Downsizing Your Home for Retirement

Downsizing your home for retirement is a huge decision. Financially it can make a lot of sense but there are many pros and cons for both selling and keeping the family home. Aside from considering where you will move to, you need to consider a number of other factors to determine if it is the right decision for your retirement.  

downsizing home

In this article we will discuss: 

  • Weighing up your needs and costs involved with downsizing 
  • Pros and cons of downsizing your home for retirement  
  • Alternatives to downsizing 
  • Possible implications on your pension or other government benefits  

What to Consider When Downsizing Your Home 

Before downsizing your home for retirement, ensure you can still afford to buy back into your preferred neighbourhood. Aside from your budget, you should also think about whether your new home will suit your preferred level of independence and the lifestyle you want in retirement. 

As with any move, there will also be a variety of costs incurred such as stamp duty, real estate fees, legal fees and removalist fees. You should itemise all these costs and work them into your proposed budget prior to downsizing your home 

By assessing the above, you will get a clearer picture about whether downsizing in retirement is the right choice for you.   

downsizing in retirement

Pros and Cons of Downsizing 

There are pros and cons for downsizing in retirement. 


  • Potential for improved cash flow and the ability to pay off any residual mortgage or other debts with the proceeds.  
  • Reduced house insurance and utility bills. 
  • Less maintenance for both home and garden and easier to keep clean. 
  • Ability to purchase a newer property or one with a better layout for needs as you progress in retirement.  


  • Can be emotionally difficult to leave your family home.
  • More difficult to entertain family or large groups in a smaller space.
  • Possibly having to adjust to a new neighbourhood.  
  • Less space may mean having to also downsize your possessions and sell or give things away.  

Alternatives to Downsizing For Retirement  

If you feel that downsizing to retire early may not be the right option but want to find other avenues you may like to consider these alternative downsizing tips:  

Look into Equity Release 

A reverse mortgage or home reversion (where you sell a portion or share of your home) can provide enhanced cash flow and subsidise your pension in retirement, allowing you to stay in your home and still enjoy a better lifestyle in retirement.  

Take on A Boarder 

If you live in an area close to universities or the city centre, you may like to consider renting out spare rooms in your home to students or professionals. This can boost your retirement income and is a great way to meet new people. 

Modify Your Space   

Should you be able to add a granny flat at your home or convert your home into a dual occupancy space, you may be able to secure rental income. Keep in mind that this will be considered an income and therefore taxable. 

downsizing to retire early

How Downsizing Your Home for Retirement Could Impact Your Pension 

Changes in your financial situation as you enter retirement can impact on your pension and other government benefits. You will be required to undergo an assets and income test. While your home isn’t included in the asset test, proceeds from its sale will be.

If not used within 12 months to buy, build or renovate, these proceeds will be deemed income and assessed accordingly.  

As with any move, there will also be a variety of costs incurred such as stamp duty, real estate fees, legal fees and removalist fees.  

Speak To Collins Mann Before You Decide on Downsizing Your Home 

Downsizing in your 60s or as you approach retirement may seem like a no-brainer, freeing up funds to live a more fulfilled retirement. However, planning for your retirement requires careful and informed decision making. This is where Collins Mann can help.  

Our expert financial advisors are passionate about helping you plan for and live out the retirement you want. Whether through long-term growth strategies or reassessing your position as you approach retirement, we can help you make the right decisions for a life of choice without compromise.  

Downsizing your home in retirement may be the perfect path for you, however it is highly recommended you seek professional advice before pursuing any major financial changes in or just before retirement.  

Call us today to discuss the possibilities of downsizing your home on 07 3251 3200.  


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