As you moved through your working years and climbed your way up the corporate ladder, monetary success and material possessions went hand in hand. As the promotions piled up and the raises continued to grow, you accumulated more and more stuff, moving into bigger and bigger houses just to hold it all. But now you are getting ready to retire, and you are anxious to tap the home equity you have worked so hard to build.
Downsizing into retirement is one of the most popular ways to save for the rest of your life. Selling the dream home that once housed a growing family and buying another, more modest, residence could add hundreds of thousands of dollars to your nest egg and make your retirement savings stretch much further.
Even so, downsizing into retirement will not just happen; you need to plan carefully to make the next phase of your life a successful one. Here are some steps you can take to make downsizing easier as your retirement date moves closer.
Compare Square Footage for Your Current and Proposed New Home
Your new home will be smaller than your current one; that is what downsizing is all about. Even so, it is important to quantify that size difference, as that will make the rest of the planning process much easier.
If you already have a condo or similar accommodations picked out, check the square footage and compare it to your current residence. If you are still shopping for a new home, you can estimate based on the sizes of the houses you have been touring.
Take Inventory of Your Possessions
Once you have the new and old square footage figures in place, you can start planning for which possessions you will be keeping and which ones will soon be finding new homes. It may take some time, but this exercise is well worth the effort.
Armed with a list of your possessions and information about the square footage of your new residence, you can start to compile a list of the items currently in your home. Once that inventory has been compiled, you can make a list of the items you want to sell, donate or give away to friends and family members.
Talk to the Proposed Recipients
Now that you are ready to downsize into retirement and shed your extraneous, it is time to talk to proposed recipients of your largesse. This is an important step, since your loved ones may have different ideas when it comes to the furnishings and home décor you currently own.
You may think that your kids have been eyeing that amazing antique desk for years, or that your grandkids cannot wait to get their hands on that massive sofa. But what if they have other home décor plans, ones that do not include those gifts? If you want your downsizing to be successful, you first need to make sure the intended recipients want the items you will be giving away.
If they do not, having another plan in place will be critical. This is especially important if you want the furniture and home décor to stay in the family.
Invest Your Real Estate Profits
Now that you have rehomed, sold or otherwise disposed of your extraneous possessions, it is time to enjoy the fruits of all that hard work. Downsizing your possessions is a vital first step toward beefing up your retirement nest egg, so you can truly enjoy this new phase of your life.
Once your dream home has been sold and the new home has been acquired, it is time to invest the proceeds in a way that will preserve its value while providing the income you need in retirement. If you are not already working with a financial advisor, you might want to hire one to help you deal with this sudden windfall.
As you move into retirement, you might want to move in a more literal sense. Moving into a smaller and more affordable home in retirement is a popular way to make those limited retirement savings stretch further, and the steps outlined above can help you make it happen.