We’re all familiar with the ideological American Dream—get married and start a family, buy a house, and then eventually move into a bigger house. It’s the standard white-picket fence dream we’ve all come to long for. But there is an unofficial “final chapter” to this dream. The kids have moved out and what used to be your dream home full of life and laughter is now left virtually empty and quiet. You’re left with not only a large space, but also the maintenance and costs that come with it. So, now what?
As we age, so do our needs in a home. The reality is that our dream homes of 20 or even 30 years ago may not necessarily be functional or best equipped for retirement years. And while the standard process in coming to these terms may be downsizing—it’s not the only option on the table. In a recent survey of more than 4,000 Baby Boomers, two-thirds expressed that they planned to age in place.1 And this is exactly where rightsizing comes into play …
So, What Is Rightsizing?
We’ve all heard of downsizing—the process of moving into a smaller home with the goal of taking on a simpler life. And while downsizing is certainly a great option for many aging seniors, it doesn’t necessarily make sense for everyone. As a growing population of Baby Boomers is reaching retirement age, the idea that people need to downsize into small, cramped homes is quickly being replaced with the philosophy of “rightsizing” —updating a living space and making necessary accommodations based on current life needs.
Making the Case for Rightsizing
A recent article in The Washington Post reports that today, 3.6% of people born between 1931 and 1941 are giving up home ownership at the age of 67. This is down from 11.6% as reported by the cohort before them,2 indicating that more seniors are choosing to age in place. But what exactly is the driving force behind this?
A majority of Boomers are staying in their longtime homes and communities as they are deferring retirement. Today’s seniors are staying in the workforce longer as they are generally healthier and will ultimately need bigger nest eggs to finance longer retirements. As a matter of fact, U.S. Department of Labor? figures show that about 20% of Americans ages 65 and older are currently working or looking for jobs, up from just 10% back in 1985.3
The shift here is evident. And recent statistics from AARP show that a whopping 90% of retiring homeowners want to age in place.4 There are several reasons as to why this is becoming such an appealing option:
The Means to Remodel Are Relatively Simple
While remodeling initially sounds intimidating, a few easy upgrades and fixes around the house can make a home livable long into retirement years. Senior-friendly fixes such as installing a grab bar in a shower stall, putting in a walk-in tub, or even retrofitting cabinets so they are well within reach without strain are just a few small tasks that can make a world of difference. The best part—in most cases—such changes are much more cost effective than moving or purchasing a new place. And with more and more custom home builders and home service companies entering the market, there is no shortage of vendors willing to help those wishing to age in place.
Home Care Is a Viable Option
Staying put in an existing home can still make sense even for seniors who need some extra day-to-day assistance. While nursing home care typically ranges from $150 to $300 per day, home care averages can be as low as $20 per hour. And with the growth of the home care industry, there are services in place to make homes more accessible, allowing more seniors to stay comfortably in their homes longer.
Moving Is Too Costly
Whether you’re going across the country or just to a small condo across town, moving is a large expense, nonetheless. Hiring a moving company can ultimately cost thousands, while realtor commission fees typically amount to upwards of 6% of the sale price. Factor in closing costs and all the other ancillary costs of making a new house a home and you could very quickly feel the financial impact. And that’s just the beginning …
It’s Not Just a House … It’s Home
As the common saying goes, “Home is where the heart is.” And with a growing number of aging Baby Boomers saying, “No thanks,” to downsizing and relocating, for some seniors, the fact that they love their home is the only reason they need to stay put. As a matter of fact, a recent study found that 49% of seniors want to modify their current homes, as compared to just 38% of seniors who want a new home that’s aging-in-place ready.5 Whether it’s the familiar surroundings or countless family memories, there are several reasons why seniors feel a strong desire to live out their golden years in the same house they’ve come to know as “home.”
Preparing to Rightsize
In determining whether or not rightsizing is the best option, those seniors wishing to age in place first need to take the following into consideration:
- Can your home be easily remodeled to accommodate wheelchair accessibility or other mobility needs?
- How close are you to friends and family or professional caregiver services that will aid in helping you stay in your home should you no longer independently be able to do so?
- Do, or will, you have adequate income to afford home maintenance needs, property taxes, and professional care should a need arise?
While rightsizing has become a popular choice amidst the aging-in-place movement, it’s important to consider all the possible implications and expenses that may come with it.
Tapping Into Your Home Equity to Fund Home Improvement Projects
Of the more than 100 million homes across the U.S., only about 1% of them are conducive to aging in place.6 With this in mind, it’s extremely likely that you’ll need to make some modifications to your home to successfully rightsize for aging in place. But as we all know, home improvements come with significant costs. So how can you afford to make such modifications on a fixed income?
A Home Equity Conversion Mortgage (HECM) is proving to be the solution. Also known as a reverse mortgage, a HECM allows homeowners ages 62 and older access a portion of the equity in their homes to help improve income and monthly cash flow. As a borrower, you can use the funds from the reverse mortgage in any way you like, such as keeping more money on hand to pay for everyday bills and expenses; setting aside funds to help pay for long-term care in the future; or making updates, repairs, or modifications to your home to live more comfortably.
Learn more about the HECM reverse mortgage here.
Making the Case for Downsizing
The “downsizing” mentality peaked during the mid-2000s—a time where Baby Boomers in their mid-50s to mid-70s first started retiring. As such, the large homes and acres of property they bought during the financially robust ‘80s and ‘90s were emptying out, giving way to the shift of Boomers opting to relocate to smaller properties, such as condos or townhomes. Since then, the concept of downsizing has become commonplace to Baby Boomers, especially as they reach retirement age.
When it comes to improving your retirement lifestyle, downsizing can still offer a wide world of possibilities. According to a TD Ameritrade survey, of Americans planning to downsize in retirement, 25% plan on moving to a warmer climate, while 17% plan to move close to family.7 These are just some of the many aspects that make downsizing an appealing option for retirees:
A Smaller Home Could Mean Fewer Expenses
If adequately insulated and well-maintained, a smaller home typically trims monthly utility expenses. But that’s not all—the financial benefits of smaller homes are numerous. These typically include smaller mortgage payments, smaller insurance and tax bills, less money spent on routine home upkeeping such as landscaping or snow removal, and less money spent on long-term maintenance such as roofing repairs or plumbing improvements. And by selling a larger property, a big chunk of the proceeds can go a long way toward building additional funds and savings for retirement years.
Accommodating Changes in Lifestyle and Mobility
A recent study found that nearly half of nondisabled seniors report difficulty navigating stairs.8 What’s more, according to the National Council on Aging, one in four Americans over the age of 65 falls each year.9 While these statistics are alarming, they’re also tell-tale signs that mobility is often a big issue. Downsizing to a one-level home can mitigate some of these imminent risks and benefit seniors with more manageable living spaces.
Less Home Upkeeping
Ask any homeowner … when it comes to home maintenance or upkeep, there is seemingly always something. And for seniors who want to save their time and energy for other pursuits, this ongoing constant home maintenance can become exhausting. With fewer rooms and smaller spaces, downsizing enables seniors to spend less time cleaning and maintaining, and more time to enjoy hobbies, recreation, travel, or just relaxing and enjoying the company of their friends and family.
Location, Location, Location
When it comes to a home, location is everything. Whether you’ve had your fill of cold winters and are looking to migrate to a warmer climate, move closer to family and spend more time with the grandkids, or even keep an active social lifestyle in a community largely populated with other seniors and retirees, there are several location-based factors that make downsizing a rewarding option.
Preparing to Downsize
Now that we’ve covered all the upsides to downsizing, you know just how liberating the process can be. However, there are several things that you’ll need to do before you can up and move into a smaller home. And the thought of going through as much as 30+ years of “stuff” can seem daunting. So, where do you begin? Consider these tips as you prepare to downsize:
Downsizing is not a spur-of-the-moment decision and preparing for the eventual move takes time. Perhaps the most time-consuming part is clearing the clutter that has accumulated over the years. Start the process of going through the house room by room at least six months to a year in advance. The goal is to stay as organized as possible, working at a steady, but manageable, pace. This also eliminates any deadline pressure as the moving date approaches.
Enlist Your Family
Clearing out and organizing your home is a big undertaking—and you don’t need to go it alone. As you take inventory of each room, coming across memories and reminiscing are inevitable. Including your family and loved ones in this process creates even more moments shared together in the house you’ve loved—before you start making memories together in your next home. Better yet, you may be able to pass down some of your belongings. For instance, perhaps you’ve been hanging on to an antique collection for your son or a china set for your granddaughter—go ahead and gift them now. This allows you to keep these heirlooms in the family, but also helps in freeing up more space for the move.
Don’t Be Afraid to Sell Things
Between Craigslist, eBay, numerous smartphone apps, Facebook Marketplace, and an abundance of consignment shops, selling your belongings has never been easier. Getting some cash for the items you are unable to take with you is a much better alternative to simply throwing them in the trash.
Tapping Into Your Home Equity to Purchase Your New Home
Whether your ideal retirement home is smaller; in a warmer climate; requires minimal maintenance; or is closer to loved ones, family, and friends—the financial implications of making the move are often a lot to comprehend. Is it all doable on a fixed income?
The HECM for Purchase is a reverse mortgage designed specifically for seniors ages 62 and older to purchase a new home using loan proceeds—all without a monthly mortgage payment. Using proceeds from the sale of your current home or cash on hand, you make the initial down payment and cover closing costs. From there, the balance of the purchase is covered by your HECM proceeds—and you can use any remaining funds however you choose.
Learn more about the HECM for Purchase here.
By 2040, the number of Baby Boomers reaching age 80 and older will climb to 28 million—more than three times the number recorded back in 2000.10 And upon retirement or later, these Boomers will face the issue of whether to stay in their homes or move. While some people will ultimately seek relief from the ongoing labor and expenses that come with maintaining a home, others will opt to remain in the comfort of the home or community where they’ve lived for decades and raised their families.
Whether downsizing or aging in place is in your future, housing expenses will undoubtedly have a huge impact on your overall retirement. At Longbridge Financial, we remain committed to helping you identify the best home equity solutions to live comfortably while maximizing your retirement income. We get to know you, and take the time to understand your unique situation, so we can offer reverse mortgage solutions tailored to your needs. And if we ever feel that a reverse mortgage isn’t right for you, we’ll say so. Not all lenders make that pledge.