Before your downsizing project for 2017 begins, start by reviewing these tips. Enthusiasm for a fresh start with less “stuff” sometimes leads people to make bad decisions that cannot be undone.
Downsizing includes more than moving to a smaller home, but according to this article,“8 things you need to know before you downsize in 2017,” from Starts at 60, doing it right can have a positive impact on your finances. Doing it wrong, can wreak havoc on your retirement and your estate plan. Before you take one more thing to the curb, consider the following:
- Allow yourself plenty of time. Start the downsizing process early. Plan the move several years in advance, so you have time to see where you’d like to move and to crunch the numbers.
- Ask for advice. Buying and selling a home can be a real emotional event, so ask a family member, friend, or financial adviser for a second opinion or a fresh pair of eyes to review the situation.
- Review any impacts on your pension. You should determine what effect your move will have on your pension.
- If you’re headed to a retirement community, figure out what would be left were you to move again. Many retirement communities charge what is called a Deferred Management Fee for each year you live there. For every year you live in the retirement village, you’re charged a fee, which is taken out of the proceeds when you choose to sell your home. It’s possible the amount you leave that retirement village with when you sell will be less than what you paid.
- Consider regular fees the facility may charge. There may be a monthly fee to defray some of the expense of running the village.
Here are a few “Don’ts” to remember:
- Don’t purchase a new home before selling your old one. Don’t sign a contract on a new home until you sell your old home. While you may have had some wiggle room while you were working, there’s little or no margin for error now. If you sell your home first, you eliminate extra stress, and you’ll know your financial status. This makes it easier to buy the next home.
- Don’t be overly itchy to move when you’re not ready. If you have doubts that a move will make sense financially, there’s no harm in staying put. If you stay a little longer, you can avoid a stressful move.
- Get help from a trusted estate planning attorney for any retirement community contracts. Buying a home is always a complex transaction. However, if you are buying a home in a retirement community or a continuing care retirement community, those contracts are even more complicated and may have a significant impact on your estate plan. Talk with an estate planning attorney who can review the contracts with an eye to your personal situation. Your estate planning attorney will also be able to tell you if the numbers work, or if you need to rethink your overall plan.
Reference: Starts at 60 (December 28, 2016) “8 things you need to know before you downsize in 2017”