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Downsizing calculator
Old 01-29-2014, 06:05 AM   #1
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Downsizing calculator

This WSJ article discusses the financial and non-financial benefits of downsizing a single-family home.

When Should Retirees Downsize Homes? - WSJ.com

Quote:
Downsizing can have a big impact on a retiree's financial plan. Even with a mortgage that has been paid off, housing often accounts for 30% of retirement expenses, says Mr. Sass at Boston College.

Mr. Sass does the math for a move from a house worth $250,000 to one costing $150,000. Factoring out the expenses of moving—roughly 10% of the selling price—that leaves $75,000 from the purchase of the new residence that can be added to a retiree's savings.

That $75,000, he figures, could enable a retiree to withdraw an extra $3,250 from savings every year. On top of that, the retiree would have savings from lower expenses on the house, which he says could easily be an additional $3,000 a year. "That's $6,250 a year in extra income," Mr. Sass says...

Mr. Schwartz says people often fail to appreciate how the aging process makes it harder to move. As just about anyone who has moved knows, the process is physically and mentally exhausting, even at a young age. It's that much more daunting for older adults.
The story includes a link to a Boston College web site with a calculator that appears to do a good job of using a dozen user-provided numbers to calculate the financial benefits of a move to a smaller house or a rental.

Figure Out How Moving Changes Your Finances | SquaredAway
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Old 01-29-2014, 07:35 AM   #2
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I agree and we've downsized to a condo. Not only do you save on house expenses you save on lawn care, exterior maintenance, snow removal etc. Much, much cheaper than a comparable size home although you do have to pay monthly condo fees. And, it is a big job to move......and expensive.....sometimes new drapes, carpeting, updating a kitchen or bathroom......worst time to move into a new home or condo is when it's about 15 years old.....just about everything is ready for updating or replacement. We've learned the hard way.
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Old 01-29-2014, 08:19 AM   #3
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If only it were possible to get a smaller place that's as private and nice as bigger places.

Everywhere we've looked on the east coast, "downsize" = "downscale," unless you're talking about expensive condos, and we want a house.

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Old 01-29-2014, 08:25 AM   #4
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Quote:
Originally Posted by Amethyst View Post
If only it were possible to get a smaller place that's as private and nice as bigger places.

Everywhere we've looked on the east coast, "downsize" = "downscale," unless you're talking about expensive condos, and we want a house.

Amethyst
DW and I downsized two years ago if you can call it downsizing. We are now only in a 2,500 sq ft house with a 1/4 acre lot. I wanted a condo but we all know who wins those discussions. My final argument was that this house will probably cause us to move to the "independent living facility" 5 to 10 years sooner than if we had a condo. When we're in our 70's I don't think any other move would be practical. I can't see us being able to keep up this place by that age. We'd last much longer in a smaller condo.
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Old 01-29-2014, 08:30 AM   #5
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Sharing walls and dealing with condo associations would put us in the nuthouse - it already is doing that, just with rental property. And from what I've heard and seen of "assisted living" places, we would probably get kicked out. You have to behave a certain way to fit in, in those places.

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Old 01-29-2014, 08:35 AM   #6
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Quote:
Originally Posted by Amethyst View Post
If only it were possible to get a smaller place that's as private and nice as bigger places.

Everywhere we've looked on the east coast, "downsize" = "downscale," unless you're talking about expensive condos, and we want a house.

Amethyst
Yep, certainly many of the "nicer", newer neighborhoods are filled with McMansions...
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Old 01-29-2014, 08:55 AM   #7
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Originally Posted by Amethyst View Post
If only it were possible to get a smaller place that's as private and nice as bigger places.

Everywhere we've looked on the east coast, "downsize" = "downscale," unless you're talking about expensive condos, and we want a house.

Amethyst
I agree with this wholeheartedly. When we built a house in the eighties we had bought a lot with a nice view. DW was in real estate and insisted that we needed at least 2500 SF for the comparables. I wanted to go smaller, but high quality, 6" stud walls for insulation, and so on. Ended up with the quality and the higher SF, but job changes forced a move and we never recouped the added expense for the quality when we sold.

So the lesson I took from that is that if you want quality in a single family home (which until we're much less able) you simply have to go larger. So even though we have about 2500 SF, much of it wasted, if we were to go smaller we'd be in a less desirable area. Furthermore, the quality of the home wouldn't be what this is. Would the cost to maintain be less? Maybe but I don't think significant. H&A per SF would maybe be slightly better depending on when built and what energy standards. Taxes if you stay in same area are ad valorem, and we are at about $4k a year now. We do have significant homeowners dues (about $800 a year) but we are at the lower end of our development; the fees are not ad valorem.

The only way to make a dent in our housing is to go condo, IMO. That means fees that likely similar to current HO fees. Taxes, utilities, and capital would likel be less. But, I spent a career in dealing with people in public service and have no desire to place myself in a condo association until I have to. Neighbors think I'm ideal for the HO association structure -- not on a bet. I want my privacy, and to deal with as few people as possible. The majority of people you have to deal with in public service or HO associations are not fun! Of course YMMV!
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Old 01-29-2014, 09:02 AM   #8
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I do think his assumption that "downsizing = cheaper" is questionable.

Like others are saying, if I were go to something where I'd be sharing walls, I'd be looking for something pretty upscale to hopefully avoid/reduce noise issues. We'd probably want to be closer to transportation and other things that mean higher price. I'd want a garage for one car.

From what I've seen, none of that is cheap. While we will certainly downsize in square feet in the not-so-distant future, I'm not counting on reduced costs. I've been toying with the idea of taking a luxury apartment in the heart of the city for a year, just for the experience, and to take the time to figure out if we want to do that longer term at a lower cost level somewhere in the city, or move to a lower COL area and forego some cultural opportunities.

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Old 01-29-2014, 09:29 AM   #9
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We recently downsized from a 3 Bed / 3 Bath 3000 sq ft two story home with an in ground pool on .5 acres to a 2 Bed / 2 Bath 1500 sq ft single story home on a 78 x 100 lot (0.2 acres) that backs up to green space in a 55+ community. Both houses are 30 years old, but the smaller home has an updated kitchen. Both houses need new bathroom fixtures. Both houses had new flooring (wood in the big house, porcelain tile in the new house).

The cost savings are considerable and the home feels more private than the prior one as it sits at the end of a cul-de-sac and lacks the "kid noise" of our prior neighborhood. Both houses were "city" homes in / around Clearwater Fl, so private is in the eye of the beholder. Property taxes are down $1500, homeowners insurance is down $1500, electric is down $1500. I'm also calculating an annual save on maintenance expenses of $2k (assuming 1.5% of home value). Those savings equate to $200k of portfolio value not needed at my 3.25% WR.

The one level makes it more appropriate for us as we age. The prior owners were in their 80s when they sold. Eventually we'll need someone to mow the lawn and clean the house which will be funded by reductions in our travel budget as we age.

I did love my big house but it turns out I love this one more ! Downsizing was fantastic, although a bit traumatic as I cleared out 12 years of junk. I now have unused closet and storage space which I have vowed not to fill back up ! My new mantra is "one in, one out !". Its only been 5 months but so far, so good.
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Old 01-29-2014, 09:32 AM   #10
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It seems that we are not the only couple who do not agree on downsizing.
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Old 01-29-2014, 10:24 AM   #11
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We are decluttering and fixing up the house to sell. We are eager to live in a lock and go rental apartment, then travel and search for a longer term place to live. It has been exciting to realize we could live some place like Spain or a tropical island in the Caribbean in a nice two bedroom condo and lower our annual expenses.

We want condo grounds someone else takes care of and a nice public beach to use for outside fun instead of a lawn to mow and leaves to rake. I would like to get our expenses low enough so that they are covered by our part time, small business income alone, and downsizing and moving to a lower cost of living area will help with that.
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Old 01-29-2014, 11:02 AM   #12
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We know we want to downsize, and we think we want an urban setting which would probably mean a condo or the like. But we plan to rent for 6-12 months to see if we really want to trade walkability and lower maintenance/utility cost FOR more noise/congestion, less outside space and/or less privacy. Urban costs, higher property taxes mostly, may stop us altogether though...no rush for now.
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Old 01-29-2014, 12:27 PM   #13
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Originally Posted by Amethyst View Post
If only it were possible to get a smaller place that's as private and nice as bigger places.

Everywhere we've looked on the east coast, "downsize" = "downscale," unless you're talking about expensive condos, and we want a house.
I think we live not too far from 2B. Our old house (in a different county in the same metropolitan area) was 4500 SF with a guest house and 2 detached garages on 2 1/2 acres.

The downsized house is about 2800 SF with attached garage on 1 acre. It is absolutely as nice as our old house. The neighborhood we live in is just as nice - actually more beautiful. We are in a different county now and it is a little farther from the big city so the land is not as expensive. But, bottom line, moving here and downsizing here saves us about $30k a year. I like it much better because it much easier to maintain a 2800 SF house than a 4500 SF house.

I could see a time that even this house would be too difficult to maintain but I'll worry about that then.
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