As more Americans age 50 and older look to move from their long-time homes into smaller abodes, many seniors are finding that downsizing in this current economy might not solve retirement problems, according to an article from the Wall Street Journal.
A number of factors contribute to the unprofitable aspects of downsizing including the state of the housing market, emotional attachment, assumptions of big savings, and simply the idea of relocating into a smaller space.
Citing a study from Boston College’s Center for Retirement Research, Wall Street Journal writes that of the older adults who moved in the 1990s and early 2000s, most plowed through almost all of their home equity for their new homes.
The state of the housing market can also trap those who move and find that they are not happy about their new surroundings, notes WSJ. The fragile market could also create roadblocks for those who are unable to sell their homes in hopes of moving to another, smaller house, many seeing their mortgages exceeding their home’s value.
Since many older homeowners are leaving places they have lived for long periods of time, a certain emotional distress is tied in with downsizing into new homes, WSJ suggests.
For some, emotional attachments keep older homeowners from fully transitioning into smaller houses, finding sentimental value in the possessions they no longer need. Three-quarters of older homeowners said the volume of possessions has made them reluctant to move, according to a report from the University of Michigan’s Health and Retirement Study.
There is a common misconception among retirees that problems end after choosing to downsize into smaller homes, WSJ writes. Many assume that because they are moving into smaller homes, they will significantly reduce expenses, but WSJ notes this only holds true for homeowners moving to places that have lower costs of living.
Even then, the savings could prove modest, warns a CEO from a financial-planning firm in New York.
Going along with the emotional dilemma of downsizing is the thought of moving into a smaller residence, the article mentions. In recent years, new breeds of professionals have aimed to help older homeowners reduce clutter while moving into new homes, suggesting practical solutions to keep possessions that fit homeowners’ current lifestyles.
While the process of downsizing carries considerable emotional and logistical factors, older homeowners must carefully think about the decision to relocate from long-time residences into smaller, more manageable homes.
Written by Jason Oliva