Downsizing in retirement is a great way to simplify your life and cut expenses. Making a few major changes, like moving to a smaller home, can ease financial stress and improve your quality of life. It could also give you room to grow in new, unexpected ways.
Find out: I’m a retired baby boomer: Here are 3 debts you absolutely must pay off before retirement
Read more: 7 reasons you shouldn’t retire before speaking to a financial advisor
As you approach retirement, you’ll be glad you gave up some things.
Earning passive income doesn’t have to be difficult. You can start this week.
Your home
There’s a reason retirement experts often recommend downsizing your home or living space in retirement. It may be one of the most effective ways to cut costs while simplifying your lifestyle.
“Moving to a smaller and newer home can often result in lower cleaning and maintenance costs in retirement, which can optimize your retirement cash flow and free you from the stress of having to constantly maintain your home,” says Steve Sexton, retirement planning expert and CEO of Sexton Advisory Group.
Moving to a smaller or more energy efficient space can also lower your electric bill. If you’ve invested a lot of time or money into your outdoor space, downsizing can make things easier there, too.
Before you take the plunge, however, there are a few things you should do first.
“Make sure you consider all possible factors,” Sexton said, “such as HOA fees, property taxes, home insurance, closing costs, realtor fees, interest rates, moving costs, etc. to make sure it makes financial sense for you.”
Learn more: 2 things parents whose children have left home should stop investing in to improve their retirement savings
Your work
Although you can work full-time until you retire, Taylor Kovar, CFP and CEO of 11 Financial, recommends reducing your work commitments and instead working part-time for a while. You can even do this after you’ve officially retired if you still want or need some structure or extra funds.
Transitioning to phased retirement or part-time work can provide a better work-life balance and more flexibility in your life. It can also reduce any work-related stress you may have previously experienced while providing you with more financial stability.
Your investments
If you have multiple investment accounts, retirement might be a good time to combine or streamline some of them.
“I have advised clients to simplify their investment portfolios and move from a diverse range of complex investments to simpler, lower-risk options,” said John F. Pace, CPA and partner at Pace & Associates CPAs.
This can reduce account maintenance fees, which is another plus for those looking to cut costs. It also shifts the focus from wealth building to wealth management, which could be a good change depending on your situation.
Your financial and legal matters
If your financial situation has been relatively complex over the years, you may want to simplify it before you retire.
“Simplifying financial and legal matters can greatly alleviate the stress and confusion that often comes with retirement planning,” said Marty Burbank, an estate planning expert at OC Elder Law.
This includes consolidating all of your financial accounts – in addition to your investment accounts. It’s also about creating clear estate plans and making sure your legal documents are up to date.
“This simplification allows for an easier transfer of assets when the time comes and ensures (your) wishes are respected,” Burbank said.
Moreover, it brings peace of mind to you and your loved ones.
disorder
If you’re like most people, you’ve probably accumulated a lot of junk over the years. This can include both memorabilia and other things you no longer need or use.
“Family heirlooms or items with sentimental value are things you’ll want to keep,” says Sexton. “But by decluttering and selling things you no longer need – sports/exercise equipment, outdated electronics, furniture and clothes that no longer fit – you can declutter and make some money on the side.”
If you donate to charities, you may even be eligible for certain tax deductions.
Your car
“Most people don’t expect to have to commute or drive as much in retirement,” Sexton said. “If you and your partner are both retired, consider switching to a one-car household and saving money on gas, insurance, repairs and more.”
Depending on your needs and where you live, you may even be able to do without a vehicle altogether. You should consider your options in terms of public transportation and ride-sharing services. However, if it makes sense to get rid of your car altogether, you can save money.
An additional benefit, according to Pace, is that not using a car promotes a more active and communal lifestyle.
If you don’t want to get rid of your car entirely, consider upgrading to a car with better gas mileage or lower annual costs. Depending on the model, you could also expect lower insurance premiums.
Your debts
As a general rule, it’s best to pay off all debt before retirement. This will free up money in your retirement budget and give you security when you leave the workforce.
“The most important thing you can eliminate before retirement is debt,” Sexton said. “In fact, you should try to eliminate it completely. This will ensure your financial freedom in retirement and avoid the stress of interest payments in your golden years.”
If you have a few years left before retirement, you should pay off your debt aggressively. Pay off any high-interest debts—like credit cards—first to avoid draining your account with interest charges. If possible, pay off your remaining mortgage and any other debts as well.
More from GOBankingRates
This article originally appeared on GOBankingRates.com: 7 Things You’ll Be Glad You Downgraded in Retirement
