The Upside of Downsizing


    You might think about moving to a smaller home to meet other financial goals. Many people realize as they grow older that they don’t need as much space or find maintaining a large yard to be a chore. Others want to move to a retirement community or try living in a more urban walkable neighborhood. Additionally, there may be significant financial advantages to downsizing. Debra Greenberg, a Personal Retirement Strategy & Solutions manager at Merrill Lynch Wealth Management says, “Downsizing can have clear benefits in addition to the profit you could receive from selling your home. Not only will your mortgage likely be lower in your new, smaller home, but your energy bills and property taxes may be smaller, too.” Saved money can be redirected into your retirement income, to help send your grandkids to school, or provide for vacation funds. However, before you decide to move forward with downsizing, you should first consider these four questions.

    HOW WILL THE MOVE AFFECT MY BUDGET?

    There is more to this question than just the purchase price of a new home or the rental cost if you chose not to buy. Figure on the cost of moving your belongings and compare the difference in the cost of living between your old and new locations.

    Greenberg suggests that a financial advisor can help to determine what factors to figure into your budget and what effect they have on your financial goals.

    WHAT IF I SELL MY HOME BEFORE I PURCHASE A NEW ONE?

    You may need a temporary place to live if there is time between the closing date of your old home and the time of possession of the new one. This may necessitate short-term financing, and you should investigate the availability of credit solutions if you need them, says Danielle Klemow, a director of Global Wealth & Investment Management Real Estate.

    WILL MY INCOME BE AFFECTED?

    Greenberg notes that a plan to move to a new place may mean “there’s a good chance you’re thinking about making other changes as well.” If you’re thinking of working less or not at all, be sure you have an idea of how the change will affect your financial needs and long-term goals. Discuss with your advisor how to draw down income from investments, if necessary.

    WHERE CAN I INVEST THE MONEY FROM DOWNSIZING?

    Consider where your money is most needed and how if can best benefit your goals. Though your home may be smaller, Greenberg says that “your opportunities have expanded.”

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    3 QUESTIONS TO ASK YOUR ADVISOR:

    1) Would it help me more, in the long run, to pay down existing debt or invest my newfound savings?
    2) Should I consider putting some of the proceeds from the sale of my home into a source of guaranteed income, such as an annuity?
    3) What other financial moves should I consider as I think about how to live in retirement?

    Source:
    Merrill Lynch

    Disclaimer:
    This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.
    Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.

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