selling primary home to downsize in retirement

[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.

[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.

[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]

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]

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.

[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.

[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...

[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

[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.

[Kamban]

But those situations are few and far between and meanwhile the tax bill every year at that time will likely be more than we’d pay in rent somewhere reasonable.

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.

[ENT Doc]

I would not even dare say or think about it if I want to stay married. I am a grouchy but some things are better left unsaid. Vent on this board but at home let the words " yes, dear" come out of your mouth.

Besides in our culture, your friends and relatives stay with us, not in a hotel. Any suggestion to that effect and I might have none visiting me. That is why master bedroom downstairs and multiple guest bedroom upstairs work very well. Unfortunately, COVID has put to crimp to visitation for the past year.

Lol true. I’m all for family living and staying with us. But holding onto an expensive home with high taxes that aren’t giving us the school benefit anymore just seems silly. I say some of the kids screaming stuff in jest. Of course I’d love to see my grandkids running around raising ************************. But those situations are few and far between and meanwhile the tax bill every year at that time will likely be more than we’d pay in rent somewhere reasonable.

[Kamban]

"what if the kids want to come home and need a place to stay or bring their families back???" My wife's constant refrain. Well, if that happens I'll rent them a nice hotel room down the street.

I would not even dare say or think about it if I want to stay married. I am a grouchy but some things are better left unsaid. Vent on this board but at home let the words " yes, dear" come out of your mouth.

Besides in our culture, our friends and relatives stay with us, not in a hotel. Any suggestion to that effect and I might have none visiting me. That is why master bedroom downstairs and multiple guest bedroom upstairs work very well. Unfortunately, COVID has put to crimp to visitation for the past year.

[JWeb]

No. What really happens is you get woken up from your sleep by your grandchild screaming or from the 3 and 5 year old grandkids fighting downstairs. Nope. Already did that for years. Hotel.

Eh, no thanks. Nothing would make me happier than my grandkids (in 20+ years) waking me up when they stay with us. Especially if my kids don't live close to us. And my parents and my wife's parents love having our kids around in the am when we stay with them. Making them Minnie Mouse waffles or Mickey pancakes.

No hotels here. . .

[Kamban]

I am baffled by this. But then again I am baffled by many physician personal finance stories. More than anything, I can understand just staying put in an oversized home that you don't need anymore because "what if the kids want to come home and need a place to stay or bring their families back???" My wife's constant refrain. Well, if that happens I'll rent them a nice hotel room down the street. I'll forgo the Folgers commercial where everyone wakes up peacefully to smells of coffee. No. What really happens is you get woken up from your sleep by your grandchild screaming or from the 3 and 5 year old grandkids fighting downstairs. Nope. Already did that for years. Hotel.

If homes are this alleged "wealth builder" (more agenda pushing than a reality) you want to get the equity out. I think there's a very solid case for a lot of people to just sell, never buy again, and just rent.

Maybe when you get to that retirement age you will get it. Right now you are applying logic. Homes and retirement don't work well with logic.

1. At age 70 you don't want the hassles of moving. You have good friends and neighbors and don't want to uproot it all to go a strange place in FL.

2. Housing market has become hot. The house you brought for a low price is now expensive but so are the smaller houses or condos or town homes. You really don't save much.

3. Say you want to move to move to a nice small condo in downtown to have the walkability and all the amenities of downtown. Usually that is in a MCOL or HCOL. . Those condos now cost in the $500K-1M range and cost more than your old house.

4. The supersavers like the people on this board don't care about the extra $500K gained from the sale and downsizing. They have more than enough in other retirement accounts and investments that downsizing does not cross their mind. Like VagabondMD said, I know many who sold their $1M home in NYC metro area and now buy a $2M home on the lake in my LCOL living state. No one really financially downsizes.

[White.Beard.Doc]

My better half is happy in this too large house set on a large piece of property full of gorgeous gardens, prized specimen plantings, and flowers. There is no mortgage, but we live in an area with the highest property taxes in the nation.

Doesn't look like there will be any downsizing in my near future. And our first grandchild will soon be living 5 minutes away. Oh well, go with the flow. Happy spouse, happy house!