Should I Downsize After My Kids Are Grown?

The word “downsizing” in modern parlance usually refers to the decision by a manufacturing company or other business to reduce the number of workers in its employment. This decision is usually the product of an economic downturn or other negative business impact, and it is intended to save the business from a worse financial consequence. Laying off employees saves wage payments and the expense of other benefits. It can also be the consequence of the adoption of new technologies that reduce the need for a larger number of employees, or it can be the product of a relocation of the business to “greener pastures.” However, in the context of a senior lawyer making a decision to downsize, similar but other circumstances enter into the process. Whether you should undertake a downsizing exercise or not is dependent on many factors, and we will take a look at some of the more significant ones in this article. In the end, it is a highly personal decision, and there is no “one size fits all” result.

Why downsize?

Let’s take a look at a few examples that might justify downsizing:

1. You have reached the mandatory retirement age at your firm and your income will be reduced as a result.
2. You have undergone a health issue affecting you or your spouse or partner and your focus has changed regarding your housing and space needs.
3. The “trophy house” is no longer needed for entertaining and socializing as it was when you were building your practice.
4. You calculate the cost of maintaining the “big house” and conclude that you can save money for other things by eliminating some of the built-in costs associated with a larger home.
5. Your family has moved away and you want to be closer to children and grandchildren.
6. Advances in technology have made it possible to do more with less…in this case, less space! HVAC systems require less space than in the past and “on demand” hot water heaters need remarkably less space.

What are the specific benefits of downsizing once the decision has been made?

Let’s take a look at some of the more significant factors that can decrease your annual expenses by thousands of dollars:

1. Cost of homeowner’s insurance. Premiums are tied to the size of the house as well as the value of contents and reducing both the size of the house and the value of the contents reduces premiums.
2. Cost of real estate taxes. In most jurisdictions, real estate taxes are directly related to the appraised value of the house and, thus, a reduction in size results in a reduction in taxes.
3. Cost of interior and exterior maintenance. I don’t know about you but my spouse isn’t interested in cleaning bedrooms and spaces that aren’t being used! For that matter, housekeeping in general is not a particularly fun way to spend your time. The bigger the house, the more it takes to keep it clean. Yardwork can be a full- time job for the house with the ½ acre lot! Mowing grass and having the equipment to do it, pruning trees and shrubs, edging, etc., are all time consuming and costly elements of the “big house.”
4. Repair and replacement. Appliances and mechanical elements that are needed in your house don’t last forever! Replacing an aging roof or HVAC system, etc., isn’t cheap, and those one-time expenses can be substantial.

What kind of space in a home do you actually need?

While some of you hired an architect and built a custom home years ago, most of us bought a house in a nice neighborhood that was designed to house a family. Four or five bedrooms, and additional bathrooms that were critical when the family was young and growing are now empty spaces that are only infrequently in use for guests or family members. Now is your time to re-think the space requirements that you really need. Many real estate developments across the country are designing and building homes for “empty nesters.” Keeping the living areas and master bedroom on one floor is a starting point. Constructing hallways and doors to accommodate a wheelchair is now routine. Two or three bedrooms with one of the bedrooms doubling as an office area maximize the opportunity to put the square feet in the house into the most usable rooms, the kitchen, for example, or a spa-like master bath. Open floor plans maximize the entertainment space and are a marked change from the separate dining room, living room, den, kitchen, etc., of yesteryear.

Where should your “downsized” home be located?

For many, if not most of us, our “hometown” is where we want to be. Our friends and, hopefully, our families are there and it’s where we have planted our roots for church and community activities, cultural and athletic events and so on. But, if some of those factors have changed, relocating is not out of the question. It is not unusual to “head south” for the winter, or, to move to a community that is close to children and grandchildren. Considering access to the broader opportunities for recreation and cultural activities is a fair justification for locating in a particular community. Good access to shopping venues, airports and highways is a consideration. Many retirees have moved back to their college town because of the memories and the numerous amenities and activities provided by the school.

What type of residence suits your needs?

We have talked above about the costs associated with maintaining a single-family residence so maybe it’s worth looking into a condominium or patio home where the maintenance is the responsibility of a homeowner’s association or maintenance company. No more lawn mowing! For some, converting the “big house” to cash and moving into an apartment is a reasonable answer. A friend calculated that the sale of his mortgage free house generated enough of an investment opportunity that he could pay rent on a very nice apartment in a great location from the interest or earnings resulting from the sale. For some, turning the “big house” into two residences is possible. Purchasing a condo in the hometown and another condo in warmer climes may be the result of such a sale and equity is preserved for a rainy day.

Final Thoughts

There are many other considerations to be taken into account when the time comes to look at the alternatives to staying where you are. For some, health issues warrant a close look at an assisted living facility or in some cases a nursing home. The loss of a spouse may be the justification for considering a community designed for seniors with clubs and other organizations providing a social environment that is built in to ward off the loneliness that frequently occurs in such an event. As with many other aspects of the aging process, we can find ourselves facing an overwhelming challenge or a happy opportunity. When the time comes for you to think about downsizing, consider it an opportunity to make improvements in your living situation and make the most of the golden years!