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Downsizing in retirement

People often talk about eventually downsizing their home when they get to retirement. Practically, it doesn’t make sense to clean and maintain unused space once the kids have flown the coop.

Financially, this may be intended as a way to free up locked away capital to help supplement retirement income, but how much becomes available – if any – depends on where and what kind of replacement housing you have in mind.

Whether you are driven by the finances, or just see it as a by-product of a lifestyle choice, you need to carefully think through the idea of downsizing and plan how to proceed. A misstep could be costly in either respect, so here are some things to mull over.

Are you assuming downsizing will be a financial windfall?

All else being equal, it costs less to maintain a smaller property. But between here and there is the matter of moving. Maybe you are leaving a house in the big city for a humbler abode further away. However, if you are moving within the same geographic market, the financial effect may be neutral at best, despite reducing the physical footprint.

Between the real estate commission on selling the old place and the land transfer tax on buying the new one, you are likely to have spent well through 5% of your sale price before you even hire the movers.

Add to that some updated appliances, new/smaller furniture, window coverings and other settling-in costs, and your physical downsize could be more of a lateral move financially. That is not necessarily a bad thing but thinking through the finer details can give you a clearer view of the full picture.

How will the new digs fit your relationships and lifestyle?

Having reviewed your finances, you may consider looking beyond the local area or at a different kind of housing.

A more distant move could affect the frequency and the amount of time you are able to spend with family and friends. Maybe you are moving closer to them, but if you are not, then you could face challenges logistically, emotionally and financially. Consider too the impact on church/community connections, and professional/personal relationships like your doctor, dentist, hairdresser/barber, and massage therapist.

If you are moving to a different kind of accommodation, say from a detached home to a townhouse or condo, have you thought about how that will feel? Some people are comforted being in closer proximity to others, whereas some may feel crowded. Elevators and underground parking are great conveniences, but to some they are a personal security concern. Being in the city with a balcony view can be invigorating or intimidating.

In terms of your physical surroundings, how much do you want to hold on to and how much do you want to leave behind? It is safer and less physically demanding not having to navigate stairs and maintain an outdoor space. But what if gardening is your thing? And with less space to maintain, you also have less room to host holiday family gatherings or have the grandkids for a sleepover. Ultimately, what matters most to you?

How about taking a test-run?

If things don’t work out with the new place, then you may want or need to move again. Understandably, that can be disruptive and inconvenient, and if you become a serial mover, then the financial strain could mount.

One way to test out the idea of moving into something different, is to use a service like Airbnb that will allow you to try living for a couple of weeks or a month in a place near and similar to what you are considering. This could be done before or after you sell and should hopefully give you some peace of mind that you are making the right decision.

Ultimately, your personal preferences and circumstances should dictate your decision to downsize or not. You should discuss the option with your real estate professional and your financial advisor to make sure you have the right information about both the market and yourself, before you make a more permanent commitment.

Seeking professional guidance
For more information on downsizing in retirement, please consult your wealth advisor and tax professional.


Mutual funds are offered through Credential Asset Management Inc. and Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor and Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.

Aviso Wealth Inc. (“Aviso Wealth”) is the parent company of Credential Qtrade Securities Inc. (“CQSI”), Credential Asset Management (“CAM”), Qtrade Asset Management (“QAM”) and Northwest & Ethical Investments L.P. (“NEI”). NEI Investments is a registered trademark of NEI. Any use by CQSI, CAM, QAM or NEI of an Aviso Wealth trade name or trademark is made with the consent and/or license of Aviso Wealth. Aviso Wealth is a wholly-owned subsidiary of Aviso Wealth Limited Partnership, which in turn is owned 50% by Desjardins Financial Holdings Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and the CUMIS Group Limited.

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. This document is published by CQSI and CAM and unless indicated otherwise, all views expressed in this document are those of CQSI and CAM. The views expressed herein are subject to change without notice as markets change over time.

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