Here are four things to consider before downsizing your home in retirement

One of the most common reasons for selling a large home and buying a smaller one is to access money, Bhagwat says. Some homeowners may wish to use the money to travel, try new hobbies and interests or help fund retirement. Others may be looking for ways to support their children’s education or help them buy a house of their own. But many homeowners overestimate how much money they can make on a downsizing move. This can be especially true in areas like southern Ontario and British Columbia’s Lower Mainland where prices are historically high, no matter how small the property.

Depending on where you are starting from, some less populous locations still have affordable prices, however. Even if it’s a long-distance move for you, you may find less expensive housing in markets like Edmonton, Winnipeg and Saint John, New Brunswick that may leave you with more cash in hand, post-sale.

The upshot: If you want to pull the most money out of a home sale, you may need to buy a much smaller property or move farther away than you think — possibly outside of your own province. And that could complicate your plan.

These days, many adult children are returning home because of the high price of housing. As well, many homeowners are now part of what is known as the sandwich generation, because they are responsible for their own children's care, as well as that of their ageing parents.

“Sometimes life comes full circle,” says Bhagwat, who also plans to have his parents move in with him when they eventually need support.

If you find yourself in this situation, putting off downsizing for longer could be ideal if you are considering overall family needs. You may even consider a renovation to make more space if various generations are inhabiting the homestead.

The upshot: Family needs change as everyone ages. Make sure you talk to your whole family — kids, parents, anyone you're responsible for — about what you expect in the future and what they expect. A Financial Planner can help you navigate these conversations and think through big decisions. Bhagwat underlines the need to prioritize your own long-term wealth and well-being: You’ll need to plan for your own lifestyle needs even if that means prioritizing yourself sometimes.

The housing market being what it is, you may be thinking about helping your children finance their new homes, and you might consider selling your own home to do it. This could take the form of an early inheritance for your children: Bhagwat notes that everyone involved should carefully consider the different methods of transferring over large sums of money for the purpose of home-buying. This might include looking at a Deed of Gift or loan which could then be directed to an adult child’s First Home Savings Account (FHSA).

An unpredictable factor that may upset careful planning can be the arrival of grandchildren, which may override other priorities. You may be offering financial help to new parents but also your time: With the high cost of childcare, some new parents may hope that grandparents can become babysitters, a trend Bhagwat has noticed with many of his clients. If you desire to be near a grandchild regardless of the cost, you may have less control on where you move to and that may crush ambitions of gaining a large profit from a downsize move. Splitting your time between locales to see family members can also be an option and come with different housing costs.

The upshot: Bhagwat says you need to build flexibility into any plan. If you have your mind set on an idyllic retirement of travel and sunsets, a planner could help you make decisions today that leave room for other goals.

Maintaining your home can take a toll on your body, and if you’re no longer working — or working less — you may want to spend your well-deserved free time on leisure activities rather than house cleaning, lawn care and shovelling snow. If that’s the case, a move might make sense.

If you treasure independence, a smaller home or condo might be the best option. But if you’d rather have more help — meals cooked for you, for instance, and laundry taken care of — you could pay for various maintenance services or even settle in a retirement community. While he knows some people feel wary of institutional residences, particularly since the COVID-19 pandemic, Bhagwat cautions clients against assuming they can age in place forever.

It’s crucial to develop an affordable long-term plan that takes into consideration all the obstacles you’ll face as you grow older, he says. If you don’t, you may find yourself forced into a move: He recalls one client who experienced a health crisis in his 90s and had to sell his home suddenly. “He had to take the first offer that came in,” Bhagwat says. “He didn’t have time to wait for the best one.”

The upshot: Don’t be a victim of short-term thinking. Make a long-term plan — ideally with a Financial Planner — that factor in costs, lifestyle and the possibility of changing priorities as you age. 

Ah, the joys of country living. No rush hour traffic to battle, no struggle to get restaurant reservations. But have you wondered whether that quaint village you’re moving to offers 24/7 emergency health care? Bhagwat cites the experience of clients who traded their downtown Toronto lifestyle for a quiet, bucolic existence, only to discover one stressful night that there were no doctors on call. “You’re not always thinking about things like health care when you think about downsizing,” he says. “But it can be important, too.”

Others find the social and entertainment options of rural life challenging — like colleagues of Bhagwat’s who moved to a small town during the COVID-19 pandemic and have since moved back to Toronto. “You need to make sure the lifestyle is right for you,” he says. Still, for those who do enjoy country environments, a move away from the city can mark the start of a new, more relaxing phase of life — and less keeping up with the Joneses.

The upshot: Consider trying out life in the smaller community you’re eyeing, before you buy a property there. Renting for a month or two could help you make a more informed decision.

Bhagwat says there are numerous and often conflicting reasons for making or delaying a downsizing move. But he says it can be important to remain in control of what you want and where you go. Family, finances and changing circumstances can push you in one direction or another, but he says making the decision you want (once you’ve gathered all the information needed) can be supremely beneficial to your self-confidence and happiness as you transition to the next stage of your life.

“Talking to a Financial Planner to get all the key information you need can help you make an informed decision,” says Bhagwat.

Sources:

1. Canadian Housing Insight, “What do we know about elderly people’s behaviour on the Canadian real estate market?,” Mar. 26, 2024.

2. National Institute on Ageing, “Enabling the future provision of long-term care in Canada”, Mar. 2024.