You are entering a new life phase, and you can make it the best one yet. So go ahead, take your finances by the reins, and do exactly that!