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How to Downsize and Plan for Retirement

As you inch closer to retirement there are probably many questions as to how to downsize when you retire. Your goal of to downsize when you retire is to simplify, get rid of what you don’t need and have a plan so as you move forward you can have the best retirement ever.

In retirement, you should have to have no worries related to money. If money is an issue you will need to temper your expectations, make more money or downsize to create the funds you need to do what you want.

You want to be prepared as best you can so that you can do the things you want to do and enjoy your well earned time after 30-40 years of hard work.

There are many things to consider when you retire and how you approach them can affect your retirement in several different ways, below are some of the best steps to consider when downsizing for retirement.

What are your specific retirement plans?

• Do you want to Travel?

My wife and I want to travel; so that means we need to ensure that there is enough Money to pay for where we want to go each year. If you’re going to go travel to foreign countries when you are retired why not go for a month or more and really experience another country and culture. This could mean who will take care of the dog, cat, pay the bills shovel the driveway or cut the lawn.

As you get older insurance for travel is a must and it is not cheap so you need to consider this as part of your planning.

• work,

I still plan on doing some form of work, as a hobby I plan to continue blogging. I will by the time I retire have over 30 years of working the Real Property industry and as such I hope that I will be able to share some of my sage wisdom if required as a consultant or other form of mentorship.

That means that If we plan on traveling or living abroad how flexible will I have to be to make myself available. Another reason I like blogging is I can do it anywhere with internet access.

• leisure activities

What are your plans? Do you want to garden, volunteer, play golf, fish, go to the gym, meet your friends for coffee, maybe teach English, learn to play an instrument, take care of your grandkids?

All of these things require overall planning. For instance, if you commit to your garden, well where I live the season for gardening is only about 5 months so what are you going to do for the other 7 months?

If you volunteer, there is a commitment so will that impact your travel plans or taking care of the grandkids.

Where do you want to live?

Part of your downsizing your home decision is going to have to include where do you want to live. Do you plan on staying in the same residence? If so is the residence appropriate for you as you get older? If you live in a 3 level townhouse perhaps all those stairs may be a problem as you get older.

If you live in the country are you close enough to amenities you will need stores, hospitals, family etc. Just recently here in Ottawa, an elderly man was found in his home buried in snow. The neighbors realized they hadn’t seen him in a while and noticed his driveway wasn’t shoveled. The police were called in and found him trapped in his house rationing food he had in his cupboards prepared to wait the winter out inside his house alone.

All that to say if you are way out in the country (or even in the City like this gentleman) you need to ensure that you have the capacity whether its good health or services

Do you want less space? I know I do. I’m fascinated with tiny house living and I’m even considering putting one in my back yard for my in-laws (or me) problem is I’m 6’4 so I’m still not convinced they are big enough, but it may be an option so it’s still on the maybe list.

I’m starting already to rid myself of “stuff” So condo or apartment living might be in the cards for us in order to simplify our lives later on in life. Apartment living is appealing as you don’t have to worry about cutting the lawn, shoveling the driveway or paying certain bills.

We’ve considered multiple times perhaps having a place in Florida or Arizona or even in the Caribbean on an Island. We’ve looked at buying now and renting until we can use it but have since decided that we better rent and explore a little more before we make a commitment like that.  

Downsizing can impact where had how you plan to live down the road, the less stuff you have the more freedom and options you will have.

Do you have kids or family that you want to be near to?

My personal situation is my in-laws and father live in the same city, according to my wife if we move the in-laws are coming to.

When our children were very young my parents made the decision to move to where we lived so they could be closer to the grandkids. We’ve always been very fortunate to have them around to help us and the kids were so lucky to be able to spend so much time with their grandparents.

What do you want your situation to be? It may be too early to know but in both cases, my parents and my wife’s parents made the decision to downsize their homes as they got older

I personally don’t know what our situation will be as my kids grow up I don’t know if they will even be in this city, but I do know somehow someway my wife and I want to be a part of their lives if they want us Lol!

Awareness of real estate costs – renting vs owning vs condo living

Renting is an interesting proposition as it can give you flexibility. Renting depending on your lease can offer some surprising upsides.

My father rents the upper portion of a bungalow. When I heard what he pays for rent I nearly fell off my chair but when you consider what is included it may be worth it.

In his lease it covers;

all utilities except his cable and internet,

you don’t have to have insurance other than your personal items,

Lawn cutting

Snow clearing

Anything that needs to be repaired

So depending on what costs you anticipate having this may be something to consider. Having an apartment would reduce those costs even further. Renting will also give you the freedom to come and go as you please without having to worry about house owning related costs or requirements (i.e. cutting a lawn)

Renting does allow you to sell your current home hopefully for a profit, you can then, in turn, use those funds to fund your retirement plans. Equity in your home can be substantial, imagine having $500K (example) added to your retirement fund. Then only having to pay for rent each month which you can fund from your pension or other forms of income.

The downsides of renting is you don’t have control over rent increases and you obviously don’t have an equity stake in the property.

I’m not a big proponent of condos because you have the condo fee which in some cases can be very expensive, while the condo fees to cover many costs that rent would cover, you are beholden to the condo executive committee who decides what your condo fees go towards paying for. If the condo exec is not good at managing this, you have may see huge increases in your condo fees with no repercussions other than to sell and get out.

The best advice I’ve ever heard when looking for a condo is asking for the executive summaries of the condominium board to see if the condo is run effectively and efficiently. This should be your priority because if its run poorly it could cost you even more money.

Continuing to own your house can be expensive, you’ll need to maintain it and deal with all the costs you are well aware of if you already own a house. Remember as you get older how much do you really want to worry about replacing a roof or a leak in the basement?

Bills that don’t go away even if your house is paid for

You will need to assess your overall needs for how much money you will need when you retire. Everyone’s situation will be different. Ideally, you will want to have as much paid off as possible. This means getting the house paid off, car or cars paid off, any debt ensure its gone

If you intend on maintaining a house, you will still have bills.

Electricity,

Water,

Cell phone,

internet,

Gas for the car,

Insurance for the car

Maintenance for the car

Food

Medical costs

Prescription costs

Property taxes

You need to ensure that you have budgeted for all of this prior to determining what your plan is.

If you are planning on traveling for longer periods of time i.e. Who is going to take care of the house, pet(s) pay the bills.

What’s realistic? Tiny house living, retirement community…

Right now I’m really fascinated with this whole tiny house thing. Now I’m 6’4 so a tiny house may not be in my future but having a smaller space is intriguing.

I’m considering a container home in my backyard. I know that as my inlaws and father get older putting them in a home will not be an option for personal reasons, so they will more than likely end up with us. In addition, with housing costs skyrocketing I’m having a hard time trying to figure out how my young children are going to be able to afford a home. Short of winning the lottery it will be very difficult.

My thinking with the container home is it would provide a small space 500-700 square feet for one or perhaps even my wife or I. Not sure yet if it’s even feasible but it is certainly a more affordable option than $5000/month in a retirement residence, that’s money for travel or other fun things to do.

Its certainly about trade-offs.

When considering retirement communities, where you have to be above a certain age to live there.

The first thing I think if it people in the same situation as you… retired. There is a network of people that are in your age group and similar likes and dislikes. Many have amenities specifically for designed for retirees, exercise programs, small shops, activities some even have restaurants and bars. A friend of mine, his parents have a place in Florida for the winter which sounds amazing, street parties, dances, organized trips every week.

If that sounds appealing to you, you may want to consider retirement communities as part of your planning.

I plan on delving more into retirement communities on the blog so stay tuned as its very interesting.

Getting rid of the “stuff”

How do you get rid of “stuff” when downsizing and planning for retirement?

You’re either a keeper or a chucker! I’m a chucker if I haven’t used in a few months I always consider getting rid of it either by donating, selling or throwing it out.

My wife, on the other hand, is a pack rat. It’s very difficult for her to throw anything out. So we have to work on simplifying.

We still have a few years before we have to concern ourselves with downsizing as I’ve mentioned we do want to spend longer times away from Canada to get away from the snow but at this point in time we do intend on keeping the house for a long time.

There are four ways to go about it

1. Do nothing and leave it for your kids (Lol!)  Not cool my sister and I have already forced my father (extreme Packrat) to start going through and get rid of stuff. He still has a storage unit filled with stuff which terrifies me.
2. Start now whatever stage in life you’re at and consider keeping only what you need
3. Wholesale dump put it in the driveway and call a company to pick it all up. This seems extreme but depending on your situation you may need to do this.
4. There some auction site options like Max Sold that might be of some interest. You might as well get some money out of it, right? Craigslist and Kijiji are my favorite ways if you have time. You can control the price for the stuff you want to rid your self of.

Have a schedule to plan your week

This may sound funny but when you retire you really should try to schedule your time. Now I know “Mike I’m retired I want to stop scheduling my life” Hear me out!

As I’ve mentioned you should have a plan even if it’s a loose plan so that you can try to organize your self. For instance, if you intend on volunteering, golfing, shopping etc.  It might be a good idea to have a schedule so you and your partner know what each other is up to if you’re apart, your friends and family know where you are in the event of an emergency and quite frankly knowing that you are planning to go golfing on say Friday allows you to organize the rest of your week with other activities… like more golfing!

Check out these recommended planners from my pal Taylor over at www.myfinancefairy.com

Budget

It goes without saying having a budget in retirement is important. You should always be aware of where your money is going. In most cases, your retirement fund will be restricted to what you have. How long it will last will be up to you.

If you decided to work part-time, have a side hustle or side gig this will add some extra security for your financial stability in retirement.

For instance, if for whatever reason you accumulate credit card debt, a budget will help you manage the way you spend or allocate money in order to shift funds to pay that debt down.

Or vice-versa if should you have a surplus you’ll know it and be able to put those extra funds down for something you are saving for to get there sooner.

Long term Health care needs

My in-laws spent their entire retirement taking care of older family members in their home. Retirement residences or nursing homes were not an option for personal reasons, they are European and it’s not an option to send your family to a home or residence.

I’m personally planning to not repeat that, but retirement residences and nursing homes are crazy expensive and don’t always mean that your family will get the best care.

We think hiring a live-in nurse from another country may be an option to care for our parents, but it’s too early to start looking at that for us right now. However, it may be an option for you right now when considering downsizing for retirement to have enough room for help.

I’ve said before this generation and younger should expect to live longer Read Article here this should be a consideration for everyone when it comes to retirement. The current rules may not apply down the road, life expectancy will increase for men and women with the help of science.

Living away for longer periods of time

How you downsize when you retire may be a factor in where you want to be in retirement.

My wife and I have not determined yet where we want to be but we know we want to be away in the winter. So maintaining a house that we’ll only be in 6-7 months out of the year really doesn’t make a lot of sense.

For us, downsizing makes a lot of sense and getting a smaller space for when we are back home.

I seriously hope we’ll be near a beach and it a warmer climate but it honestly could be anywhere in the world. The closer we are to home will always be a driving factor, but when we are away we’ll be traveling light there will be no need to lug around our stuff.

People who are retired and have those large campers know this. They travel with only what they need and can fit in a camper for months at a time. This is the way you should think.

By downsizing to what is necessary, you alleviate the need for bringing stuff elsewhere.

How mobile will you be?

You know to live a long life you need to have a little luck. Staying healthy is important

How mobile will you be in retirement? When downsizing you need to consider what you have.

Does your current house or dwelling facilitate your mobility when you get older, meaning are there a lot of stairs, will you be in a wheelchair, if so would it work where you plan to live, is the bathroom easy to convert?

Considering how accessible from a mobility perspective your residence will need to be thought of. There is always the chance of something happening that may impede what you do on any given day.

Quality of health care where you will live

We’re very very fortunate to live in Canada with its health care system. It’s not perfect but it’s not something we have to worry about in retirement. On top of that the city we live in Ottawa has some of the best Cancer and Heart centers in the world, so for us, a major decision point will be the health care we have in our home town.

I realize in the United States this is a completely different concern. When you see folks lined up on weekends in school parking lots to get to see a dentist or doctor its concerning. Insurance can be very expensive and it will eat into your retirement savings.

Then you have to consider the availability of health care. If you live in the country how quickly can you get to a doctor or medical aid in an emergency?

If you move to a foreign country what options are there? I would argue many of the countries in Central America, South America, and the Caribbean may have better general health care than the country you live in right now. If you’re planning on going to a country for longer than 2-3 weeks you need to ensure that the country you’re planning on visiting has the care you need and it has affordable quality care.

I recently read an article where a woman was living in the Dominican Republic as an expat. She had to go to the doctor and the cost was $15 dollars and 30 minutes to be seen by a doctor. For that same ailment, she figured it would have cost over $400 and 5 hours in the USA.

Caring for your parents

I’ve touched on this earlier. If you have surviving parents when you are retired, you may be called upon to care for them. Downsizing for retirement may mean making room for them in your residence.

Some may decide to put their parent in a retirement residence as mentioned are very expensive and they are not going to get cheaper. You’ll need to think about the quality of care they will receive and whether its worth that cost.

Your parents may have to go into a retirement home for the simple reason they will be too hard to take care of depending on their particular ailment. Alzheimer’s is an example of an ailment that is nearly impossible for you or an in-home caretaker to treat and maintain any quality of life.

Remember this is your retirement, it may seem cold but I really what to enjoy it so you’ll have to consider YOUR quality of life as well.

What is the financial situation of your children?

I don’t go a day where I’m not thinking about my kids and what are they going to be up against in the future. Everyone (I hope everyone) wants the best for their kids. Secondary education is getting more expensive, housing getting more expensive and overall cost of living is going up monthly. I don’t see the salaries doing the same thing.

The average student debt load in the USA is $80,0000 and that’s for a bachelor’s degree.

I think it’s fair to say that most middle-income families will need to consider how long the kids will be staying with you; will they be back sooner than you think after they leave…. Will they ever leave?

In our city, the average price of a home is approx. $500,000 how will with student debt assuming they have debt they be able to afford a home with an average salary of $63,000. I would teach them the value of saving as early as possible or it’s going to be pretty tight for them and maybe you.

Downsizing for your retirement could mean making room for your kids to live with you longer than you think.

Have fun

As you can see there is a lot to think about, the point is trying to do consider everything so that when you decide what you want to do you’ve got most of the potential pitfalls covered off.

Retirement should be fun, its why you worked for so long.

Plan to do things that make you happy, do things you haven’t done before, experiment, try new cultures, food and explore.

As always, if you like this article please share and check out some of our other posts.

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If you have any questions don’t hesitate to drop me a line at theteam@wickedretirement.com