For many Australians over 60, the family home represents decades of memories, a familiar location and a significant financial asset. As retirement approaches, however, some consider trading the home they raised a family in for something smaller, easier to maintain and better suited to their current lifestyle. Downsizing can free up money, reduce upkeep and allow for a fresh start – but it also comes with costs, complexities and emotions that are important to weigh up.
Why Downsizing Appeals to Retirees:
Moving to a smaller property can unlock equity tied up in the home. For those who are mortgage-free, selling could provide access to a substantial sum. This money may be used to support retirement income, cover medical or aged-care costs, or fund travel and hobbies.
Downsizing can also reduce household expenses. Rates, insurance, utilities and general maintenance are generally lower in a smaller home or in a retirement living community. Some people also choose locations closer to family, essential services, transport or the beach, improving lifestyle while maintaining independence.
Financial Considerations & Tax Implications
While selling can free up funds, it is important to understand the possible financial impacts.
For homeowners aged 55 and over, the Downsizer Contribution allows up to $300,000 per person ($600,000 per couple) from the sale of the family home to be contributed to superannuation, provided certain eligibility conditions are met. This can boost retirement savings and may allow more control over investments.
However, there are costs to factor into the equation:
- Real estate agent fees
- Legal and conveyancing fees
- Removalist and relocation costs
- Possible renovations to prepare the home for sale
- Stamp duty on the new property (except in certain states where concessions apply)
There are also Age Pension implications. The family home is exempt from the pension assets test, but any sale proceeds added to savings or investments are not. A boost in assessable assets could reduce pension entitlements, so professional advice is recommended.
The Emotional Side of Downsizing
Beyond the numbers, downsizing is often an emotional decision. Leaving a long-term home may feel like leaving behind a chapter of life – especially when the home holds memories of children, partners or loved ones who have passed.
Some older Australians worry about losing space for family gatherings or guest rooms for grandchildren. Others find the move liberating – a chance to simplify life, reduce clutter and create a home that suits their current needs rather than their past responsibilities.
It can be helpful to include family in the discussion, visit potential communities and take time to adjust to the idea before making a commitment.
The Bottom Line
Downsizing can be financially worthwhile for many older Australians, offering improved cash flow, reduced home maintenance and lifestyle benefits. However, upfront costs, pension implications and the emotional weight of leaving the family home must be carefully considered.
Before making a decision, it is wise to seek guidance from a financial adviser and explore different housing options. A well-planned downsizing move can support both financial security and a fulfilling retirement – but it’s not a one-size-fits-all choice.
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