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Downsizing your home?

When you’ve got retirement in your sights, you might be weighing up the pros and cons of living in a smaller home. Find out if it’s the right move for you - emotionally and financially - with our 3 step guide to making decisions about downsizing.

Is downsizing the way forward?

In spite of the potential downsizing benefits of cutting living costs and releasing equity to boost retirement income, downsizing is still relatively uncommon among seniors. According to government research, about one in five older Australians have sold their property to buy a less expensive home since turning 501. A further 15% have the intention to downsize2 and this seems likely to be something they’ll do before, or soon after, retiring. The same research found that over 85% of Australians who downsize will make the move before they’re 703.


About one in five older Australians have sold their property to buy a less expensive home since turning 50.

A smaller home for your future?

Reasons for downsizing in retirement could be financial or practical. Perhaps you want a home that takes less time to maintain. You could be looking for an income boost from selling or a change of pace and scenery with a sea change move to the coast or country.

Whatever your motives might be, here are 3 steps to evaluating your downsizing plan to make sure it matches your retirement goals:

1

Lifestyle and values

Finding the right home for retirement could mean moving to a new neighbourhood.

  • Keep in mind things you might need to have nearby in your retirement years - medical services and shopping facilities within an easy walk.
  • Will you still be close enough to friends and family you enjoy spending time with?
  • Do some research so you can be sure your new community is one where you’ll feel safe and welcome.
2

Timing is everything

If you’re planning to downsize, is now the time to do it?

  • Are you emotionally ready to farewell a home you may have lived in for decades?
  • Will you have to move again later in retirement for your health or other reasons?
  • Weigh up the benefits of moving when you’re younger and have the energy to take it on vs. waiting until you’ve finished work and have more time for house hunting and sorting through possessions.
3

Your finances

Downsizing can impact your retirement income and financial outlook in a number of ways.

  • If you have a mortgage to repay, explore how selling and buying again, or renting, will affect your retirement budget. [link]
  • The Government has introduced tax benefits for over 65s who downsize. As a result, you may be able to make a non-concessional (post-tax) contribution into super of up to $300,000 from the proceeds of selling your home. The benefits may be subject to eligibility requirements, such as how quickly you need to make the contribution, so it’s always best to do your research when the time comes.
  • The whole selling, buying and moving process comes at a cost. Be sure to include these in your budget calculations.
  • Selling your home can impact your aged pension entitlement so you need to take this into account too.

Are you emotionally ready to farewell a home you may have lived in for decades?

Make downsizing part of your retirement game plan

With so many financial, emotional and practical factors to consider, getting professional advice on downsizing can help you make the right decision. Making the choice as part of your financial plan means you can look forward to a comfortable retirement, no matter where you decide to live.

Need help managing your money?

Getting expert advice can make a big difference to how prepared you are for retirement - both emotionally and financially. By discussing your lifestyle goals with a StatePlus financial planner you’ll have a much better understanding of the super and income you’ll need to make retirement a positive change in your life.

For more tips and tools, download our free Retirement guide or call us on 1800 620 305.



REFERENCES
1 Housing decisions of older Australians, Productivity Commission Research Paper, December 2015, page 7, “Of the older home owners that have not moved yet, about 15 per cent had strong intentions to do so at some point in the future.”
2 Housing decisions of older Australians, Productivity Commission Research Paper, December 2015, page 7, “When people do downsize it tends to happen relatively early in retirement — over 85 per cent of older Australians who downsize do so before they turn 70.”
3 Housing decisions of older Australians, Productivity Commission Research Paper, December 2015, page 7, “According to the Commission’s survey, about one in five older Australians have sold their property and purchased a less expensive home since turning 50”
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This information is of a general nature only and is not specific to your personal objectives, personal situation or needs. Before making any decisions based on this information you should consider its appropriateness to you. Every effort has been made to ensure the information is accurate. We strongly recommend that you consult a financial planner before taking action and review the relevant Product Disclosure Statement. 

Past performance is not an indicator of future performance and future performance is not guaranteed. 

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