(Special) – For older Canadians, the decision to downsize their living accommodations to a smaller space or a more affordable community can be a real dilemma. On the one hand, they may be lured by the possibility of getting money to help fund their retirement lifestyle but on the other, they may be moving away from family and friends and they may find the costs of the venture greater than they had expected.
Surveys commissioned by HomeEquity Bank recently have found that 39 per cent of current home owners are skeptical that downsizing will save them money and 27 per cent of people who actually did downsize found that the costs were more than expected.
The decision to downsize can be a real dilemma.
On one side almost half of those aged 75 and older say it’s important to stay in their current home because they want to stay close to family, friends or their community while 40 per cent say emotional attachments and memories are what’s behind the importance of staying put.
On the other hand, 31 per cent say they need the equity in their homes in order to live comfortably in retirement.
Another recent survey by Sun Life found that money is a real concern for many retiring/retired Canadians. Twenty-five per cent of retirees are carrying non-mortgage debt from month-to-month and still are making mortgage payments on their homes. Twenty-two per cent of Canadians 55 to 65, 16 per cent between 66 and 69, 23 per cent between 70 and 74 and 17 per cent between 75 and 80 are continuing to make mortgage payments on their homes.
Besides owing money on their mortgages, 66 per cent have miscellaneous credit card debt, 26 per cent are making car payments, seven per cent are paying down health expenses, seven per cent paying for holiday expense or a vacation property, and six per cent are paying off home renovations.
Author Joyce Wayne who writes the blog, Retirement Matters, says downsizing was a big mistake for her. She says she was lured by the thought of improving her cash flow to support her writing career following her retirement, but it didn’t quite work out that way.
“It really didn’t net out that way after factoring in all the closing costs and moving expenses,” she says. “I moved further away from my friends too, which was more difficult than I imagined. After a few years I moved back into my old neighbourhood. It’s a big decision that should not be entered into lightly — know your options and really explore them.”
There are real financial, emotional and personal costs to downsizing.
“From a financial perspective if you had to move outside your cherished neighbourhood or further away from family and friends and personal support networks it may mean you’ll spend more resources to maintain relationships, develop new connections and navigate life in a different setting,” says Yvonne Ziomecki, executive vice president of marketing with HomeEquity Bank. “Moving into a smaller house or adjusting to a condo or apartment means coping with the harsh reality of selling or giving away some belongings and sacrificing personal comforts when space becomes limited.”
One option to the downsizing dilemma is to rent accommodation in the community or condominium where you plan to go first to see if you like it.
Another good idea is to consult an adviser to see what the financial implications of downsizing might be to you, including costs, whether you could stay in your home by using a reverse mortgage or how any financial windfall you might receive from the sale of your house could affect your income, taxes and eligibility for and collection of government retirement programs as Old Age Security.
Eighty-eight per cent of older adults in the HomeEquity survey who downsized said they were pleased with their decision but admitted it involved some regrets and unknown sacrifices, so examine all possibilities carefully with the help of an adviser before making a move to be sure it is right for you.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2018 Talbot Boggs
Talbot Boggs , The Canadian Press
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