Helping Your Parents Downsize in Retirement

September 15, 2015

Some people can’t wait to downsize their homes in retirement, especially if it means moving to a more pleasant location. It can be an outstanding strategy on so many fronts. But many more people resist downsizing even though it may be highly desirable or even entirely necessary.

If you’d like your parents to downsize, but they’ve been resisting – or you anticipate that they will resist – here are points that may help you to persuade them.

Why They May Not Be OK With Moving

The first point is understanding why your parents may not want to downsize in retirement. By anticipating these in advance, you may be able to work around them.

Here are common objections to downsizing:

  • Habit – “This is where we’ve always lived” – it can be especially difficult for them to uproot after several decades in the same house.
  • Emotion – A house isn’t just another possession, it’s a home; leaving it means letting go of memories, especially if they raised their kids in the house.
  • Fear of change – Some people just don’t do change well.
  • Fear of their own mortality – Moving out of their longtime home is seen as an acknowledgement that they are coming to the end of their lives.
  • They distrust you – If you press the issue too hard, they may assume that you have a selfish motive. Or they may be unconsciously resisting the parent-child role reversal that often takes place between adult children and their aging parents. Tread lightly here!
  • There may be no health reasons necessitating a move – for now.

Identify which objections your parents are likely to raise or have raised in the past, and be ready with a work-round. For example, if fear of their own mortality is the issue, stress the move as a shift to a new beginning in life. Or if they are in good health, emphasize that that’s the best time to make a move, since they can do it on their own terms, rather than being forced into it by a life event.

In addition, be ready to explain the many benefits of downsizing…

Lowering Their Monthly Payment

Living comfortably in retirement is all about getting your budget to fit within a reduced income. Since housing is typically the largest expense, reducing it can be the single best way to create some breathing room in an otherwise tight budget.

This can be especially significant if your parents live in an area that has high property taxes. Going from a home that has an $8,000 annual property tax bill, to one where the taxes are only $2,000, will save them $6,000 per year. That translates to $500 per month, and is practically a small pension.

Also, if your parents still have a mortgage on the home, trading down to a less expensive home could be a way of becoming mortgage-free. For example, if their home is worth $300,000 and they have a $100,000 mortgage on it, selling the property and trading down to a house that’s worth something less than $200,000 could enable them to buy it for cash, and make the old mortgage go away forever.

Freeing Up Capital

If your parents have lived in their home for many years, they may have a lot of equity in the property. If they are light on retirement savings, this can be a way to build up their investment portfolio quickly.

If their home is worth, say $500,000, they can sell it and buy a new one for $200,000 – and put $300,000 into retirement savings. Using the safe withdrawal rate of 4%, that would give them an additional income of $12,000 ($300,000 X 4%), or $1,000 per month. That, plus lower carrying costs on their new home.

Less Space = Less Maintenance and Lower Upkeep Costs

A larger home will naturally cost more to maintain. That includes landscaping, housecleaning, snow removal, as well as anything that needs to be replaced, such as the roof, the furnace, the central air conditioner, or even the driveway.

Some of that cost is also born through time and effort. The larger the home is, the more time that your parents will have to spend maintaining it. That may not be a problem when they’re younger, but as they get older it could become a burden. And if they have to pay people to start taking over those chores, the cost will become financial.

It’s an Excellent Strategy If They Are Financially Unprepared for Retirement

We’ve already discussed the financial benefits that downsizing can bring. But they can become critically important if your parents have little or nothing in the way of retirement savings. If they will be primarily relying on Social Security and some sort of continuing job situation, downsizing could be a move of strategic proportions.

In this case, the lower living costs, as well as the additional investment capital they can get as a result of downsizing, could be the difference between a fairly comfortable retirement, and an old age of perpetual struggle.

It’s Easier When Downsizing Happens Early in Retirement

Most people will have to downsize at some point during their retirement years, particularly if they live well into their 80s. At that point, necessity may step in and force it upon them. But making a move is always easier when it is done in the early years of retirement. At that point, your parents will have more control over the process and how it turns out.

In addition, the financial benefits that come from downsizing can last for the rest of their lives. This may be the most important benefit that you can introduce your parents to in the event that they are reluctant to make a move. If nothing else, downsizing early gives them the ability to settle in to their new lives, which will make the whole process go much smoother.

If your parents don’t want to make a move, introduce them to these benefits one at a time. It may take several years to convince them of the merits of downsizing, so you may want to begin as soon as possible.


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Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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