What are the hidden traps in downsizing for retirement?


Selling your home may not be an easy or simple decision. There can be unexpected expenses and consequences that affect your government benefits entitlements. There are also many other things to consider before you sell. And there are lifestyle issues to think about too.

You can avoid hidden traps by planning as far ahead as possible and being prepared for the unexpected—professional financial advice is a good place to start. The table below outlines some things to consider.

Potential trap Managing the trap
A smaller place isn’t always cheaper. Understand all the costs of moving, living in and maintaining a new home before you move.
Selling your home could impact your age pension entitlements. Be aware how the money from the sale of your home will affect you under the government assets and income tests.
You may miss people and services in your current area. Explore options like house sitting if you’re thinking of moving to a new area so you can trial a potential location before you commit.
It may be difficult living in a smaller place. Try locking up some of the rooms in your current home and doing without items you may not be able to take—you may or may not be ready to move to something smaller.
You may not be as prepared for the change as you’d like to be. Aim to understand exactly what downsizing will mean for you and what’s most important.
The home you buy turns out to be unsuitable down the track. Before you sell or buy another home, work with a financial adviser to make a long-term plan that can help you understand your options and potential implications.
You’re unable to sell your home for the price you’d like because of issues in the property market.

A financial adviser can help you decide how much money you need to achieve your goals.

Put a plan in place that will help get the best price for your home and buy at the right price too.

Some of the things to consider include:

  • getting advice from a real estate specialist about how the property market cycle is likely to affect prices in the short and long terms and aim to time your sale and purchase accordingly
  • whether to buy and sell at the same time
  • whether selling first will put you in a stronger negotiating position. If you sell first, how long will it take to find your ideal place and where will you live in the meantime? If it takes longer than 12 months your eligibility for government entitlements may be affected
  • the financial and practical implications of buying before selling
  • whether or not renovations and repairs will return a greater profit.

Avoiding the traps

Before considering whether or not to sell your home it’s important to thoroughly understand your reasons for selling.

A financial adviser can help you:

  • take a systematic approach to your decision
  • consider the emotional impact of selling your home and moving
  • understand exactly how much downsizing will cost. What expenses do you need to allow for so you’ll be comfortable later in life?
  • decide on the right time to move—considering your goals and the property market
  • make the most of your opportunities and avoid unexpected expenses. For example, consider how long it may take you to find a new home and whether it’s better to sell first or buy and then sell
  • understand what matters most to you so you can set your downsizing and retirement goals, and achieve them.


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It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account.

This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.