top of page
  • Writer's pictureBill Savellis

Downsizing your Home for Retirement

Elderly couple with packing boxes

Thinking of downsizing your home for retirement? This is a common scenario, and all part and parcel of organising what your golden years are going to look like.

Downsizing at some stage is often part of the retirement journey, but it can be a daunting decision to make.

While it may seem appealing to jump right into selling your home, it's good to examine your individual circumstances to determine if this is the right choice for you.

Selling your family home can bring a range of emotions, but it's also important to think about pros and cons.

Some of the benefits include reducing your mortgage payments, freeing up equity to invest elsewhere, and lowering your overall cost of living.

However there may also be implications for your tax payable, pension, and other benefits.

By working with a financial adviser, you can determine if downsizing is indeed the right decision for you, and how it can impact your future.

What are the costs and what do I need?

Knowing how much money you'll need is an important part of the retirement planning process, with knock-on implications such as considering what kind of home suits your lifestyle, level of independence, and overall budget.

Whether it's a downsized house, an apartment, or one of the almost two and a half thousand retirement villages across Australia, you need to consider the features and amenities that match your needs and preferences.

It's essential to recognise that selling your home can also come with various costs, such as real estate agent and legal fees, as well as stamp duty.

Why consider downsizing your home for retirement?

If the idea of downsizing is something you're considering, it's a good idea to look at what you enjoy about your current space, and whether or not you could live with less room.

Reasons for downsizing vary widely, but some of the more common ones include wanting to cut back on the amount of cleaning and maintenance required in the house and yard.

Downsizing can also offer the financial freedom needed during retirement, as well as the opportunity to live in a location closer to family, transportation and services - or maybe even make that long dreamt of "sea change" or "tree change".

While downsizing may mean less space for visitors and cherished belongings, it can also provide the chance for a simpler, more manageable lifestyle.

What are the alternatives to downsizing my home?

As retirement planning becomes more of a priority for many, downsizing your home might not be the best solution for everyone. Fortunately, there are other ways to maximise the usability of your property.

One option is to rent out a portion of your home to supplement your income and help you pay off any outstanding mortgage or other loans. For those who need more space and additional income, dual occupancy could be an attractive choice.

And for those who want to access their home equity without having to downsize, there’s equity release, also known as a "reverse mortgage". This type of loan can provide you with regular payments or a lump sum against the value of your property.

All of these alternatives can help you achieve a comfortable retirement without sacrificing your property or financial security.

How will this impact my pension or government benefits?

Downsizing your home for retirement doesn't just mean a move to a smaller home. It can also have a significant impact on your Age Pension or the other government benefits that you may be entitled to. The assets test and income test are the two key factors that decide your eligibility and the amount of benefit you receive. Careful consideration must be taken before making any decision that may reduce your entitlement to these benefits.

While your residence is not included in the assets test, selling your home to buy, build or renovate another one can still affect your eligibility. Luckily, you can be exempted from paying taxes on the earnings for up to 12 months.

There could also be tax implications. As you can see, part of the retirement planning process is to do your research and talk to a financial adviser BEFORE making any life-changing decisions, to ensure you have a clear understanding of the benefits system.

What is the next step after downsizing?

Downsizing can be a great way to free up capital, but it can also lead to uncertainty about what to do next. Renting for a while can be a good option, as it allows you to explore a new area and see if it suits your lifestyle.

For those thinking about retirement planning and investing their newly freed-up capital, there are plenty of options available.

Additionally, seniors may be eligible for the Commonwealth Home Support Programme, which can assist with daily tasks and support independent living.

Ultimately, evaluating your own individual circumstances to decide what to do next after downsizing - and having a solid financial plan in place - is what matters. If unsure, don't be afraid to seek advice from experts.

Finding independent financial advice

Planning for retirement can seem overwhelming, especially when you consider all the different factors that come into play. That’s why our team of financial experts is here to help make sense of it all. We’ll take the time to understand your unique circumstances and help you create a tailored plan that works for you. With our independent advice, you can be confident that your future is in good hands. So why wait? Get in touch with us today and start taking control of your retirement planning.

Headshot of Bill Savellis

Bill Savellis

Senior Financial Adviser

Having navigated the Aged Care landscape for both of his parents, Bill understands how challenging it can be to make the right decisions for your future care needs. That's why he believes that everyone should have access to financial advice during this time. Bill has been a Financial Adviser for over 22 years, and is passionate about helping others access the financial advice they need. Drawing from his own experience in the financial sector, Bill develops strategic, personalised plans to support transitions to Aged Care or Home Care.


Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 30 May 2023. Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.


Commenting has been turned off.
bottom of page