Downsizing Dilemma

[Koolau]

We lived in a walkable urban area for most of the last 30 years. One thing you may not realize if you’ve never done that is you will probably need to be prepared for a significant increase in petty crime and homelessness. You may or may not be a direct victim of crime, but it did get pretty depressing for us when we lived at the beach regularly seeing homeless intoxicated folks passed out on the sidewalks surrounding our building or intoxicated/mentally ill people screaming at the sky. This was not a rare occurrence.

Yes, there was a time when "nice" neighborhoods were also "safe" neighborhoods. In general, I suppose there is still some truth to that, but not as much as in the "good old days." I'll stay away from the reasons as I'm certain it would foster controversy. Let's just say YMMV.

 

[Escapevelocity]

OP, would you consider putting most of your things in storage, renting out your suburban home to a long-term tenant, and renting a smaller place in the walkable urban area you’re wanting? This would give you maximum flexibility. You could experiment with downsizing and see if you’re happier in a smaller place, see if you enjoy the urban neighborhood as much as you think you will, and see what you think about renting vs owning.

If you decide you love your new lifestyle, you can sell your existing home later, but if you miss your large suburban home or your old neighborhood, you can move back in a year or two.

That is what DH and I have done. We actually upsized from a 1,600 sq ft oceanfront condo to a 2,600 sq ft suburban duplex on a golf course in the desert. We leased our beachfront condo out to a long-term tenant. So far we love the desert lifestyle, but we are also glad we still own the beachfront place. Options are good.

We lived in a walkable urban area for most of the last 30 years. One thing you may not realize if you’ve never done that is you will probably need to be prepared for a significant increase in petty crime and homelessness. You may or may not be a direct victim of crime, but it did get pretty depressing for us when we lived at the beach regularly seeing homeless intoxicated folks passed out on the sidewalks surrounding our building or intoxicated/mentally ill people screaming at the sky. This was not a rare occurrence. The suburb we live in now is a 5 minute drive to great restaurants and nightlife, but it feels so much more peaceful. Urban life has its benefits, but also its challenges.

Thanks for these suggestions. Some things to consider for sure. I'm no stranger to cities but I suppose it's different living in one than day tripping.

 

[Escapevelocity]

We went from 3700 sq feet. A year later into 1200 sq feet. Four years later 1500 sq. feet.

It was all good. Took us a while to understand what we really wanted.

I expect that we will need a few years as well to understand what we really want and what we want is likely to evolve over the years as well.

 

[Koolau]

Thanks for these suggestions. Some things to consider for sure. I'm no stranger to cities but I suppose it's different living in one than day tripping.

True. One of the hardest things to get used to when we stopped being tourists and became residents was the homeless situation. We actually have a rather good "official" homeless program within gummint. NGOs offer incredible outreach to the homeless as well. Still, whole tarp and tent cities are everywhere. Every "tweak" of the law eventually causes the homeless to move (sometimes literally just a few feet.) The problem seems intractable and I submit that it is not primarily a financial issue. I'll leave it at that because YMMV.

 

[Yipper]

The stuff you mentioned about walkable versus 15 min drive to everything is the key for us. We want to ditch one of the cars and do the bulk of our daily commerce within walking distance.. also to take advantage of cultural activities like museums in walking distance would be a major plus l.

Are you in the Philly area by chance? HCOL in most of the surrounding suburbs so reducing overhead like property taxes can be a benefit to going from NJ to PA and still staying nearby... also - I believe PA doesn't tax retirement income (401K/IRA).

 

[Escapevelocity]

Are you in the Philly area by chance? HCOL in most of the surrounding suburbs so reducing overhead like property taxes can be a benefit to going from NJ to PA and still staying nearby... also - I believe PA doesn't tax retirement income (401K/IRA).

Yes, we're 15 mins from Philly. We pay 11k property tax on our 430k market valued home. The tax situation in PA is definitely attractive once we're no longer W-2 wage earners. We were thinking maybe Ardmore or possibly even Philly proper (Rittenhouse Square, Art Museum, Manayunk).

 

[Yipper]

Yes, we're 15 mins from Philly. We pay 11k property tax on our 430k market valued home. The tax situation in PA is definitely attractive once we're no longer W-2 wage earners. We were thinking maybe Ardmore or possibly even Philly proper (Rittenhouse Square, Art Museum, Manayunk).

I thought so when I saw "Cherry Hill" in your profile... I'm just up the river from you north of Trenton and am thinking the same possibly as a second "downsize" in a few more years. My daughter is in Philly proper not far from Rittenhouse and it's a fantastic area in the "go go" years. The near suburbs are nice but not cheap these days as I'm sure you know.

 

[Sesq]

How about Delaware? Your property and sales tax go to about zero (not quite).

 

[Scuba]

Yes, we're 15 mins from Philly. We pay 11k property tax on our 430k market valued home. The tax situation in PA is definitely attractive once we're no longer W-2 wage earners. We were thinking maybe Ardmore or possibly even Philly proper (Rittenhouse Square, Art Museum, Manayunk).

I love Manayunk. We used to live just outside of Philly and Manayunk was always a fun day trip.

 

[Scuba]

Thanks for these suggestions. Some things to consider for sure. I'm no stranger to cities but I suppose it's different living in one than day tripping.

Living anywhere is different than vacationing or day tripping. That’s why I think renting in a new location that involves a significant lifestyle change is a good idea. You would likely discover some positive and negative surprises.

 

[Escapevelocity]

How about Delaware? Your property and sales tax go to about zero (not quite).

Most of Delaware is pretty rural other than Wilmington which is not my cup of tea

 

[Retired Expat]

SFH = single family home?

Our goal is to move to a walkable town or city which means high density housing like apartment, condo, or townhome.

You can’t really predict how your expenses will change. Less driving, less auto expense? Walking to the market makes me buy less than when I can unload a grocery cart full of stuff. Smaller place with no real maintenance costs. Surely you spent $ on the mower, seed, fertilizer, ice melt etc etc. Conversely you may go out to eat much more, movies and such (when that really comes back). But you may travel more since you don’t have a backyard. I found that most everything changed in retirement from clothing costs, food, utilities etc and my projections were about only 60% accurate

So just allow yourself to be flexible

 

[Escapevelocity]

You can’t really predict how your expenses will change. Less driving, less auto expense? Walking to the market makes me buy less than when I can unload a grocery cart full of stuff. Smaller place with no real maintenance costs. Surely you spent $ on the mower, seed, fertilizer, ice melt etc etc. Conversely you may go out to eat much more, movies and such (when that really comes back). But you may travel more since you don’t have a backyard. I found that most everything changed in retirement from clothing costs, food, utilities etc and my projections were about only 60% accurate

So just allow yourself to be flexible

Thanks for this. You've tapped into my #1 stressor when it comes to entering retirement. I really worry how little we know about our future spending. Of course, a lot of this is discretionary stuff, but I don't want to feel like a miser all the time.

 

[marion10]

We downsized- but as others have said- it was not cheaper ( at least at first)- we had an older 3 bedroom, 1 1/2 bath in a suburb of a major city. It had a good school system, but we worked in the city and the commute was killing us. We had talked about living in the city- so once both kids had graduated college ( but we still had our son and small dog), we rented ( from a private owner) a condo in the city. Dog died four months in, our son moved out about 8 months later. Cut our commute to 10 minutes. We rented out our house- what if we did not like condo living? We were in the condo four years- sold our house after 3 to avoid capital gains. Prior to moving out of the house, we had a big estate sale and still ended up donating things. Rented a small storage locker for some stuff.

We adapted very well to condo living and views were great. But we missed the sense of community we had where we formerly lived- so we went back to the same general area but our new condo was slightly more expensive than the proceeds of the house , so we took out a mortgage ( since paid off). We are in a walkable area in an elevator building and garage parking and washer/ dryer in unit. 1500 square feet - 2 bathrooms, 2 bedrooms and a den. I do not think we could be comfortable in anything much smaller. Especially since we spent so much time in our unit because of COVID.

 

[Teacher Terry]

We downsized from 2000 sq ft with a fourth acre in the burbs to a 1400 sq ft ranch on a city lot close to everything. It was big enough for 2 people. Then we divorced and I moved into a 855 sq ft 2 bedroom condo in a neighborhood I love close to everything. I considered downtown but the homeless situation is depressing. My son has been here for the past 4 months and will probably stay until the first of the year and we are not cramped. We both are very neat so that probably helps.

 

[PandaBear]

I'm 54, married with 3 kids (age 20, 21, 25) and will be retiring in 6 months.



We currently live in a medium cost of living suburb of Philly in South Jersey. The suburb requires driving to everything although it is convenient/close to most things once in the car. We own our 4BR split level home outright currently valued around $430k. Annual property tax is $11.5k, homeowners is $1.2k and utilities around $4k for a total cash outlay of around $17k or $1400 per month. We do our own yard work and cleaning and basic upkeep. No major renovations needed or planned in the next few years.



We'd like to sell the house in about two years once the 20 and 21 year old are finished college and hopefully have jobs and out of the house (crossing fingers). Our preference is to stay reasonably close (within an hour or so) of our current area while in-laws are still alive since they might require our help. We'd like to rent and ideally to be in a walkable town. We're thinking 2 BR and 1.5 or 2 BA.



The problem is that anything appealing based on our wish list is in the range of $3k per month give or take. We want something fairly modern and attractive. This is more than 2X our current cash outlay to stay in our current house. I thought downsizing was supposed to free up cash not drain it!



I suppose if the money from the house is invested at our 60/40 allocation it would earn a return approx the cost delta. We could buy a condo or townhouse instead of renting, but the purchase price will be close or maybe more than our current house is worth and then we need to pay a maintenance cost or HOA fee! Any advice?

I can’t comment on the money aspect….I think others have covered it well. I have three kids (currently 29, almost 27 and 24). We have had one child or another living with us over the past few years, following their college graduations (not what we necessarily expected).

Of course, YMMV……but I wouldn’t rule out you may have a child come back home. Would you be okay with that with 2 bedrooms?

 

[Escapevelocity]

I can’t comment on the money aspect….I think others have covered it well. I have three kids (currently 29, almost 27 and 24). We have had one child or another living with us over the past few years, following their college graduations (not what we necessarily expected).

Of course, YMMV……but I wouldn’t rule out you may have a child come back home. Would you be okay with that with 2 bedrooms?

Yeah, this whole plan is contingent on them actually getting jobs and moving out so it's not etched in stone. Have yours all flown the coop now?

 

[Retired Expat]

Thanks for this. You've tapped into my #1 stressor when it comes to entering retirement. I really worry how little we know about our future spending. Of course, a lot of this is discretionary stuff, but I don't want to feel like a miser all the time.

But if it is any consolation, for us at least, our expenses are far lower than our prior costs and even lower than our projections. Between the lower spending and the market run up, we have adjusted our spending budgets to allow for more but never seem to meet them. Too set in our own “miserly” or perhaps frugal ways.

You may find that the extra time available in retirement opens up opportunities to save money you didn’t expect. We figured out how to cut the cord on cable and phone. That was worth more than $1500, learned to make some of the things we love to eat at home, for another close to $3000 savings things like baked or smoked salmon, corned beef and pastrami, virtually never go to the dry cleaner anymore. Have the time to fix things ourselves instead of calling “the guy”. Wife renewed her youthful interest in sewing and now did all the curtains, pillows and bed spreads in the house. Saving in many unexpected ways!

 

[DCdave]

Yes, there was a time when "nice" neighborhoods were also "safe" neighborhoods. In general, I suppose there is still some truth to that, but not as much as in the "good old days." I'll stay away from the reasons as I'm certain it would foster controversy. Let's just say YMMV.

The “good old days” , which I lived through, are a bit romanticized as the current crime rates (on a per capita basis) for murder, robbery, rape, etc are quite a bit lower than the late 60’s, early 80’s etc.

 

[JJpop]

I'm 54, married with 3 kids (age 20, 21, 25) and will be retiring in 6 months.

We currently live in a medium cost of living suburb of Philly in South Jersey. The suburb requires driving to everything although it is convenient/close to most things once in the car. We own our 4BR split level home outright currently valued around $430k. Annual property tax is $11.5k, homeowners is $1.2k and utilities around $4k for a total cash outlay of around $17k or $1400 per month. We do our own yard work and cleaning and basic upkeep. No major renovations needed or planned in the next few years.

We'd like to sell the house in about two years once the 20 and 21 year old are finished college and hopefully have jobs and out of the house (crossing fingers). Our preference is to stay reasonably close (within an hour or so) of our current area while in-laws are still alive since they might require our help. We'd like to rent and ideally to be in a walkable town. We're thinking 2 BR and 1.5 or 2 BA.

The problem is that anything appealing based on our wish list is in the range of $3k per month give or take. We want something fairly modern and attractive. This is more than 2X our current cash outlay to stay in our current house. I thought downsizing was supposed to free up cash not drain it!

I suppose if the money from the house is invested at our 60/40 allocation it would earn a return approx the cost delta. We could buy a condo or townhouse instead of renting, but the purchase price will be close or maybe more than our current house is worth and then we need to pay a maintenance cost or HOA fee! Any advice?

I believe downsizing is mostly equated with selling a large expensive home for say 800,000 and buying a smaller home in a less expensive area for say 300,000.

You are really just making a choice that is a more expensive type of lifestyle.
Downsizing does not really mean just moving into a smaller place, which seems to be how you are addressing it.

 

[Scuba]

But if it is any consolation, for us at least, our expenses are far lower than our prior costs and even lower than our projections. Between the lower spending and the market run up, we have adjusted our spending budgets to allow for more but never seem to meet them. Too set in our own “miserly” or perhaps frugal ways.



You may find that the extra time available in retirement opens up opportunities to save money you didn’t expect. We figured out how to cut the cord on cable and phone. That was worth more than $1500, learned to make some of the things we love to eat at home, for another close to $3000 savings things like baked or smoked salmon, corned beef and pastrami, virtually never go to the dry cleaner anymore. Have the time to fix things ourselves instead of calling “the guy”. Wife renewed her youthful interest in sewing and now did all the curtains, pillows and bed spreads in the house. Saving in many unexpected ways!

We actually spend more in retirement, but we expected to. No longer have employer provided health insurance, a huge additional cost. We travel for much longer periods of time, and while the cost per night is lower, the total cost of vacations is much higher. We also spend more entertaining ourselves, at least we did pre-COVID. None of this is a surprise to us, except our health insurance cost inflation has been higher than we expected. Market appreciation has fortunately far surpassed excess spending, even covered a massive remodel done on a home purchase we weren’t planning.

 

[Amethyst]

That's an interesting point of view. I always thought downsizing referred to "size," period. People might downsize their living quarters in the hope of saving money, or simply because they don't want to rattle around inside a big place where they only use half of it. If I moved from a $1M house with 4,000 square feet, to a $1M beach view condo with 1250 square feet, I'd still have to get rid of lots of stuff and would surely feel I'd "downsized."

I believe downsizing is mostly equated with selling a large expensive home for say 800,000 and buying a smaller home in a less expensive area for say 300,000.

You are really just making a choice that is a more expensive type of lifestyle.
Downsizing does not really mean just moving into a smaller place, which seems to be how you are addressing it.

 

[Romer]

Is there a balance between the Home with driving vs being in the mix of things?

I live in Colorado and I know it is different here. There are a lot of pockets of entertainment/restaurants in the action spots in the middle of residential areas here. Some of them are close to light rail/train where you could be downtown in minutes without having to drive.

Just a thought. I often find when I am debating a problem I think is binary that the best solution turns out to be a balanced approach

Everyone is different, I could never be happy in an apartment. There is no place for my toys/hobbies I know for others renting an apartment may be the best solution

 

[youbet]

430 x 4% rule = $17,200/yr = $1,433/mo

3000 - 1433 = $1567/mo

1567 - 1400 = $167/mo

Apartment costs roughly $167/mo more than the house.

It's a lot more complicated than that latexman. If you want to use the 4% rule, you assume the money is gone in 30 years. With the house, properly maintained, it's still there to sell. But then you have to factor in maintenance costs over that long time period. And on and on and on. The rent vs. buy question can become very complicated and dependent on circumstances.

 

[JJpop]

That's an interesting point of view. I always thought downsizing referred to "size," period. People might downsize their living quarters in the hope of saving money, or simply because they don't want to rattle around inside a big place where they only use half of it. If I moved from a $1M house with 4,000 square feet, to a $1M beach view condo with 1250 square feet, I'd still have to get rid of lots of stuff and would surely feel I'd "downsized."

Well, as I said “I believe” most people……
I have always thought less expensive was a part of the equation but different people, different views. I understand your point and technically you are correct.
The OP was complaining about the cost so it played into my way of thinking.