Empty Nest? Empty Nesters Should Consider Downsizing
Consider the Benefits of Sprucing Up Your Home and Downsizing
Think downsizing is just for seniors or those in retirement? Think again. Empty Nesters Should Consider Downsizing.
Once your kids have left your home for good, you should seriously consider downsizing and making some improvements to your current home to boost its resale value. From enjoying a less stressful move to boosting retirement savings to saving money each month, there are many benefits to downsizing in your 40s instead of waiting until retirement.
Moving to a new area means you have the chance to relocate somewhere that’s closer to amenities or your workplace. Once you reach retirement, you’ll be glad that you’re close to amenities like shopping and restaurants. You may also want to live near recreational activities, such as a gym, and cultural amenities, such as a theatre, museum, or concert hall. Being near these things means you’ll never have a shortage of things to do, and you can easily access them. Additionally, staying active and social has proven benefits, especially as you age.
Moving is physically and emotionally hard no matter your age, but the older you are, the more this is true. Make the transition easier by moving in your 40s. To prevent moving again and to allow you to safely age in place, it’s important to choose a home that will suit your needs as you age. You’ll need home attributes such as wider doorways to accommodate a walker or wheelchair, slip-resistant floors, ramps, lever-style doorknobs, remotely controlled lighting, railings, walk-in showers, and more. Also, choose a home that’s either a single level or one that has a master bedroom on the first floor.
Having a higher mortgage can lead to you to cut back on essentials and prevent you from setting money aside for retirement. Also, people with mortgages retire later than those whose mortgages are paid off. If your home is delaying your retirement, downsizing to a smaller, less-expensive house well before retirement is logical over waiting until your 50s or 60s. “If the goal is stronger financial position when you get into your older years and retirement, the sooner you downsize, the better position you’ll be in,” says CBS News.
Waiting until your 50s or later to downsize doesn’t give you much time to reap the benefits. Doing it at 40 gives you another 10 years to boost retirement contributions by investing the difference and watching your money grow. For example, downsizing from a $250,000 house to one that costs $150,000 leaves you with $75,000 to add to savings after you factor out the costs of selling and moving, which is 10 percent of the selling price. Doing this in retirement increases your yearly income by $3,000 if you withdraw 4 percent of the $75,000 annually. However, if you do so in your 40s, you can invest the $75,000 with a 6.5 percent annual rate of return, and it could grow to nearly $250,000 over 20 years.
In addition to cutting your mortgage, downsizing can also cut the hidden costs of homeownership such as utilities, property taxes, HOA fees, and homeowner’s insurance. These hidden costs total to 3.25 percent of home’s value. Downsizing from a $250,000 home to $150,000 home means the costs drop from $8,125 a year to $4,875 a year, which frees up $3,250 to add to savings. But the difference would be even more if you downsized in your 40s.
Downsizing means you’ll be selling your old home, and you want to get as much money out of it as possible. “One of the keys for adding value to your home is to repair, replace, or remove anything that could turn buyers away,” suggests HGTV. A fresh coat of paint is simple and cost-effective and makes rooms look clean and updated. If it’s in your budget, replace carpet with hard-surface floors. You’ll get the most reward from renovating the kitchen and bathroom. Even if you can’t afford a full remodel, small changes (such as replacing light fixtures or small appliances) will do wonders without breaking the bank. Planting shrubs and colorful plants will add curb appeal.
Whether you’re looking to improve your monthly finances, find a home with less unused space, or put more money away for retirement, downsizing might be a great decision for you. Once your kids leave and you have an empty nest, weigh the benefits of downsizing. To really get the most out of downsizing in your 40s, make some improvements to your home that will increase your resale value.
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