Is it time to downsize?
21 Jan 2019
In the first of a six-part series tackling this most important of topics for retirees, we look at whether or not it’s time to downsize your home.
When Jennie and Jim Keller, both in their 80s, made the decision to downsize from their four-bedroom house in Sydney, they wanted to be free of ongoing garden and pool maintenance.
Within a matter of months they found a three-bedroom apartment that ticked their boxes and now they couldn’t be happier they’ve made the move. “We’re settling in and we’re loving it,” Jennie says.
Having lived in their home for 38 years, they turned to a local downsizing business, Simply Downsize, to help them with the logistics of sorting and rehoming their possessions, finding tradespeople, and removalists.
“It was enormous getting rid of stuff,” says Jennie, adding: “It just made it so smooth and miles easier than we thought it would be.”
If your family has (finally) left home and you’re living in a place that feels too big for your needs, the idea of downsizing might cross your mind more than once. Pip Archer, Simply Downsize owner, says that among her clients, health issues are often behind the decision to downsize. “They have a fall or something happens and they become unwell,” Pip says.
For those who have time to plan, there can be other reasons why downsizing makes sense. Initially, it’s about working out what you’re looking for in the move, Pip says.
“Are you looking to be closer to family? To move near to the ocean? Are you looking to be closer to services and amenities, or for community in a retirement village?”
You may want a home that’s easier to lock up and leave while you travel. There can also be changes in life circumstances that prompt the move. A spouse may have passed away, or there may be a relationship breakdown or a change in your financial situation.
It can also be a way to access the equity in your home to either top up super or fund your desired lifestyle.
From July 1, 2018, Australians aged 65 or more are able to deposit up to $300,000 of the proceeds from selling the family home into superannuation. The home must have been owned for at least 10 years. For a couple who both qualify to contribute, the maximum contribution is $600,000.
While there can be plenty of reasons that can make downsizing seem attractive, there can also be barriers that stop people from making the leap.
Pip says the transaction costs of moving can be a major drawback. Only three Australian states or territories (ACT, Northern Territory and Victoria) offer stamp duty concessions to pensioners. On top of stamp duty, there are the costs of preparing the family house for sale; agent’s and solicitor’s fees; and moving costs.
Another disincentive can be the impact releasing equity can have on the age pension and its associated benefits such as discounts on energy bills and travel concessions.
And of course, apart from the practical aspects, the emotional toll of leaving behind a house where children have been raised means downsizing can stay on the drawing board for years, Pip says.
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