Itâ€™s a mantra that millions of people recite when they feel insecure about their looming retirementÂ â€“ when the numbers on the 401(k) statement look distressingly low, or the credit card bills from little Ryanâ€™s junior year abroad eat into the savings kitty. Itâ€™s alright, we tell ourselves, weâ€™re planning to downsize.
More than 40% of Americans age 50 to 64 want to move within the next five years or so, according to one survey, and about half of the people in that group plan to move into a smaller house. A lower mortgage (or none), plus saving money on everything from heating and gardening to property taxes, should mean their retirement nest egg will stretch that much further. How could this brilliant plan possibly go wrong?
Let us count the ways. In todayâ€™s Wall Street Journal, Encore contributor Anne Tergesen details the pitfalls that are tripping up many â€“ maybe even most â€“ baby boomersâ€™ downsizing plans. The most important boil down to:
Hey, how about that housing market? Downsizing strategies generally only work if the downsizer can sell her old home the way she wants, when she wants, and at a profit. With home values in many parts of the country still well below their pre-crash peaks, thatâ€™s out of the question for many 50- and 60-somethings. Fun Fact That Isnâ€™t Actually Fun: Among families where the head of household was between 55 and 64 years old, 54% had mortgage debt in 2010, up from only 37% in 1989.
Thereâ€™s a lot more to â€œsavingâ€ than a smaller mortgage. Many retirees find that theyâ€™re more attached to their pre-retirement lifestyles than theyâ€™d realizedâ€”which makes it harder for them to leave their hometowns, and thus harder to cut their expenses. Even retirees who slash their housing bills often find they arenâ€™t saving that much overall; some wind up spending extra to maintain the amenities that remind them of home. Tergesenâ€™s best example: A couple that downsized from a 2,300-square-foot home to smaller quarters in an age-restricted community, only to blow all of their â€œprofitâ€ and then some on a massive R.V. that would get them, well, out of their age-restricted community.
Your kids would like your house, please. Letâ€™s just say that if youâ€™re planning to sell your home out from under the children you raised in it, you should resign yourself to some awfully awkward Thanksgivings.
Smaller homes are, um, smaller. When youâ€™ve accumulated a lifetime worth of belongings, from vital furniture to cluttering bric-a-brac, moving to smaller living quarters can feel like trying to stuff 50 changes of clothing into your airplane carry-on. Retirees who have downsized describe getting used to the loss of everything from privacy (in relation to each other and the neighbors) to Tupperware and serving platters. And thereâ€™s always the sandwich-generation question to consider: If thereâ€™s a chance one of your parents may move in with you in five years, can you afford to downsize today?