If you’re a freelancer and a homeowner, you’ll have big decisions to make as you get older; most notably, whether or not to sell your family home and downsize. This is a practical decision that brings many benefits – a number of which are financial, such as the reduced cost of living and equity release. It is no surprise then that more than two million over 55s plan to downsize in the hope of raising extra cash for their retirement but with the emotional connections you’re likely to have to a property, deciding if this option is right for you can be difficult.
Before you start looking for a property for sale, it’s important to understand the benefits of downsizing so you can establish if it’s right for you.
When you’re younger, a mortgage seems like the Holy Grail of financial independence. When you retire, it is nothing but a huge financial burden that continues to drain your bank balance. By downsizing you might be able to clear your mortgage and prevent further monthly payments, giving you more cash to spend on things you want.
The Welfare Reform Act 2012 had a huge impact on the benefits system, including the controversial bedroom tax. If you receive benefits and live in a property deemed larger than what’s required to meet your needs, you could be affected by the tax which means you will receive less help with the rent.
Boost pension income
Downsizing doesn’t just reduce your mortgage payments or get rid of them altogether, it can also release equity in your property. This lump sum can be spent as you wish, but one option is to invest it in a flexible scheme and draw from it in the future to boost your pension income.
More leisure time
Retirement is supposed to give you the opportunity to do all the things you’ve always dreamed of but didn’t have the time (or money) to do before. If you’re spending all day cleaning and maintaining a large home then you might never get the chance to fulfill your dreams.
While downsizing does mean you’ll have to be quite strict with your possessions, it also gives you the perfect opportunity for a clear out. All those old clothes you never wear, boxes of stuff in the attic and tools in the shed can be sold or given to charity so that you’re new home is clutter free. If you’re selling these items, you might find you scoop even more cash rewards from downsizing your home!
If you choose to move into a retirement village or independent living apartments, you’ll become part of a community and gain all the benefits that come with it. While your home will still be yours, there are communal areas where all the residents can meet up and entertain, giving you the best of both worlds and ensuring that your retirement is active and fulfilling.
header image courtesy of Glenn Jones