Homeowners

Downsizing Done Right: How a Smaller Home Can Transform Your Life

Downsizing in retirement isn't just about getting a smaller house, it's a chance to upgrade your life. Selling a large, more expensive home and then purchasing or renting a smaller one for less, could free up extra money to boost your savings or fund that around-the-world trip you have always wanted to take.

Moving to a home with less square footage may also result in lower property taxes, cheaper homeowner’s insurance, and less expensive utility bills.

Downsizing could even give you the financial flexibility to delay Social Security, increasing your future benefits. As a bonus, a smaller home may not require as much as maintenance or have as many rooms to clean.

"One client told me, 'I feel like I’m living a different life now that I don’t have a big house to take care of,” said architect Matthew Coates of Coates Design Architects based out of Venice, Calif. "It's a chance to simplify and focus on what truly matters."

Whether you're an empty nester, approaching retirement, or simply craving a more manageable lifestyle, moving to a smaller space may be able to help you to reach your financial goals. clarity.

Here's what downsizing means, how to determine if it is the right choice for you, and what to do to make it happen.

What does downsizing mean in real estate?

Downsizing means moving from a larger home into a smaller one that’s more manageable, often with fewer bedrooms, less land, and less square footage.

This transition is common among empty nesters who raised their children in a spacious house but now find the extra rooms unnecessary.

As priorities shift, so do housing needs. Proximity to schools and large backyards may become less important.

Downsizing can lead to immediate financial advantages.

"Selling a larger home often frees up [home] equity, which can be redirected into retirement accounts or used to create a financial cushion for unexpected expenses," said David Kindness, a certified public accountant in San Diego, Calif.

Downsizing might also offer tax advantages if you sell your home and make a profit. While the first $250,000 in profits for single filers (or $500,000 for married couples) is exempt from capital gains taxes, homeowners in high-value markets should consider how taxes might impact their overall plan.

“Additionally, some states offer tax incentives for retirees who downsize, making the financial benefits even more compelling,” said Kindness.

The lifestyle perks of downsizing

Beyond finances, downsizing may lead to a more fulfilling lifestyle. A smaller home typically requires less upkeep. This could allow homeowners to spend more time on hobbies, travel, or quality time with family. For some, it also means moving closer to loved ones.

"I've seen how moving to a smaller home can streamline people's lives," said Kindness. "Clients often share how they suddenly have more time to focus on what matters instead of managing a large property."

For others, downsizing allows them to align their home with their interests. Golf enthusiasts might move to a community near a course, while beach lovers could relocate closer to the coast.

Downsizing also offers a chance to future-proof housing needs, such as transitioning from a two-story home to a single-level residence for easier mobility. This may allow them to age in place.

When is the right time to downsize?

The decision to downsize is often tied to life changes or financial goals.

For empty nesters, the timing might coincide with children leaving home. Retirees might move to stretch their retirement savings or avoid the more unpleasant tasks of homeownership, such as shoveling snow or mowing a large yard.

Housing market conditions may also play a role. Selling a large home during a seller's market and purchasing a smaller home in a buyer's market can maximize financial benefits.

For some, downsizing is triggered by immediate financial needs, such as high mortgage payments or medical expenses.

"Sellers of larger homes often have strong negotiating power, making it an opportune time to make a move," said Coates.

Making the transition to a smaller home a bit easier

Downsizing may require you to get rid of furniture and other belongings that won’t fit in the new home.

Many experts suggest starting with decluttering, focusing on one room at a time. Sorting items into "keep," "donate," and "discard" categories helps streamline the move.

For sentimental items, taking photos or creating a memory book can preserve emotional connections without keeping physical clutter.

If you’re unsure what will fit in your new space, consider creating a floor plan and mapping out where your furniture and belongings will go. This visual guide helps prioritize what to bring and ensures nothing important gets left behind.

Finally, seek out organizations that pick up donations. Many charities offer free pickup services, which can save time and effort during the move.

“A smaller home means less maintenance and more time for the things you enjoy,” said Coates.