Should I consider downsizing over 65? By the point you reach retirement, you will likely have significant equity in your home. Selling that home is one excellent way to free up money for retirement, to buy a smaller home or to invest in shares or your super.
There are a number of factors that you need to consider before you downsize – practically speaking, emotionally speaking, as well as financially. How it will impact your social security, whether there are alternatives available, and what will you do when you’re downsizing over 65.
The proceeds of your home sale are exempt from the assets test for a period of 12 months. That is, provided you plan to use that money to purchase a new home. Those proceeds will still fall into the income test, though.
A Case Study in downsizing over 65
Jen is divorced and at the age of 66 decides that it’s time to sell her home. Her kids have left the nest and she’s left rattling around a home that is far too large. The home value is placed at $750,000 and she plans to invest half of that in a new home and invest the rest. She visits an expert to determine how it will impact her pension and finds out that the half she plans to invest will count to her asset test. For Jen, it’s still better to downsize, even if it does impact her pension.
That is only for you to decide, of course, but generally, the only people who need to concern themselves with the asset test are those that are heavily reliant on a pension to live.
Downsizing Or An Alternative
There are alternatives if you aren’t quite ready to downsize. It’s stressful and emotionally difficult to sell off your home where you raised your family and spent decades. So, you can live in half of your home and rent out the other half (or even sell it). You can rent out a room or two. This, though, will also impact your pension.
Additionally, you could make improvements to your home to prepare it for old age if you plan to stay. This will allow you to maintain independence.
Once you have sold your home, you can invest elsewhere to produce income. If you aren’t experienced in this area, it’s wise to seek financial advice.
Of course, now there is the government incentive that allows you to make contributions to your superannuation fund. This is provided your home is your primary residence and has been for at least a decade. It’s certainly a benefit to anyone considering downsizing over 65.
So, there’s a lot to think about as to whether you should downsize before or after 65. There is no right or wrong answer to when you downsize. Ultimately, it’s up to you to determine when the circumstances are right for you. The biggest reason many people choose to downsize is to enjoy a more comfortable lifestyle. Instead of maintaining a large garden at the weekend, you could be exploring the city and enjoying leisurely meals with friends. Your entire life has been consumed by work, it’s time to relax and enjoy the fruits of your labour.
Read more Downsizing Tips and News at Downsize Now
Add Comment