Downsizing… Is it right for you?
Downsizing is very common situation. Children move away and a house becomes too big. Or it becomes difficult to maintain the house because of physical limitations. Here are two questions to ask yourself:
· Is it a good idea for you to downsize? List of the why’s and the why not’s.
· What is the best way to make it as easy as possible, and best financially.
This book tells you how to answers both questions.
Reasons not to downsize.
· The tremendous amount of time and trouble involved. A lifetime of possessions to sort through.
· Need to find a new living situation, which can be difficult.
· Emotional attachment to your home. Moving to a new location can be traumatic. Especially if it is far away.
· Emotional attachment to all the things in your home; the furniture, pictures, all that stuff in the garage and the cupboards and in the cardboard boxes hidden away.
· Possibility of a poor market for your present home.
· Loosening of ties with friends and relatives. Possible lack of emotional support in the new location.
· Need to establish new health care resources and other resources if the move is distant.
· The many details involved in selling and buying a property.
All these things need to be considered in your decision to downsize. Fortunately there are many resources available to you to make downsizing relatively pain-free. There are people and agencies to work with you throughout the entire process. All this is covered in this book.
Reasons to Downsize
· The present house is simply too expensive to maintain. Possible mortgage payment, heating and cooling, yard maintenance, roof repairs, cost of assistance.
· Many rooms are unused and the place feels lonely.
· Downsizing could greatly increase the retirement nest egg and income.
· Physical limitations make cleaning, maintaining, stair climbing difficult.
· The possibility to rejoin friends and relatives who have already relocated.
· In some cases move to an assisted care facility.
What’s involved in downsizing
Here are some steps to take:
Talk about the possibility with people you know and trust. Children, friends, professionals like your doctor and clergyman. Get a number of opinions. Talk to you financial planner, and get one if you don’t already have one.
Make a list of the advantages to you, and the disadvantages.
Investigate various options. If you plan to move to another state then visit there for long enough to find out what it is really like. Do some research on what the new area is really like, not what’s in the brochures. Talk to people who live there. Make sure that you visit when the weather is extreme to find out what it is really like.
Make a list of all the things you will have to do in order to make the change. Try to minimize the number of surprises that you will encounter.
Pare down the items in your home
Go through the items in your home and divide them into three categories:
Must Have (Financial records, heirlooms, irreplaceable items, jewelry etc.)
Would like to keep but not really essential and can be replaced if necessary.
(Furniture, unused tools, etc.)
Definitely discard. (All the balls of string, old newspapers, receipts over seven years old, an all the things you thought you could use some day which never comes.) Shred anything with personal information on it
Photos and memorabilia are difficult for many people to discard because they recall fond and important times. Save your favorite photos in one or two albums and make digital copies of the rest. (There are services that do this.) Once digital copies are made you can pass on your collected photos and memorabilia to friends and family members.
Start thinning out your belongings at least three months before the move. Take some time each day, or one morning each week, to go through that jammed coat closet or overflowing filing cabinet. Paper is often the most difficult, so tackle it one box at a time. The same goes for photos, which require a lot of attention.
Most important; get help if at all possible. It is surprising hard work to load things into boxes, and/or prepare them for shipping. There are people who will do this for a small hourly rate. You may find some younger family members who are happy to help you.
Get a feel for the size of your new rooms by comparing them to rooms of similar dimensions in your present home. For instance, your new living room may well be might be smaller than your current bedroom. You may think you can squeeze in two sofas, but a reality check could help you realize that only one will fit comfortably.
It may be both easier and less expensive to buy new furniture for your relocation. Consider this option.
Use floor plans to prearrange your furniture before the move. This is another useful reality check. To start, draw plans if you don't have any, and sketch in a furniture layout. Then look at the plans realistically; if you've crammed in side tables, armoires and chairs, you need to edit more. Don't wait until after you move to contend with furniture you'll just end up tripping over. There are also some amazing computer programs that give you realistic predictions of what everything will look like in your new home. One example is https://www.roomsketcher.com. Five free designs and then only $50 a year.
How to sensibly eliminate things you don’t need.
Don't throw anything in the garbage. Recycle, reuse, sell and donate instead. As tempting and easy as it is to pitch wire hangers, musty clothes and shabby furnishings, be environmentally responsible and find a home for everything. A can of Comet with a few shakes of powder left could make someone else's sink sparkle if you don't want it; consider giving supplies to a shelter, neighbor or cleaning lady. Or donate to a charity.
You will be pleasantly surprised at how much money you can get for some of your items. There are people in every neighborhood who will organize a yard sale for a share of the profit. There are also people who will help you sell things on Ebay.
Another alternate is auction house for high-end items. You could also look for reputable antique and secondhand dealers. They can buy all of your wares or put you in touch with booksellers and other specialty dealers. Some dealers will come to your home, take what you don't want and even drop off the some items for charity. If you can't sell an item, donate it to a charity for a tax write-off.
The most difficult aspect of downsizing is the emotional impact. All of us have some sort of attachment to our belongings and to our home. Possibly memories, or their usefulness to us, or even just a love of their attractiveness. This can be a long and involved subject, too long for this booklet. If attachment stands in your way, you might want the workbook version of a book called “Downsizing The Family Home” by Marni Jameson. Published by AARP, it’s available on Amazon. 110 pages of a most clear step-by-step downsizing process dedicated to how to select items to keep, store temporarily, donate or give away.
Remember to take your time and to get help when you go through your belongings. Be prepared for some surprises, especially how hard it can be to let go of memorabilia. You have most probably been in your home for a long time, and it is a huge part of your life.
Buying and Selling a Home
Once you decide to mover to a smaller or more convenient location, you must then decide what to do with your present home. It’s most likely that will want to either sell it or rent it. Depends on your financial needs. Remember that you will most probably have to pay a capital gains tax if you sell.
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income if your file as a single person, or up to $500,000 of that gain if you file a joint return with your spouse. IRS publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.
You will want to find a good realtor to help you sell your home. While this involves a small commission, you will actually get more money in the long run. Your realtor will guide you through the process, do most of the work for you, and negotiate the best possible price and arrangements.
Renting is not for the faint of heart, especially if you have never owned a rental property. At its best renting provides a steady source of income that grows with the cost of living. At its worst it can be a nightmare. You will want to familiarize yourself with local laws concerning rent control, landlord responsibility, eviction process and required insurance. Do some research. Talk to other people who have rental experience.
Extra important; find a good property manager. They will expect around 10% of the gross rent for their fee. They will relieve you of most of the potential headaches. Do you really want a midnight call to tell you about an overflowing toilet?
You have several choices in selling your home. You can sell it yourself, which takes great courage and a tremendous amount of effort. Or you can do a quick sale to a company the makes a business of flipping homes. You will get much less than you could by doing this but you will get a fast transaction. Or, if you wish the best possible arrangement in terms of convenience and the most money possible, find a good realtor.
Remember that the downsizing process usually gets easier once you get started, especially if you keep your final goal in mind. You will be glad that you have taken this most important step. It’s easier to enjoy retirement when you can focus on living.
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