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Money Fix: Downsizing in retirement

When considering whether to downsize your home in

When considering whether to downsize your home in retirement, evaluate the situation very carefully, experts say. It is not for everyone. Credit: iStock

Conventional wisdom says to downsize your home in retirement. Many have no choice. But downsizing isn't the best strategy for everybody.


You assume buying a property at the bottom of the real estate market would help to "free up" extra cash, but you use all of the equity in your house to pay cash for your new property and don't end up with much, if any, profit, warns Jon Ulin, certified financial planner with Ulin Financial in Boca Raton, Fla.

Consider closing costs and other expenses that could eat into your profit, says Jamie Patrick Hopkins, assistant professor of taxation at The American College in Bryn Mawr, Pa.


"If your kids live too far away, you miss them -- what about your support network?" asks Jonathan Gassman, CPA with Gassman & Golodny in Manhattan. The transition can be tough.


 "Do your research. Develop a downsizing plan. With knowledge, you can make informed decisions, anticipate future needs and know your options. Research state income tax rates and other cost-of-living factors," says David Bendix, CPA with Bendix Financial Group in Garden City.

Realize that downsizing but moving to an area with higher taxes could be counterproductive, cautions Karen Carlson, director of education for InCharge Debt Solutions in Orlando.

While downsizing is a valuable retirement planning technique, says Hopkins, "It shouldn't be done without proper thought."

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