It’s commonly assumed that, as we move towards and into retirement, we need less space in our home. The children (theoretically!) have left. At the same time, it may well be that we can move to a different (read “cheaper”) location since we do not need to be close to our place of work. Or to a smaller home in a nicer location–downsize.

So could downsizing be the answer for YOU – either now or at some time in the future?

There are, of course lots of reasons to consider downsizing (or “rightsizing” / “right placing” as it is sometimes termed). But is downsizing a good move financially? And is to wise to build your retirement financial plans around that cash injection at some time in the future?

Reasons to consider downsizing

A recent survey from equity release adviser Key Later Life Finance found that 29% of over-45s (29%) say they have plans to downsize in the next five years. However, when push comes to shove, just how many end up making that leap? In fact, just 13% of over-75s have done so, with many of them keen to retain their roots in the local community… or simply stay in the house that has memories.

The survey also found that:

• One in five (17%) said the cost-of-living impact on running a home has pushed them to consider downsizing.
• 8% want to release cash to support their families;
• 5% see the proceeds as a way of repaying expensive debt;
• 43% think a smaller property would be easier to manage;
• 38 % see it as a way to reduce the cost of running their home;
• and 27% want to improve their finances in retirement.

So, lots of (good reasons) to consider planning that move as one of your retirement scenarios. But is it right for everyone?

How could downsizing help you financially when you retire?

Financially, there are two major benefits: firstly, a smaller home should release funds that can either be invested or used to repay an outstanding mortgage or other debt. Either way there will be more money available to cover your retirement living costs. The running costs (eg, energy, council tax, insurance) of a smaller property should also be lower.

All at a time when many people’s incomes are being reduced and possibly not keeping up with inflation.

That said, the cost of moving also has to be built into your calculations. Once you’ve factored in stamp duty; estate agents, surveyor and solicitor fees; removal costs and the inevitable need to redecorate or refurbish your own home (and possibly the one you’re moving into as well) you are typically looking at north of £15,000.

If there is still a sizable wodge available after you’ve paid that, it’s important to factor in all the other considerations too – such as the quality of life and peace of mind you can enjoy with the extra injection of cash, and the possibility of moving closer to family – especially if you are looking to care for grandchildren and/or your family want to keep an eye out for you.

How a retirement planner can help you decide whether or not to downsize

All this needs to be carefully planned to understand what the effect on your living standards will be – and how long you can make your money last. It should also be weighed up against other ways to release capital from your home, such as equity release and lifetime mortgages.

And the best way to do all of this is to use an online retirement planning tool such as RetireEasy.co.uk, which allows you to play a whole series of scenarios showing how your long-term income will be impacted by moving home and the other different options.

RetireEasy is easy to use and intuitive, yet it is comprehensive, giving those with multiple investments or pensions the ability to easily understand a complex situation.

What’s more, if you’re one of the thousands of people who have used RetireEasy in the past to get a snapshot of your future finances, now might be a good time to return for a modest monthly or discounted annual subscription.