Downsizing to a smaller home can cut retirement expenses by as much as $1,000 per month, according to Money Magazine.
The savings come from five areas. A lower-priced home reduces your monthly mortgage or rent payment. Moving to a home with lower assessed value cuts property taxes, especially if you relocate to an area with lower tax rates. A smaller space requires less energy to heat and cool, lowering utility bills. Homeowners insurance premiums typically drop with a less expensive home. You also avoid buying new furniture and decor for a smaller space.
The magazine provides an example. A retired couple sold a $600,000 home with a $2,800 monthly mortgage, $700 in property taxes, and $200 in insurance. They bought a $375,000 condo with a $1,400 mortgage, $450 in property taxes, and $120 in insurance. Their housing costs fell from $3,700 to $1,970 monthly, saving $1,730.
The article notes that downsizing offers non-financial benefits. A smaller house requires less cleaning and maintenance. Relocating gives you a chance to explore a new area or build a new social circle.
The magazine recommends considering your goals before making the move. It suggests renting temporarily in locations you are considering before buying again.