When planning retirement, many people consider the pros and cons of ‘downsizing’ their home. This is not only reducing the physical space you inhabit, but should also be reducing your monthly costs. And if you take this step prior to retirement, that’s just more money to put aside in anticipation of the big change!
What happens when I sell that is financially beneficial to me?
Assuming you have been living in your home for some time and have not recently refinanced to take out equity, you probably have equity in your home. Especially now with rising market values.
With the proceeds from the sale of your home in addition to current savings, you could potentially afford a higher down payment on your new, smaller home. This can not only help you compete in making an offer on a property, but will reduce your ongoing costs by reducing your monthly principal and interest payment on your loan. And since we are assuming the purchase price of your new home will be less than the sale of your current home (as well as the property taxes), that’s a double win for reducing your payment!
The bliss of extra cash
So, here are some ideas to get you started with all that extra money in your bank account each month!
- Travel. Save it for a few months and plan a trip. Dust off that passport and go
on a cruise, explore down-under or that dream destination you have always pined after. You have the time, now, too! - Reinvest.* Why not use that and reinvest it into another income producing investment? Depositing it back into your brokerage account may help lengthen the amount of time you can go without regular income from a job by enjoying the leverage of market returns. You could even save for a down payment on income producing property.
- Learn to play guitar. Maybe not, but having a little extra to pursue your passions that either got you here, or those you’ve been putting off. Photography lessons, anyone?
- Spoil the Grandkids. That’s the beauty of being a grandparent, right?
- Give back. Perhaps you always enjoyed your nights at the symphony, or you see how much the children in your community enjoy the local zoo. Not only are there volunteer opportunities here, but many organizations rely on the generosity of donors to keep the doors open. You can help ensure they are still there for the next generation to enjoy, just as you did.
- Start a business. But you just retired, right? Still, now that you have the freedom of time, some money available to start that business plan that fits your passion. Plus, if successful, it could provide additional income going forward.
- Go to school. Maybe not grad school (maybe…), but perhaps that cooking school you’ve been eyeing, or learn to be a sommelier or an art or writing camp. Who knows what’s in the next chapter?
- Get out. Going to work everyday is built-in socializing. Once that is gone, you might need to make an effort to keep up with other people. It’s important to your ongoing health. Go to a weekly coffee club, book club, happy hour, Lions club, etc.
*This is not a substitute for legal or financial advice. Always seek advice from your financial, tax and legal advisers before making any changes that could affect your finances.
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