Should baby boomers downsize homes?

The much discussed baby boomers are turning 65 at the rate of 8,000 per day. At some point, many of these folks will think about downsizing, but what are the key things to consider before making such a major decision? Let’s contemplate three significant factors: financial issues, lifestyle interests and layout concerns.

Probably first and foremost are the financial considerations. The thought of a looming fixed income makes the allure of a smaller or non-existent mortgage more enticing. A downsized home may also carry lower taxes, but not always. If you have been in your existing home for quite a while, it is likely that your taxes may be capped at a lower value than the current fair market value. But taxes on a new house would be based on the current purchase price.

Utilities can also play a big part of the financial evaluation. A 4,000-square-foot home on a half-acre will likely use more gas to heat, electricity to light and water for irrigation than a 2,200-square-foot house on a 40-foot wide lot.

Let’s not forget maintenance. Lawn service, snow plowing, window washing, painting and house cleaning all can be favorably affected by a move to downsize. Certainly there are a lot of other considerations, such as your tax bracket, investment alternatives and tax rates of the properties, but by outlining a couple of alternatives, your financial planner and accountant should be able to help you evaluate the options.

The second, more subjective consideration is lifestyle-related. Like many a baby boomer, you might have had children and raised them in a traditional colonial with three to five bedrooms, three-plus baths and a large backyard in a suburban community. But now with no children at home and more free time, these living conditions are less optimal.

Do you want to travel and just have a home “base?” Do you want to be in a more urban setting and ditch the car for walking and public transportation? Do you want to rid yourself of extra “stuff” and excessive “space?” Perhaps, with no children in school, communities with less stellar education systems are now considerations. The most important thing is for your home to support your new lifestyle as you transition to a new chapter in life.

Lastly, while 65 is certainly not the end of the road, you might want to anticipate that stairs will become more difficult and yard work may lose its allure. Many boomers, post-children, are attracted to first-floor master bedrooms and laundries, smaller yards, non-sunken family rooms and loads of natural light. The neighborhood layout might also be considered. House versus cluster home versus duplex or maybe high-rise condominium versus townhouse all have advantages and disadvantages. Finding the best housing alternative for your financial and lifestyle considerations is essential.

Downsizing is a significant life decision. Making sure you consider all the key issues together will help you come to the ideal solution for your situation.

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