Article by Marilyn Hallett, You've Earned It
Many South African over-60s, who are still in their homes, are exploring alternative options for accommodation in retirement.
There is a worldwide growing trend towards multi-generational living – where adult children and their families are moving into the family home, and baby boomers are looking after ageing parents. The big question appears to be – are we in a position to downsize or not? If so, when, how, why, why not?
YEI looks at several aspects of downsizing or not – all of which need careful consideration.
What does it mean to downsize?
Downsizing means moving to a smaller home from the family home and simultaneously reducing the amount of possessions that you own. In later life, it becomes increasingly difficult to manage a large home and garden, and on a fixed and/or limited pension, the costs of maintaining the home can become a burden.
You may think that downsizing is not an option for you – you may think that it is a critical survival strategy that could boost your savings. Life events can overturn one’s retirement plans on their head. However, does downsizing boost your coffers – read on…
Research, research, research and then plan, plan, plan
Downsizing can set an emotional rollercoaster in place. Timing is a critical consideration – don’t move on impulse – you may regret your decision. Run the numbers before you start packing – you need to do your homework thoroughly when making the downsizing decision. Will the family home fund a happy retirement and bolster your nest egg? Consider unexpected life events that could be a drain on your pension. Also consider if you can adapt your current home to meet your physical and financial needs in later life? And when you think you are ready to make a decision, consult a financial advisor for assistance in crunching the numbers.
Where do you want to live?
Do you want to live in a smaller home, a retirement village or a flat within a retirement complex? Do you want to live near friends, your children and grandchildren, in the country, the city or by the sea? What sort of climate are you looking at? Do you want to be close to medical facilities? Or do you want to stay in your family home?
Financing your retirement by selling your current home – myth or fact?
Many of us bought our homes in the 70’s and 80’s and their current value has substantially increased. Many people believe that they can sell their home, buy a smaller place and invest the difference to boost their retirement savings. Time to do your homework – it is possible that you have overestimated what your home is worth and you will reap less profit that you had hoped. Consult three or four estate agents to get a realistic estimate on your home’s current market value.
Don’t forget the additional costs
It may have been years since you last bought a home. Don’t forget to factor in all the additional costs – legal fees, estate agent commission, moving costs, levies, maintenance, security and all possible hidden costs.
In a nutshell:
Signs that it could be time to downsize:
• Your youngest child has moved out of the family home
• There are rooms in the house that are not being used
• Everything is becoming too much work – the house, the garden
• You are either retired or preparing for retirement
• You feel it’s time to be living a simpler life so you can lock up and go, have more time with family and friends and travel to those bucket list destinations
The good parts about downsizing
• You will simplify your life
• You will reduce your accumulated lifetime possessions which have probably become a burden
• Downsizing could mean easier, cheaper, less stress
• You could increase your retirement pot
• Your home-maintenance and utility bills will reduce for years to come.
• Lock up and go and travel more frequently
Thoughts to consider when downsizing
• Downsizing can bring about an emotional rollercoaster. Do your homework thoroughly and ensure that you are prepared emotionally before moving.
• We can’t emphasize this enough – check out the financials, the total cost of downsizing. Consider all the hidden expenses.
• Consider your friends and family. Some say that as you get older, your social network becomes even more important than your family. If you move, will you be further away from good friends?
• Are there activities that you would enjoy in the new vicinity? Are there health-care services available? What sort of transport is available?
• Will you be able to live in your new home for a long time? Does it have the features that enable ageing?
• Be honest about why you are considering moving. Consider the financial reasons and the practical reasons. Assess your current and possible future needs so that you can reach old age with dignity and comfort.
• How about renting in the new area for a year before you sell up the family home? This will give you a good idea of what your new location is like throughout the year, and whether moving to this new area is the right move for you.
• If you are living mortgage-free, but need more income – have you considered renting a room or turning the garage into a bedsit?
So is downsizing for you?
Experts have said that downsizing needs to reduce your expenses by at least 25%. If not, is it worth the trauma, the bother, the expense. If you have done all your homework and are convinced that it is, then a whole new simplified life could be waiting for you.
YEI readers have this to say:
James and Helen live in Claremont. They believe that their biggest asset base is their current home and they plan to live there for the next 7-10 years. They plan to put their names down at one of the local retirement homes, but “the waiting list is so long, we’ll probably be dead by the time they offer us a place”!! The only reason that would prompt them to sell earlier would be if they were made an offer on the house that they simply couldn’t refuse, or possibly ill health. James' view on downsizing is that it is “bloody expensive, and costs a lot of money!”
“Downsizing at this stage of our lives just does not appeal” – so say Trish and Kim who have been living in their Newlands home for over 38 years. At this stage of their lives, nothing would prompt them into selling. They love their home which is not big. The garden is manageable, and there is adequate space for grandchildren to play and for the old fogies to play a game of croquet or boulle. They believe that buying into a retirement village is very expensive when one takes the on-going costs of levies into account. Trish agrees that a retirement village would be a lure for someone who might have lost a partner, or for those who enjoy community spirit, but it’s not for them.
Belinda and John have had their adult daughter, her husband and two small tots move back to Cape Town from Canada. With the cost of housing going through the roof, the decision they have made is to turn their granny flat into a larger abode. Belinda and John will move into the granny flat while the youngsters take over the main house. They believe that this is a win-win situation for the whole family.
Felicity and Mark believe that they have experienced an upside to downsizing since they moved into a smaller home in a retirement village. Their life has simplified. They have more usable money. Their quality of life is so much better than it was – they are able to go out regularly for meals and they are in a position to travel to see grandchildren in the UK.