What are the hidden traps in downsizing for retirement?


Selling your home and buying a smaller property to fund your retirement might sound like a great idea. But if you don’t do your research properly and think it through, you could get caught out by some hidden traps. By planning ahead and being well prepared, you can avoid some of the unexpected consequences of downsizing to retire.

Here are some things to consider:

Potential trap Managing the trap
A smaller place isn’t always cheaper. Research the property prices and property market of the area you want to live in. Find out the value of your current property and how much you owe (if anything) on your current home loan compared to the purchase price of your new home to make sure you'll have enough money to achieve your goal. Read how much it really costs to buy a property.
Selling your home could impact your age pension entitlements. Find out how the money from the sale of your home could affect your government entitlements, such as the Age Pension.
You may miss people and services in your current area. Explore options like house sitting in other areas so you can trial locations before you commit to moving.
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 emotionally for the change as you think.
Aim to understand exactly what downsizing will mean for you and what’s most important. Read our article on Can downsizing give you a better lifestyle in retirement?  
The home you buy turns out to be unsuitable down the track. Before you sell up and buy another home, work with a financial adviser to make a long-term plan to ensure the new home fits into these plans.
You’re unable to sell your home for the price you’d like because of issues in the property market.

Consider the following:
• getting advice from a real estate specialist about how the property market cycle is likely to affect prices in the short and long term
• 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 to sell, your eligibility for government entitlements may be affected
• what are the financial and practical implications of buying before selling?
• whether or not renovations and repairs will return a greater profit.

We’re here to help

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

Think about talking to a financial adviser to help you:

• take a systematic approach to your decision
• consider the emotional impact of selling your home and moving
• make the most of your opportunities and avoid unexpected expenses.


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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.

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