What It Really Costs to Remain in Your House After 65 — and When a Smaller Home Makes Sense

Leaving behind the home you’ve lived in for years can be difficult once retirement arrives. Still, moving to a smaller place often pays off financially, particularly after children have moved out.

A mortgage may be the biggest monthly expense for many homeowners, but it is far from the only one. Property taxes, insurance, maintenance, utilities, and upgrades related to aging all contribute to the total. Reviewing your investment portfolio, withdrawal rate, Social Security income, local home prices, and other parts of your financial picture can help you decide what makes the most sense.

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The true price of “staying put” after 65

A home that is paid off is often assumed to be inexpensive to keep, but ownership costs continue long after the mortgage is gone. Those ongoing bills can rise over time, including property taxes and homeowners insurance.

Maintenance expenses such as lawn care and snow removal can also climb with inflation. And if you pay homeowners association fees, those should be included too.

Retirees also need to plan for future costs that may come later. You might need safety or accessibility improvements, or help with household tasks if physical limitations develop. Other expenses, including health care, can further reduce savings. Even retirees who can cover monthly bills with Social Security may still be exposed to large unexpected expenses. Location matters as well, since some people need communities with easier access to medical care. If you remain in place, think about how you would reach health care services and what that transportation would cost.

When downsizing can be the smarter financial move

Moving to a smaller home can save money for many households, and it may be especially useful for retirees living on a fixed income. If you are concerned about depleting your investments too quickly or struggling to cover basic expenses in the years ahead, downsizing may be worth considering.

Even so, the new home has to fit your finances. Trading one costly property for another expensive one will not improve your situation, but moving to a home that reduces monthly housing costs by $1,000 or more could make a significant difference. Be sure to account for other changing expenses, such as taxes and insurance premiums, especially if you are relocating to a different state.