Should a retirement plan include your home?

Oct 7, 2019
Retired couple meeting with financial advisor

When your home represents a sizable portion of your net worth, you might wonder if downsizing would give you a more comfortable retirement. It’s a decision that not only involves financial planning, but practical and psychological factors as well.

Retirement planning versus estate planning

If downsizing your home generates a large-enough net gain, you could travel more during retirement, purchase vacation property or invest the difference and boost retirement income. Downsizing as retirement arrives could prevent the need to work longer than planned.

However, there’s a strong case for making the family home part of an estate plan. Under the principal residence exemption, the home becomes a large tax-free inheritance for children, and you avoid the complications of a move.

Your happiness matters

Your home may be the place you’re most comfortable, a source of fond family memories, where you feel you belong. That contentment may be more important than any dollar value.

On the other hand, psychological factors could support leaving. Perhaps you chose your home because it was close to work, but now you’ll have peace of mind being close to nature.

A practical choice

Downsizing means less home to maintain. For example, a move to a condo would eliminate mowing the lawn and shoveling snow. Some retirees may not even need a traditional home, such as a couple who enjoys warmer months at their vacation property and spends winters down south.

But reasons of practicality could be why you don’t downsize. You may value your home as the family’s gathering place for holidays, celebrations and visits. Or you might consider the possibility of a child returning temporarily.

If you ever wonder about selling the family home, feel free to contact us. While you consider the practical and psychological factors, we’ll help you assess the financial side of downsizing.

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