3 Benefits of Downsizing Your Home in Retirement

Here's why it often pays for retirees to move to a small home.

Once you enter retirement, your personal finances could change. You may see your income go down once your paycheck from work disappears. Or you may just become more money-conscious and decide to reduce your costs.

In that regard, downsizing your home could be a smart move, especially if you have more space than you actually need. It's common for retirees to no longer have children living at home, and if that's the case, you may be able to find a smaller place to live that still allows you to be comfortable.

Now, generally speaking, if you stay in the same area, downsizing your home will mean having a smaller mortgage to pay. But even if you're already mortgage-free, it could still pay to downsize as a retiree for these reasons.

1. Lower property taxes

While it's possible to pay off a mortgage in time for retirement, property taxes never go away -- you have to continue to pay them for as long as you own a home. The more living space your home has, the higher its property taxes are likely to be. If you move to a smaller home in the same area, there's a good chance you'll slash your property tax bill in the process.

2. Lower insurance costs

Smaller homes typically cost less to replace than larger ones. As such, if you downsize, you might lower the cost of your homeowners insurance premiums and enjoy a decent amount of savings. Plus, a smaller home may have fewer features that tend to drive insurance costs up. If you go from a large house with a swimming pool to a small house with a minimal patch of land behind it, your homeowners insurance premiums could shrink.

3. Less maintenance

A smaller home typically means less maintenance, and that's advantageous for a couple of reasons. First, the less square footage you have to maintain, the less you're likely to spend. But also, as you age, you may find that it becomes more difficult to tackle maintenance items you'd normally handle yourself. Having less of that work to do could actually enhance your quality of life and, just as importantly, help prevent a physical toll on your body.

Should you downsize in retirement?

Downsizing isn't the right move for every retiree. If you don't have any family members who live nearby, you may want to hang on to a larger home so you can host your loved ones when they visit. Plus, keeping a larger home could mean giving yourself the option to rent out a portion of it (like a finished basement) and boost your retirement income.

But if you don't need to host out-of-town family members and you're not interested in the idea of becoming a landlord, then downsizing your home once you retire could be a smart decision. The less money you have to spend on housing, the more financial flexibility you'll have.