selling primary home to downsize in retirement

[ENT Doc]

From your posts I have gathered you are in the early half of your career. You are an ENT. Trust me, by the time the situation arrives that your house will be too big and the grand kid visits are not that frequent, you would have such a good net worth that the tax bill will play an insignificant part on the decision of how you live and spend your money.

I don’t know. As you might also be able to tell, I’m not a fan of giving the government more of my money.

[StarTrekDoc]

I have rarely seen a high income professional downsize into a less expensive home at retirement.

Here's what I have commonly seen:
1. Downsizing into a more expensive home.
2. Moving to a larger, more expensive home.
3. Putting an addition on the current home.
4. Adding a second home.

If you are the rare bird that actually downsizes into a less expensive home, remember that your cost basis is increased by the improvements that you have made along the way.

#1 - on tap ~15 years
#2 -- check - done twice and pending third time in two months
#3. check did that during 2007 downturn
#4 - bought parents and in-laws homes.

Yeah, oh well.

Kamban - yeah, with #2, the newest one will have plenty of space upstairs to host with the 1st floor master for us -- really enjoy that. Yes, ENT Doc - throwing an additional 12k yearly in stepup taxes from our current home for that privilege/convenience. Wasteful - absolutely; but it's San Diego

[Larry Ragman]

Trying. Been trying. Will keep trying. Logic tells me we have captive value and wasted space and expenses. The problem is that I think a change in life event is needed to overcome all the emotional rationalizations.
1. You want the same neighborhood type, just smaller. Not going to happen.
2. What is the alternative? We have leisurely scouted farther out and farther in (urban). Scaling back the neighborhood leaves a sticker shock. Half the house for 80% of price or half the house for 150% of price.
3. I am leaning towards that the geographic arbitrage is probably the key in downsizing.
Not aware of great on the water desirable locations with really really nice redone places in low cost of living areas.
4. A plan to lower your standard of living in retirement is possible, but that is not downsizing.
Life events as well.

Downsizing is not just a smaller house.

Anecdotally, my old estate attorney bought the house next door for cash, 2 days on the market and closed in one week.

I also have been trying. Missed the most recent window. Timing for retirement prevented me from buying in the new MCOL area we want because too far to get effective use as a vacation second home. Did not want to tie up the money for it just to sit there and did not want another rental. Then in the last year housing prices have exploded, so the whole idea of reduced (or even reasonable) cost retirement home left the station. Otherwise “perfect” house was on the market recently and we realized we weren’t ready, or at least I was unwilling to spend that much. So we are reinvesting in another round of renovations in the current place, which we like well enough anyway, and plan to wait until retirement and a return to sanity in the housing market post pandemic panic. But as a practical matter getting that close and then not pulling the trigger makes it much less likely that we will move. Meanwhile, just rented a place at the beach and invited the kids...

[Tim]

#1 - on tap ~15 years
#2 -- check - done twice and pending third time in two months
#3. check did that during 2007 downturn
#4 - bought parents and in-laws homes.

Yeah, oh well.

Kamban - yeah, with #2, the newest one will have plenty of space upstairs to host with the 1st floor master for us -- really enjoy that. Yes, ENT Doc - throwing an additional 12k yearly in stepup taxes from our current home for that privilege/convenience. Wasteful - absolutely; but it's San Diego

Consider adding #5 as a potential amenity.
#5 A second downstairs master bedroom.

We intentionally added a “full pool bathroom” with an outside entrance. Serves as separate bath for a separate master bedroom. My intent was for a large home office Not to be.Large walk-in closet, sitting area, queen size bed, separate bath, microwave, small refrigerator and what do you have? A business class extended stay suite or studio apartment. Currently it’s Grandma’s room due to the pandemic and hip surgery. It has had previous names for extended stays. Eliminated stairs, which was our primary objective.

Trade off of assisted living, emergency shelter (we have hurricanes), and infrequent large family gatherings it frees up the upstairs. We have had four family house guests at one time.

Moving would involve sooooo much decluttering.
The downstairs master bedroom has be by far the most useful. Eliminated daycare too. Live-in aunt. We don’t use the upstairs now (3br/3bath, game room, media room).

In my gut, the property taxes, insurance and AC equate to a cheap one bedroom apartment. Hard to make that trade. #5 is MY insurance policy now. We always seem to find it as a perfect solution for something.

[mjdevito]

now those were some FUNNY and informative comments and perspectives... thanks.

In short:
pancakes - yum
hotel - great idea, practicality, unlikely.
"downsizing" is a matter of perspective but not financially speaking (in reality)
cultural norms - zingo!
"yes, dear" - uh, yep.
high local taxes - may not be as much of a concern later on
did I say pancakes with the grandkids!?
build the nest egg (i.e. FI) rather than worrying about the wife's nesting requirements

thanks again.

[Hatton]

When I was looking to move prior to retirement what I was looking for was totally different from my "work" house. For work proximity to hospital trumped all other concerns. As I geared down to retire by working part-time and no longer taking call many new neighborhoods that were not close to the medical district became considerations. A downstairs master was a must. I upsized in square footage. I got rid of a large yard. I gained an attached 3 car garage and a generator. The new neighborhood is walkable. I stroll to restaurants, hotels, and pubs. I also walk on "greenway" trails with my dogs. I hope this house lasts until assisted living one day. I kicked in about $300k over what my old house cost. Property taxes $3400 versus $1600. Utilities the same due to better construction.

[mjdevito]

When I was looking to move prior to retirement what I was looking for was totally different from my "work" house. For work proximity to hospital trumped all other concerns. As I geared down to retire by working part-time and no longer taking call many new neighborhoods that were not close to the medical district became considerations. A downstairs master was a must. I upsized in square footage. I got rid of a large yard. I gained an attached 3 car garage and a generator. The new neighborhood is walkable. I stroll to restaurants, hotels, and pubs. I also walk on "greenway" trails with my dogs. I hope this house lasts until assisted living one day. I kicked in about $300k over what my old house cost. Property taxes $3400 versus $1600. Utilities the same due to better construction.

huh!? $3400 in property taxes. Nice! and Congrats.

You are surely taking advantage of geoarbitrage, ha. I'm in NJ - taxes are 6x that and I do presume my wife will want the same, i.e. stay in this house until it's time for assisted living... but a guy's gotta dream

With that said, we have solar, generator and no need for any additional upgrades with a very small mortgage left, so I should not complain (too much)

[Hatton]

huh!? $3400 in property taxes. Nice! and Congrats.

You are surely taking advantage of geoarbitrage, ha. I'm in NJ - taxes are 6x that and I do presume my wife will want the same, i.e. stay in this house until it's time for assisted living... but a guy's gotta dream

With that said, we have solar, generator and no need for any additional upgrades with a very small mortgage left, so I should not complain (too much)

It is nice that I lucked into a low tax state.

[StateOfMyHead]

My plan for retirement was to sell and down size in sq footage as well as cost which probably won't happen for the reasons others have listed. I'm now attached to a certain, albeit not extravagant, lifestyle that will be expensive to replicate. I've been planning my retirement for decades and find it unnerving the ways things change and continue to require flexibility. I guess we are all blessed to be in a position to roll with it.