All the signs are pointing to one thing – time to downsize to a smaller home. But how do you know if it’s the right decision and how do you prepare, both emotionally and practically?

Why and why now?

Work out why you’re considering downsizing. You may have some or all of these common reasons: 

• Financial – to free up equity in your home, purchase a smaller cheaper home and use that difference to enjoy your retirement
• Home maintenance – your family home may be looking tired, need repairs, have too large a garden which requires work or just be too big now that children have left home
• Location – you might want to move away from the city to a coastal or rural area or it might be the opposite pull of the city attractions which appeals
• Too much ‘stuff’ – like many people, you may have accumulated many possessions over a long time in the same home and now, after finishing work, you want to feel free to move ahead
• Your partner is keen to move – make sure you both agree about your future living arrangements. It’s important not to feel talked in to a move you’re not comfortable with but it may just be a matter of time until you’re both ready.

What you need to know

Financial costs of moving – don’t forget that selling and buying property costs more than just the sale and purchase prices. You need to factor in stamp duty, agent’s fees and legal costs. You may also find there’s an impact on any Government age pension you receive. Your home and the 2 hectares surrounding it are not counted under the age pension assets test and, if you sell your home, the proceeds will be exempt for up to 12 months as long as you are planning to use the money to buy another home. However, the proceeds will be deemed under the income test.* It’s worth checking your personal situation.

Moving to a new area can be appealing and can give many retirees a new lease of life but it can also be challenging. Making new friends and creating new networks isn’t always easy and some people find the change quite alienating. Most of us have heard of people who’ve moved ‘to the coast’ or ‘up north’ when they’ve retired and then come back a while later as it hasn’t worked out the way they’d hoped. Importantly, research a new area carefully before you commit. Even moving to a new suburb can seem more different than you expect as you have to adapt to new shops, transport and resources. 

What can you do with all that ‘stuff’? Streamlining your possessions with a new start can be appealing but it does take effort. It’s worth gradually clearing out cupboards and offloading some of the contents long before you need to. Garage sales, online sale sites and op shops can all be good ways to declutter and make your home ready for sale, and you might even make a bit of cash along the way.     

Take advantage of the incentives – the rules allow eligible over 55s (as of 1 January 2023) to sell their primary residence and contribute the proceeds into super. You can contribute up to $300,000 for individuals or $600,000 for couples and the contributions don’t count towards existing contributions caps or any restrictions to voluntary contributions. See how it works.

But if you don’t want to downsize check out the changes to the pension loan scheme where you may be able to leverage the value of your home to draw top up your Age Pension income.

Want some help with your downsizing decision 

You can sit down with a Financial Adviser from TelstraSuper Financial Planning and discuss how downsizing may affect any Centrelink payments you are receiving and potentially boost your super. You can book an appointment by calling 1300 033 166 or by filling in the online form.