Great article from USA Today, by Adam Shell
Sharon Greenthal always dreamed of living in a cottage by the sea.
So when the freelance writer and blogger became an empty nester after her two kids left home following college, she turned that dream into real life: She replaced a 2,400 square-foot home in suburban Rossmoor, California, with a cozy, 1,500-square-foot cottage in Long Beach.
The move a few years back was more about lifestyle than a desire to downsize. But Greenthal admits that she and her husband, Peter, 58, an aerospace consultant, have cut their expenses by roughly $1,000 a month.
“We’re about a block away from the beach,” Sharon, 57, says. “We love it. We can walk to restaurants, shops and the beach. That was our main reason for downsizing. We have not looked back.”
The move to a smaller home is a lifestyle and financial change all parents should weigh after their offspring are off on their own, personal finance pros say.
One of the first things freshly minted empty nesters should do is “revisit their housing situation,” says Dana Anspach, founder and CEO of Sensible Money, an investment advisory firm in Scottsdale, Arizona.
While parents often have fond memories of their kids’ childhood home, she says, it makes sense to consider a move to less-expensive digs or to a locale or living situation that better fits their needs in the new phase of their lives.
Empty nesters have a number of questions that require answers.
“Do the calculus: Do we still need a house this size?” Anspach says. “Is this the area where we want to spend retirement? Do we want to move to a retirement community? Do we want to downsize and use the extra cash to fund retirement?”
There are, of course, savings to be gained by trading in a big home for a smaller space. Or moving to a less expensive part of the country. Another route: freeing up cash or replenishing your savings by paying off your mortgage before you officially retire from the workplace.
Nearly one in five (17 percent) of soon-to-be empty nesters said they planned to “downsize” their home, according to the Empty Nesterdom survey conducted in late 2016 by the American Association of Retired Persons.
Eleven percent said they expected to move to a new city or town, and 10 percent said they likely would move to a new home.
Rich Ramassini, a disciplined saver who served in the Navy and now works for PNC Investments in Pittsburgh, made changes to his real estate portfolio after his son left the family nest in fall 2017. While Ramassini and his wife, Kris, had initially planned to pay off their mortgage on their primary home more quickly, they switched gears and opted to fast-forward their downsizing plans. They funneled their savings into a 2-bedroom condo in Sarasota, Florida.
“It was an opportunistic thing,” Ramassini says. “It allowed us to move forward with our retirement plan.”
For the time being, it will be a “vacation home,” he says, adding that the Florida beach pad “puts some adventure in our lives while we are young enough to enjoy it.”
Some benefits of downsizing – or what some personal finance pros refer to as “rightsizing” – include:
Ability to pay down debt
Empty nesters who have raised kids in a home that they have owned for a decade or more are likely to walk away from the sale of the house with a profit. If the windfall is big enough, the proceeds can be used to purchase a less expensive home in cash or with a sizable down payment that will lead to much lower monthly costs. Profit from a home sale can also be used to eliminate mortgage debt completely, as well as reduce or pay off other debts, including credit cards and auto loans.
“Anything you can do to put yourself into a position to pay off debt” is a plus, says Jonathan Knapp, chief operating officer at Creative Planning in Kansas City, Kansas, a wealth management services firm.
Freeing up cash flow
A smaller house means lower monthly payments on items ranging from your mortgage to landscaping to utility bills. Add those savings to the money no longer needed to pay for many of your children’s expenses, such as cell phones, field trips and car insurance, and it adds up to more cash available to invest in retirement accounts or fund daily living expenses.
The key is to put the freed-up cash to good use, Anspach advises.
“Look for ways to re-purpose the extra cash, because if you don’t, you will spend it,” she says.
Establish new lifestyle
Downsizing from a big home also gives you a chance to choose where and what kind of lifestyle you want to live when your full-time working career is over, personal finance pros say.
Do you want to live near your children so you can see the grandkids? Or do you want to flee the snowy winters of Minnesota for higher temperatures down South? Or do you want to live within walking distance of a vibrant downtown filled with restaurants, museums and shops?
If you’re a golfer, you might consider moving to a warm-weather climate dotted with 18-hole courses.
Now’s the time to change your lifestyle, says Diahann Lassus, president of wealth management firm Lassus Wherley with offices in New Providence, New Jersey, and Bonita Springs, Florida.
“Figure out what is it you want to do in the next stage of your life,” Lassus says. “That defines where you want to be.”
That’s exactly the thinking that drove the empty nester, Greenthal, to Long Beach.
Living so close to the Pacific Ocean is a “very comfortable, very low key kind of lifestyle,” she says. “If you’re thinking of downsizing, do it. Change is good.”