The hidden costs of downsizing
Do you plan to downsize the house as a part of your retirement plan? Lots of people do. Selling the house to buy a less expensive one has been a good and easy option for a lot of people in the past.
However, here are some issues for people who are completely reliant on downsizing to think about. First of these is that the couple owns a house and not much else. This makes the couple very concentrated to just one residential property asset class. if that market took a big hit they could be in trouble.
Some people would say that such a hit is possible because as the baby boom generation ages, there could be a rush to the home-owning exits.
An property market slump without a corresponding slump would have the couple in trouble. Second, if the couple plans to do any sort of work they could find that work is not available in Fielding. No doubt there will be some work but perhaps not the type and with the same pay rate as could be found in the larger city. A lower pay rate may not be completely offset by lower living costs.
Third, they could leave family and friends behind. Many older people tell me that shifting and entering a new community becomes more difficult as you get older. Moreover, there could be greater costs for visits to the children and grandchildren.
Finally, living costs generally may not be as low as expected. The major one for some are health costs. A smaller town is quite possibly well served by GPs but diagnostics, specialists, and surgeons will be fairly thin on the ground. Healthcare demand and costs increase as you get older but if you add travel and accommodation as well they may get out of hand.
Planning to downsize is not a bad idea in itself. However, when you consider the risks, I would usually prefer that downsizing the house was a backup for something going awry rather than the main plan itself.
Have you downsized? Let us know in the comments.
Written by Martin Hawes. First appeared on Stuff.co.nz.
Related links:
6 questions to ask when choosing a retirement village
The definitive checklist for downsizing
How to cope with the stress of moving out of the family home