On the face of it downsizing sounds great in retirement

Lock up and leave, free up some cash for living expenses, and enjoy the facilities and social warmth of a retirement community.

What many people don’t plan for and think through is the affect on their financial wealth in 10 to 20 years time.

Some time and a little money spent on doing the analysis early on could easily mean a difference in wealth of over $400,000 as little as 10 years down the track.

The attached case study shows the value loss that can occur through downsizing.

Media release down sizing case study

In addition to the wealth loss there can be a significant impact on aged care costs.  Another case study done showed that where one partner needs residential aged care, staying in the family home saved $23,500 per year compared to downsizing.

Basically the steps to go through are:

  1. Do budgets and analysis on changing accommodation to assess and compare what the net wealth would be when reaching at least 80 years of age.
  2. Make sure you factor in changes in pensions and benefits and living cost changes.
  3. Under the different scenarios, determine what the affordability for residential aged care looks like at 80 if one member needs it. Assess the means testing costs of care, the accommodation costs to the provider and what the total costs of living will be for the couple.