Your home is your sanctuary, but it’s also one of your biggest budget items. And after you retire, it may feel like more house than you need. But in this housing market, when a smaller home with upgraded features may be about as expensive as the one you’re selling, is it still smart to downsize?
In some cases, downsizing is appropriate, but not necessarily money-saving. You may be able to sell your house and buy something cheaper, but it might also make sense to downsize to move closer to family or have less house to clean.
It’s important to be clear on what you want. “Goals are so crucial,” says Juan HernandezAriano, a certified financial planner in Houston. “There are multiple pathways people can take.”
Here are some situations that may match up with a “For Sale” sign.
YOU’RE IN A CASH FLOW BIND
In retirement, you might find that rising prices combined with a fixed income make you feel a little squeezed.
FILE - A home under construction marked as "SOLD" at a development in Eagleville, Pa., is shown on Friday, April 28, 2023. Your home is your sanctuary, but it’s also one of your biggest budget items. And after you retire, it may feel like more house than you need. But in this housing market, when a smaller home with upgraded features may be about as expensive as the one you’re selling, is it still smart to downsize? (AP Photo/Matt Rourke, File)
HernandezAriano notes that his clients in southeast Texas are bothered by high home insurance premiums due to severe weather events, plus high property taxes. “A lot of insurance companies are dropping coverage on the southeast side of Texas,” he says.
If downsizing is a question of money, consider all your housing costs. Weigh the mortgage, property taxes and insurance, plus basic bills like electricity and water services for your current and future homes.
One client in Houston did the math and moved 90 minutes away, where they got a cheaper home and dropped their homeowners insurance by 60%. “Property taxes also went down since they weren’t in a highly competitive school district,” HernandezAriano says. “They still spent more on gas and water and had to pay for relocation expenses, but overall, they saved monthly.”
YOU’RE IN A PRICEY AREA
If you live in an expensive city, you have a better chance of selling your home and finding something cheaper. “When you’re in a lower-cost area, it’s going to be difficult to find something even (more) lower cost,” says David Demming, a CFP in Aurora, Ohio.
Just do some looking before you leap. Inventory is low in many places, and competition is steep for a smaller home with upgrades.
To save money overall, the value of the home you’re purchasing should be at least 20% less than the house that you’re selling, says Diane Pearson, a CFP in Wexford, Pennsylvania.
YOU CAN’T LIVE THERE SAFELY ANYMORE
Your health may require you to find a new home with fewer stairs, a first-floor primary bedroom or an accessible bathroom.
Michael Maye, a CFP in Gillette, New Jersey, notes that his clients who’ve seen parents go through long-term care or health issues are more likely to consider future mobility when planning their retirement. “Recently, I proactively worked with a couple and they knew that they didn’t want to age in place, because they have a bigger house,” he says.
They wanted to buy into a continuing care retirement community, where they could take advantage of graduated levels of care as they needed it. “They could stay in their house, but they don’t plan to,” Maye says.
YOU WANT TO BE CLOSER TO FAMILY
While being closer to children or aging parents is a good reason to downsize, don’t count on this being the cheaper option, especially if you’re moving into a hotter market.
Consider one of Demming’s clients, who moved from one part of Ohio to another part of the state. “It cost her $150,000 more to move there, to get a house that was acceptable to her,” Demming said.
Even with the higher cost, Demming says, it was worth it to be closer to her children and grandchildren — and her new city is booming. “There is no looking back,” Demming says. “Her new home has appreciated quite a bit since moving.”
YOU’RE PREPARED TO CREATE A NEW SUPPORT NETWORK
If downsizing means a new city, keep in mind that you may have to rebuild your community. Even if you’re moving to be near family, you shouldn’t count on them to be your activities hub. “Are you a social person who’s going to be able to get out and about and make your own way?” Maye says.
You’ll need to make new friends, find new medical professionals, find a new gym. “Those are the trade-offs,” Maye says. “None of them are deal breakers, but I think people should really think about all these other things.”
This article was provided to The Associated Press by the personal finance website NerdWallet. Kate Ashford is a writer at NerdWallet. Email: kashford@nerdwallet.com. Twitter: @kateashford.
RELATED LINKS:
NerdWallet: How to sell your house https://bit.ly/nerdwallet-how-to-sell-your-house
ST. PAUL, Minn. (AP) — A Minnesota Senate ethics panel deferred further action Tuesday night on a complaint against a lawmaker who's charged with burglary for allegedly breaking into her estranged stepmother's house until after her next court date.
Democratic Sen. Nicole Mitchell, of Woodbury, told police she broke in last month because her stepmother refused to give her items of sentimental value from her late father, including his ashes, according to the felony criminal complaint.
The ethics panel, which is made up of two Democrats and two Republicans, deadlocked on several potential paths until the members decided to return June 12. One of Mitchell's attorneys, Bruce Ringstrom Jr., told them she might enter a plea at her next court hearing, which is set for June 10, but said the proceeding could be delayed. The decision means the panel will take no further action before the legislative session's adjournment deadline of May 20.
“Sen. Nicole Mitchell’s actions are a clear violation of Senate rules and leave the Minnesota Senate under a cloud of distrust,” Republican Sen. Eric Lucero, of St. Michael, told the ethics panel.
“This was a planned and deliberate action, not a decision made on a whim,” said Republican Sen Karin Housley, of Stillwater.
But Democratic Sen. Bobby Joe Champion, of Minneapolis, who chairs the panel, told his colleagues that the prudent thing to do was to wait until the evidence could be tested for accuracy.
Mitchell's status has posed a dilemma for her fellow Democrats because they hold only a one-seat majority in the Senate, so they need her vote to pass anything that lacks bipartisan support. They have excluded her from caucus meetings and taken her off her committees but have not publicly asked her to quit.
Mitchell resumed voting last week on the Senate floor, even on votes that affect her fate.
She attended Tuesday's hearing but did not speak. Ringstrom told the panel that Mitchell would invoke her Fifth Amendment right against self-incrimination and refuse to answer any questions the members might ask. He also refused to confirm or deny the accuracy of the key allegations in the criminal complaint, as well as news reports that Republicans introduced as exhibits in the ethics case.
Ringstrom said Mitchell “desperately wants to tell her story, but I am not letting her.” He urged the panel to defer action until her criminal case is resolved, saying she'd be happy to answer their questions once it's complete.
A Republican panel member, Sen. Andrew Matthews, of Princeton, said the Senate has the authority to determine whether Mitchell has violated its ethics rules and does not need to wait for the courts.
Republican Senate Minority Leader Mark Johnson, of East Grand Forks, who has called on Mitchell to resign, told reporters last week that she deserves due process in court. But, he said, the Senate should hold legislators to a higher standard, even if it's politically difficult. He said it's not right for Democrats to protect her because they need her vote.
Ringstrom refused on Mitchell's behalf to say whether any Democratic senators have asked her to step down.
No Senate seats would normally be on the ballot this November. But the state chairman of the Democratic Party in Minnesota, Ken Martin, said recently that he'd like for Mitchell to resign by June 8 so that her seat could be filled in a special election on election day. Mitchell represents a mostly Democratic suburban St. Paul district that would be easier for Democrats to hold if it's on the November ballot when turnout should be high.
The ethics panel earlier Tuesday deadlocked 2-2 on party lines on how to proceed with a long dormant complaint filed by Democrats last year against Republican Sen. Glenn Gruenhagen, of Glencoe. He sent an email to colleagues during a debate over trans rights in the 2023 session that included a link to a medical school video showing gender-transition surgery. It included a note saying it documented “mutilating transgender surgeries on minor children. Extremely graphic and disturbing.” The panel was due to return Wednesday to discuss possible next steps in the case.
Minnesota Senate Democratic Majority Leader Erin Murphy talks with reporters on the Senate floor in the Minnesota State Capitol after a Republican attempt to expedite an ethics investigation of Democratic Sen. Nicole Mitchell, who's facing a felony burglary charge, failed on a tie vote, Wednesday, April 24, 2024 in St. Paul, Minn. (AP Photo/Steve Karnowski)
Minnesota Senate Republican Minority Leader Mark Johnson talks with reporters on the Senate floor in the Minnesota State Capitol after a Republican attempt to expedite an ethics investigation of Democratic Sen. Nicole Mitchell, who's facing a felony burglary charge, failed on a tie vote, Wednesday, April 24, 2024 in St. Paul, Minn. (AP Photo/Steve Karnowski).
Minnesota state Sen. Nicole Mitchell, a Democrat from Woodbury who faces an ethics hearing Tuesday stemming from her arrest on a felony burglary charge, gets up to leave from her desk on the Senate floor in the State Capitol in St. Paul, on Monday, May 6, 2024. Mitchell told police she broke in last month because her stepmother refused to give her items of sentimental value from her late father. (AP Photo/Steve Karnowski)
Minnesota state Sen. Nicole Mitchell, a Democrat from Woodbury who faces an ethics hearing Tuesday stemming from her arrest on a felony burglary charge, is shown seated at her desk on the Senate floor in the State Capitol in St. Paul, on Monday, May 6, 2024. Mitchell told police she broke in last month because her stepmother refused to give her items of sentimental value from her late father. (AP Photo/Steve Karnowski)
