If you’re on track to owning a home mortgage-free by the time you retire, you may be considering selling it and ‘downsizing’ your life to fund your retirement lifestyle.

But while moving into a smaller place can make a lot of sense, banking your retirement exclusively on it is a bit like putting all your eggs in the same retirement basket. So, here are some pros and cons to think about, according to our SHARE advisers.

You can free up money… but how much?

If you have most of your savings tied up in your home, downsizing offers you the opportunity to release your capital. You can then reinvest part of this money, use it to fund some big-ticket items, or simply have an extra cash flow to cover your everyday expenses.

Having said that, the potential drawback of ‘downsizing for money’ is that you may not get as much money as you expect. Diversifying your investment may allow you to take advantage of different opportunities as they come up, and lower your exposure to risk.

There are savings but also costs to factor in

By selling and buying a smaller home, you may have less maintenance, along with lower bills, all of which can add up to significant savings over time.

On the other hand, there may be extra costs to take into account. For example, your existing furnishings may be too big for your new home, and you’ll need to buy new ones. Plus, consider other expenses involved with the move – like urgent repairs, higher council rates, lawyer’s fees, building inspection fees and so on.

It can be a big lifestyle change

Many people underestimate the emotional impact of leaving their own family home to move elsewhere, perhaps in a completely different suburb or region. The reality is, there is a certain comfort level obtained by staying with what is familiar. And especially if you’ve been in the same place for a long time, you may need to go through an adjustment period before you fully enjoy the benefits of living smaller.

So, what if you realise that you don’t want to leave your home – but you have to? To avoid this scenario, it’s all the more important to plan for different sources of income in retirement well ahead of time. Ideally, if you have other investments in place (e.g., shares, KiwiSaver), you might not have to downsize if you don’t feel like it.

We can help you understand your options

Would you like to explore your retirement planning options? Get in touch. Our SHARE advisers can help you take a closer look at where you’re at, and put together a strategy to get you where you’d like to be.

Like to talk about it? Click here to find a SHARE adviser near you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.