There’s a lot of truth to the old phrase, “home is where the heart is.” It’s where your family grew up, where you made awesome holiday memories, and felt comforted in life’s hard moments. As you think about your retirement, you might be struggling with the question: Is this still the right place for us? The thought of leaving might feel sad, but the idea of a simpler, more affordable life is appealing. Maybe you want to make cleaning and maintenance easier with a smaller space. Alternatively, you might still owe on a house that’s too big for you and downsizing could save you significant mortgage interest. Deciding whether to downsize your home in retirement is both a financial calculation and an emotional decision about letting go of one story to begin another. At Stage Ready Financial Planning, we regularly help our retired clients through the financial decision making when it comes to considering such a move. This article will walk you through the pros and cons, helping you decide if downsizing is right for you.
Key Takeaways
- Downsizing can boost your retirement savings and lifestyle, but it’s not a guaranteed financial win. Selling your long-time family home and moving to a smaller space can free up home equity and possibly reduce monthly costs. However, it’s important to factor in moving costs, potential tax implications, and the emotional challenges of letting go.
- It’s wise to consider all the financial and lifestyle trade-offs before deciding. The biggest financial pro is the ability to cash in on home equity, but timing the real estate market is difficult and you must account for all transaction costs. The biggest lifestyle pro is simplified living, but adjusting to a smaller space and new community can be emotionally difficult.
- A financial planner can help you with the numbers and a game plan. The decision to downsize involves more than just square footage. A professional can help you analyze the costs, potential property tax implications, and how it impacts your long-term retirement strategy so you can make a smart, informed choice.
Why Retirees Consider Downsizing
Downsizing in retirement usually comes down to your financial situation, your health, and where you want to spend your golden years.
Rising Costs of Staying Put
A big house tends to cost more to maintain and can put a strain on your retirement income. Even if you’ve paid off your mortgage, the housing costs of a large home can add up in retirement. You still have to deal with:
- Increasing property taxes and homeowner’s insurance
- Rising utility bills
- Ongoing maintenance costs
- The cost of cosmetically upgrading an aging home
If you retire without paying off your mortgage, your retirement income might feel pinched. That’s because of debt payments for a house that’s bigger than you need. The idea of eliminating your mortgage by moving to a smaller home might sound like a great way to save money.
Lifestyle Changes in Retirement
Your kids have likely moved out, and that big house that was perfect for a busy family might feel too large now. A smaller space can make it easier to manage and give you more time for things you actually want to do, like traveling to see family and volunteering.
Other lifestyle changes that drive downsizing include:
- Mobility limitations that require less stairs
- The chance to relocate to be closer to family and friends
- Upgrading your home’s amenities without living through a remodel
- Proximity to entertainment and healthcare
Housing Options for Retirement
As you think through whether or not it makes sense to downsize, consider all of your housing options:
- Staying in your current home: Downsizing isn’t for everyone. In fact, many retirees choose to stay in their current home and age in place. Maybe you’ve paid off your current home and love your community. You don’t have to move if your current home fits your mobility and lifestyle needs.
- Downsizing to a smaller home: This is what most people think of when considering a move in retirement. The goal would be to find a home you can afford without a house payment, and that requires less maintenance.
- Moving into a condo or townhouse: Condos and townhomes come with attractive features like no yardwork or outside maintenance. Tradeoffs include being close to neighbors including shared walls, and higher HOA, community fees.
- Living with family members: Examples of why you might consider a move to live with family if you are in need of mobility help or your family could use help with your grandkids.
- Buying into a Retirement community: If you are worried about eventually needing long-term care services, you might also explore downsizing to a continuing care retirement community (CCRC). These communities offer a range of services from independent living to assisted living and skilled nursing care, all in one location.
The Financial Pros of Downsizing
For many retirees, the main driver behind exploring downsizing is financial.
Lower Monthly Expenses
A smaller home can lead to lower monthly expenses. You’ll likely pay less in property taxes and utilities with less square footage, and a smaller yard means more manageable landscaping costs
Example: A family in a 3,000-square-foot home in Dayton, Ohio might be spending upwards of $300/month on heating and cooling during the peak seasons. By downsizing to a 1,500-square-foot home, that bill could drop to a more manageable $150/month.
That said, the biggest way to lower expenses is usually to create a smaller house payment if you still have a mortgage. Downsizing can make that happen. You might be able to use your current home equity to buy a smaller home with little to no loan, making more room in your retirement budget for travel and healthcare.
Cashing in on Home Equity
A big financial benefit of downsizing is the ability to tap into the equity you’ve built up in your home. Cashing in on your home equity sounds especially appealing. St. Louis Fed data shows that the median US home sales price has increased approximately 70% since 2015.
When you sell your current home and buy a less expensive one, you can use the leftover money to:
- Boost your retirement savings
- Fund goals like vacations or car purchases
- Have a larger financial cushion for emergencies and health care needs
While there can be tax implications for selling your home, most retirees won’t face large tax bills for cashing in on their home equity. Under current IRS regulations, you can generally exclude up to $250,000 of the profit from the sale of your primary residence from your income tax. For couples, this increases to $500,000. This assumes you’ve lived in it for 2 out of the last 5 years.
Example: Let’s say you and your spouse bought your current home 20 years ago for $350,000. Today, it’s worth $750,000. If you sell it, you would net a profit of $400,000 (the difference between the original purchase price and sale price, not considering basis increases for home improvements). Under current IRS rules, that entire $400,000 profit would be tax-free for you as a married couple, leaving you with extra equity for your next home or padding your savings.
Fewer Maintenance and Repair Costs
Downsizing in retirement, especially to a newer home, can mean fewer surprise maintenance costs. The older your home, the higher the risk of expensive and time-consuming repairs. This could mean having to splurge for things like:
- New roof
- Water heater
- HVAC system
- Windows
- Plumbing and electrical failures
A newer, smaller home can create a lot of peace of mind knowing you won’t have to replace these big ticket items anytime soon.
The Lifestyle Benefits of Downsizing
Money aside, downsizing or “rightsizing” can also lead to a more relaxed and enjoyable retirement lifestyle.
Simplified Living Experience
A smaller space can be easier to manage and clean. Less rooms to vacuum, less surfaces to dust, means more time spent enjoying retirement.
The process of downsizing also gives you a chance to de-clutter and get organized. You’ve probably built up closets and rooms filled with boxes you haven’t sifted through in years. As you move into a smaller space, you can sell or donate things that won’t fit or even gift family heirlooms to your kids. It’s a chance to finally practice what Marie Kondo preaches.
Age-Friendly Layouts and Locations
As we get older, things like stairs and large yards can become a mobility challenge. Downsizing gives you the chance to find a home with a more practical layout. You might be able to dispatch the basement for a single-story home, or pick a home with wider doorways and utilities that are easily accessible.
You might also choose a location that puts you closer to your favorite entertainment, shopping, and healthcare locations or even be closer to your kids and grandkids.
Opportunities for Community Living
Moving into a retirement community or a neighborhood with more people in your similar life stage can provide a new sense of belonging. Downsizing can be a great way to meet new people and find social opportunities close to home. Some retirement communities even include housekeeping services, meal programs, and regular social activities.
The Financial Cons of Downsizing
While the pros are appealing, it’s important to consider the other side of the coin. Downsizing isn’t a guaranteed financial win, and there are costs to consider.
Moving and Transaction Costs
Buying and selling a home can be expensive, and it’s easy to underestimate the full scope of these costs. For example, moving expenses alone can add up, with the average long-distance move for a 4-5 bedroom house costing around $3,000. If your new home is updated, you may want to purchase new furniture and decor, making the cost of your downsize more expensive. If you need to declutter, you might have to pay for disposal of your old furniture or items you can’t easily donate or trash.
When you sell your home, you’ll probably negotiate some form of repairs with your potential buyer, which will come off your bottom line. You’ll also need to plan for real estate agent commissions when looking at the net proceeds of selling your home. These can be up to 6% of the sale price.
Also, real estate closing costs for both the sale and the purchase can include legal fees, title searches and insurance, loan origination, appraisal fees, property taxes due on sale, and more. Be sure to have your real estate agent provide a detailed “net-sheet” to give you a clear idea of how much you might actually net from the sale of your home if you decide to downsize. This will help you run the numbers to see if downsizing will actually benefit your retirement plan or not.
What Will Downsizing Really Cost Me?
If you sell your home for $750,000. You might pay up to 6% in real estate agent commissions, which would be $45,000. Additionally, you could face closing costs of 2-5% of the sale price, or another $15,000 to $37,500. Add in a moving company costing around $3,000, and you could easily be looking at $63,000 to $85,500 in total expenses. This is why getting a detailed net sheet from your agent is so important to truly understand what you’ll walk away with.
Possibly Higher Living Costs Elsewhere
While your mortgage may be lower or gone, your other housing costs could be higher in a new area. You might experience higher property taxes, sales taxes, or state income taxes on your retirement income if you relocate across state lines.
If you’re considering downsizing to a retirement community, you also have to factor in hoa dues, entrance fees, and ongoing monthly expenses, which can increase over time. For those considering a continuing care retirement community, these costs can vary significantly depending on the level of care you need.
Before you assume you’ll save money by downsizing, it’s important to do your homework to understand the full impact of cost of living changes on your retirement plan.
Timing the Market
The real estate market is always changing. Cashing in on your home equity and house value growth sounds attractive. Unfortunately, it’s difficult to sell your home for a high price and buy a new one at a low price at the same time. Realtors often educate their clients about the fact that you usually buy and sell in the same market.
In a hot seller’s market, you might get a great price for your current home, but you’ll also face bidding wars and high prices on the smaller home you want to buy. Conversely, in a buyer’s market, you might get a great deal on your new place, but you’ll have a harder time selling your existing home for the price you hoped for.
Especially today, it’s easy to make the mistake of overestimating the value of your current home while underestimating the housing prices of downsizing in retirement. So that you can make the best decision when it comes to relocating in retirement, it’s wise to get a professional appraisal and work with a professional who is an expert in the real estate market where you want to move to.
The Emotional and Lifestyle Challenges
The emotional side of downsizing in retirement can be just as difficult as the financial side, if not more so.
Letting Go of Your Longtime Home
Leaving your home filled with a lifetime of memories can be tough. The emotional attachment to the place where you and your family grew up is real. Consider involving your family members in the downsize process to help everyone feel more comfortable with the change.
Less Space and Privacy
Downsizing to a smaller space can be a big adjustment, even if it’s a positive one. If you’re used to having a lot of room for guests, or just some quiet time, a smaller space might initially feel confining. You might also have less storage for all the things you’ve accumulated over the years, reinforcing why the decluttering process is so important in this transition.
Unfamiliar Community or Location
If you are downsizing to be closer to family out of state, moving can mean leaving behind a community you’ve been a part of for decades. Building a new network of friends, finding a new doctor, and getting used to a new neighborhood will take time and mental effort.
Downsizing in the Midwest: Financial and Lifestyle Considerations
If you are a retiree in the midwest considering downsizing, the following table summarizes some of the top items you’ve read about in this guide, providing a quick reference to help you start your planning.
| Financial Pros | Financial Cons | Lifestyle Pros | Lifestyle Cons |
| You could save money monthly on property taxes, utilities, and a lower mortgage amount. | The cost of moving and real estate transaction expenses can be significant and reduce the benefit. | A smaller home means simpler living and ease of cleaning and maintenance. | Letting go of your long-time family home is emotionally challenging for all parties involved. |
| Downsizing means the ability to put your home equity to good use in retirement. | You might have a higher cost of living in your new area including property taxes, sales taxes, and income taxes. | Downsizing provides the ability to remove mobility issues like stairs or large yards. | Adjusting to a smaller home might be tough at first and force decluttering. |
| Moving to a newer home might mean less repairs and maintenance costs. | Timing your sale and purchase to maximize your home’s value and get a deal on your new home is difficult. | Moving in retirement is a chance to find a new community and social network with people in your stage of life. | It may take time and mental energy to make new friends and adjust to a new neighborhood or area. |
How to Prepare for the Move
The process of downsizing can feel overwhelming. Many experts suggest starting the process well in advance to reduce stress.
- Create a Timeline: Consider planning your move 6-12 months before your ideal move date. Use this time to explore potential new communities and consult with a great local real estate agent to assess your current home’s value and realistic net amount.
- Declutter Early: The process of “rightsizing,” or deciding what to keep, can be emotional. Start by sorting through belongings in less-used rooms, like the basement or attic. Ask yourself: Do you use this item regularly? Does it have sentimental value? Will it fit in my new home? Also, consider involving your family members in this process, especially for items they may want to keep.
- Plan for Your New Space: Measure your new living space and create a layout to ensure your essential furniture will fit comfortably.
- Get Help with Your Move and The Numbers: Don’t be afraid to hire great professionals to make your life easier and confirm you are on the right retirement path. Your financial planner and tax professional can help you work through the numbers to make sure you have a solid downsizing game plan. Moving companies can take the physical pain out of packing and hauling your belongings to your new home.
How to Decide If Downsizing Is Right for You
Ultimately, the decision to downsize is a personal one. Your trusted financial advisor can help you work through questions like:
- Is your current home meeting your physical and financial needs?
- Do you value simplicity or having more space at this stage in life?
- Would you prefer to live closer to your favorite amenities or family members?
- Can you afford to downsize and move, including all the unexpected costs?
- Will downsizing improve or harm your long-term financial plan?
Final Thoughts: Downsizing Isn’t Just About Square Footage
Downsizing is a major decision, and it involves much more than just the size of your house. You should consider your finances, your lifestyle, and your emotional well-being. There’s no one-size-fits-all answer when it comes to staying in your home or moving in retirement.
Taking the time to think through these pros and cons, and discussing them with your trusted financial advisor, can help you make a decision that supports your ideal retirement. A good financial advisor and tax professional can help you understand the tax implications of downsizing and whether or not it fits into your overall retirement savings strategy.
Want One-on-One Help Deciding If Downsizing Is Right for Your Retirement? Contact Stage Ready for a No-Commitment, Personalized Consultation
Are you a retiree in Dayton, Ohio wondering if you should downsize to improve your retirement plan? As fee-only financial planners, we can help you analyze the numbers, consider the tax implications, and create a comprehensive financial strategy that takes your housing decision into account. We’ll help you see your full retirement picture so you can feel confident in your downsizing choice.
A great financial advisor can bring clarity and confidence to this process. We can help you find a real estate agent if needed, budget for closing costs, and work with your tax professional to navigate any income tax impacts. Schedule your complimentary intro call today!
Frequently Asked Questions (FAQs)
Should you downsize your home at retirement?
Downsizing can be a great option if it improves your retirement finances and lifestyle at the same time. It has the potential to free up home equity, reduce your monthly expenses, and simplify your lifestyle. That said, it’s important to carefully consider the financial costs of the move and the emotional challenges of leaving your current home.
At what age do most people downsize their home?
There is no “right” age to downsize. The decision usually comes when a home becomes too large for a retiree’s needs, or when the maintenance costs or mortgage expense becomes a retirement income problem.
Is there a downside to downsizing?
Yes, there are several potential downsides. These include real estate closing costs and moving expenses, the potential for higher living costs in a new location, and the emotional difficulty of leaving your current home. A smaller space also means less room for guests and your personal belongings.
When should a senior sell their home?
A retiree should consider selling their home when they are ready for a change in retirement lifestyle and have a clear understanding of the financial implications. It’s best to plan well in advance and consult with a real estate agent, financial advisor, and tax professional to time the sale effectively.
What percentage of retirees downsize?
While downsizing sounds popular, a significant number of retirees choose to stay in their homes. According to a recent Kiplinger article, the majority of retirees don’t downsize and choose to age in place instead.
What is a continuing care retirement community?
A continuing care retirement community (CCRC) is a special type of retirement community that provides different levels of care as you age. This can include independent living, assisted living, and skilled nursing care all in the same community. For more information on planning for long-term care in retirement, including how to incorporate a CCRC, check out our recent article!
About the Author
Joseph A. Eck, CFP®, is the owner and lead financial advisor at Stage Ready Financial Planning. He’s dedicated to helping retirement savers like you achieve peace of mind by creating retirement plans that account for all of life’s transitions, including the big decision of whether to downsize your home in retirement. With years of experience, Joseph provides personalized guidance on topics like utilizing your home equity, the tax implications of selling assets, and optimizing your retirement savings to support your lifestyle. A proud member of the Dayton, Ohio community, Joseph is committed to providing down-to-earth, professional financial guidance and wealth management.
Article References
- Kiplinger. “Myths About Downsizing in Retirement.” Accessed September 22, 2025. https://www.kiplinger.com/retirement/retirement-planning/myths-about-downsizing-in-retirement
- FRED. “Median Sales Price of Houses Sold for the United States.” Accessed September 22, 2025. https://fred.stlouisfed.org/series/MSPUS
- Internal Revenue Service. “Publication 523, Selling Your Home.” Accessed September 22, 2025. https://www.irs.gov/publications/p523
- Moving.com. “Moving Cost Calculator.” Accessed September 22, 2025. https://www.moving.com/movers/moving-cost-calculator.asp
- KonMari. “What is the KonMari Method?” Accessed September 22, 2025. https://konmari.com/
- Stage Ready Financial Planning. “Planning Long-Term Care in Dayton, OH: A Guide.” Accessed September 22, 2025. https://stagereadyfp.com/blog/planning-long-term-care-dayton-oh-guide/
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