Is downsizing to a new home the right financial move for retirees? It depends on your personal situation. But if you’re serious about cutting expenses, moving to a smaller home can be a terrific way to save, according to this CNBC article by Jeff Reeves of InvestorPlace.com.
When it comes to retirement planning, there are a lot of opinions on how much you need to save; eight times your salary and the 4% rule are just a couple rules of thumb out there.
Equally important to a comfortable retirement is not just the money you have, but also the expenses you’re tallying up, too. And reducing your monthly bills can be a powerful tool for savers who are either behind on savings or simply looking to do more with less.
If you’re serious about cutting expenses, the most obvious place to look for savings is your home.
“Often a house is the most valuable asset that people have, so it is the source of potential wealth in retirement,” Lori Trawinski, director of banking and finance with AARP’s Public Policy Institute.
Yes, there are potential savings by moving to a smaller place, even for someone with a significant mortgage or even someone who rents. But if you’re near retirement you should do some careful calculations before deciding to downsize.
Done right, there are a host of cost savings that can be found from a change in scenery. But you have to know what to look for beyond simply selling your house for more than what you paid.
“I think you have to look at it holistically, and I think it’s hard to look at any one lever to pull for savings,” said Chris Blunt, president of the investments group at insurance giant New York Life.
The good news, Blunt adds, is that a variety of items can add up to a pretty big difference in the monthly budget of Boomers who are willing to downsize. Those items can include taxes, access to public transit, health care, and the lower costs of utilities and insurance that come with a smaller home.
