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I'm a financial expert: Here's what to consider when downsizing for retirement (and why it might not make sense)

What to consider before downsizing in retirement (MoMo Productions via Getty Images)

Anyone who’s considering retirement is probably also asking themselves whether they ought to start downsizing. Is it time to sell off the family home, move into an apartment or condo and use the money you save to fund your golden years?

The short answer is — well, not necessarily. Selling your biggest asset right as you retire could turn out to be shortsighted, especially if you don’t fully consider what you’re going to get in exchange for what you might be giving up.

It isn’t just that selling one home and buying another in a volatile, inflation-driven real estate market could be a money-losing decision, although that’s part of it. It’s also that maintaining something you already own could be less expensive than you realize, especially if you approach it with the right mindset.

With that in mind, here’s what I suggest you consider before you downsize.

The first step in deciding whether to downsize is to consider what's most important to you in the coming years — and then whether downsizing is a good way to achieve that lifestyle.

Some retirees, for example, want to spend more money on travel or snowbirding on the road. Downsizing could be a way to shrink your home base while freeing up time and energy for adventuring. Other retirees want to spend more time visiting grandkids and may decide that moving to a smaller home or apartment closer to their grown children will afford them that access while saving them money.

As you consider your ideal life, you’ll also want to think about what you can realistically expect over the next several decades. Let’s say you’re considering a move from a multi-bedroom home to a single-bedroom home. While this could save you money in the short term, it might present problems in the long term. Grandchildren, for example, might not have a comfortable, private place to sleep when they visit — and neither will your adult children, if they ever need to shift into a caregiving role.

If the life you’d like to live after you retire supports a downsized existence, that’s one reason to take the plunge. However, if you’re considering downsizing only because you believe that selling your current home and reducing your possessions is the best way to increase your retirement savings, you may want to think a bit more strategically.

Moving is not only a stressful experience but also an expensive one. Selling a home requires you to navigate a fluctuating real estate market — and if you happen to sell when supply outpaces demand, you may get much less for your home than you were expecting. Homebuying also requires you to work within a variable system of mortgage interest rates that could end up being higher than anticipated, not to mention the costs associated with appraisals, inspections and so on.

Renting is always an option, but remember that rents are still high — and since landlords and property companies often continue to raise rents year over year, long-term renting could give you less of a financial cushion than you might have been hoping for.

This is all before you get into the actual cost of the move, which adds up fast. Even if you don’t use professional movers, you’ll need to pay for basic moving supplies like boxes and tape, as well as the takeout meals you’re going to start ordering as soon as you pack up your kitchen. Even if you commit to moving without buying any new furniture or decorations (which is, shall we say, unlikely), you’re probably going to end up purchasing items like trash cans and shower curtains that you wouldn’t necessarily have bought if you’d stayed put.

Plus, once you get yourself moved in, you can expect to spend the first year or so dealing with all of those unanticipated household costs that don’t reveal themselves as necessary until you begin living in a new home. The bedroom window that requires a blackout curtain, for example. The HVAC unit that requires regular air filter changes. The potted plants that you might want to put on your back patio. It costs money to set up a new life — so think carefully about whether moving right now is the right move.

If moving turns out to be too expensive, or if the family home could still be useful to the family — for holidays and other gatherings, for example, as well as a stable base for kids and grandkids — it’s time to start thinking about downsizing in place.

This could mean selling off unused possessions, like the exercise bike taking up space in your basement (although you don’t need me to tell you that you won’t get as much money for old fitness gear as you might hope). Selling a second car might be a better choice, if that’s an option for you, and there is often a market for high-quality instruments like pianos and guitars that may no longer get regular practice.

But downsizing in place, much like aging in place, involves getting the most out of what you already have — and getting rid of what is no longer necessary. This doesn’t necessarily mean canceling your Spotify subscription and dusting off your record player, although that’s one way of cutting back on costs. It’s more like a mindset:

From this point forward, we’re going to live within our means. This means cooking meals at home, growing tomatoes in the backyard, wearing the clothes we already have and getting our books at the library. It means spending less on gifts for the grandkids but keeping our home as a space for the family to gather. It means fewer vacations and more volunteering. Fewer indulgences and a few more daily exercises. Many more evenings shared with family and friends.

It may not be the retirement of your dreams — but if you can make it work, it might be even better.

Read more: Top 7 home renovations that can increase your property's value — and quality of life as you age

Nicole Dieker is a seasoned freelance writer with a focus on personal finance and personal development. Her expertise has been featured in Yahoo Finance, Newsweek, Bankrate, NBC News, Lifehacker, Penny Hoarder, The Simple Dollar, Vox and other top media brands. Nicole also spent five years as a writer and editor for The Billfold, a personal finance blog focused on honest conversations about money.