Downsizing for retirement is a good way to simplify your life and trim expenses. Making some key changes, like moving into a smaller home, could reduce financial strain and improve your quality of life. It could also give you room to grow in new, unexpected ways.
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As you approach retirement, here are some things you’ll be glad you downgraded.
Your Home
There’s a reason retirement experts often suggest downsizing your home or living space in retirement. It’s perhaps one of the most significant ways of lowering costs while simplifying your lifestyle.
“Downsizing to a smaller and newer living space can often translate to less cleaning and maintenance costs in retirement, which can optimize your cash flow in retirement and remove the stress of constantly having to upkeep your home,” said Steve Sexton, retirement planning expert and CEO of Sexton Advisory Group.
Moving into a smaller or energy-efficient space can also cut down on your utility bill. If you were spending a lot of time or money on your outdoor space, downsizing can make things easier here as well.
Before taking the plunge, there are a few things you should do first, though.
“Make sure you consider all potential factors,” Sexton said, “like HOA fees, property tax, homeowners insurance, closing costs, real estate agent fees, interest rates, moving costs, etc., to make sure this makes financial sense for you.”
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Your Work
While you can work full-time until the day you retire, Taylor Kovar, certified financial planner (CFP) and CEO of 11 Financial, suggested cutting back on your work-related commitments and working part-time for a while instead. This is something you can even do after you’ve officially retired if you still want or need some structure or additional funds.
Switching to semi-retirement or switching to part-time work can lead to a better work-life balance and more flexibility in your life. It also can cut down on any work-related stresses you might have had previously while giving you greater financial stability.
Your Investments
If you have multiple investment accounts, retirement could be a good time to combine or streamline some of them.
“I’ve advised clients to simplify their investment portfolios, moving from a diverse array of complex investments to more straightforward, lower-risk options,” said John F. Pace, certified public accountant (CPA) and partner at Pace & Associates CPAs.
Doing this can cut down on account management fees, which is another plus for those trying to cut costs. Plus, it shifts the focus from wealth accrual to wealth management which, depending on your situation, could be a good change.
Your Financial and Legal Affairs
If you’ve been dealing with a relatively complex financial situation over the years, you might want to simplify it before retiring.
“Simplifying financial and legal affairs can greatly alleviate the stress and confusion that often accompanies retirement planning,” said Marty Burbank, an estate planning expert at OC Elder Law.
This includes consolidating any financial accounts you have — in addition to your investment accounts. It also involves creating clear-cut estate plans and ensuring everything is current when it comes to your legal documents.
“This simplification allows for an easier transfer of assets when the time comes and ensures that [your] wishes are respected,” Burbank said.
It also brings about peace of mind for both you and your loved ones.
Clutter
If you’re like most people, you’ve probably accumulated a good deal of clutter over the years. This can include sentimental items as well as other things you no longer need or use.
“While you’ll want to hold on to family heirlooms or things that have sentimental value,” Sexton said, “decluttering your space and selling off items you don’t need — sports/workout equipment, outdated electronics, furniture and clothes that no longer fit — can help you organize your space while making some extra cash on the side.”
If you donate to charitable organizations, you might even qualify for certain tax deductions.
Your Car
“In retirement, most people don’t expect to commute or drive as much,” Sexton said. “If you and your partner are both retired, consider downsizing to a one-car household and save money on gas, insurance, repairs and more.”
Depending on your needs and where you live, you might even be able to get away with not having a personal vehicle at all. You’ll want to check your options as far as public transportation and ridesharing services go. But if it makes sense to get rid of your car altogether, you can save money.
As an added bonus, losing the car encourages a more active, community-engaged lifestyle, according to Pace.
If getting rid of your car entirely isn’t in the cards, consider switching to one with better gas mileage or lower annual costs. You could end up with lower insurance premiums, too, depending on the model.
Your Debts
As a general rule, it’s best to pay off any debts before retiring. Doing so will free up cash in your retirement budget, as well as give you peace of mind once you leave the workforce.
“The most important thing you can downsize prior to retirement is debt,” Sexton said. “In fact, aim to eliminate it completely. Doing so will safeguard your financial freedom in retirement and remove the stress of paying interest in your golden years.”
If you still have a few years left before retirement, get aggressive with paying off your debts. Tackle any high-interest debts — like credit cards — first to avoid draining your account on interest charges. If possible, pay off your remaining mortgage and any other debts as well.
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This article originally appeared on GOBankingRates.com: 7 Things You’ll Be Happy You Downsized in Retirement
