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Giving up your old house is an emotional undertaking . When are the financial advantages too big to ignore ?

By Ben Mattlin

The answer depends on many variables , and to navigate a potentially thorny issue , advisors must balance a complex mix of financial and emotional considerations , any of which could tip the balance between success and disaster .

“ Moving to a smaller home in retirement could be an obvious smart choice for many , but it doesn ’ t always make financial sense ,” says Kurt Whitesell of Summit Wealth Group in Rapid City , S . D .

The financial logic behind the idea is that selling a large house to purchase something smaller will save money , he says . The upkeep should be cheaper , and the mortgage or home-equity loan , if any , less expensive . But the reality is more complicated when you figure in “ inflation , building costs , moving expenses and higher interest rates .” Which means this isn ’ t always the best move .

The first step for advisors , he says , is to crunch the numbers and develop a financial plan that ensures the client ’ s cash flow can support a move . The plan should include the true cost of the new home and how much will be netted from selling the current one . And clients shouldn ’ t forget to review potentially costly consequences such as capital gains taxes from the sale of the old place , property taxes on the new place , insurance on the new place , its utility costs and its monthly maintenance outlays .

Another key factor is the location of the new home . It ’ s important to identify exactly where clients are considering moving to and then thoroughly research the advantages of that location .

According to Don Grant of Sabre Wealth Management in Wichita , Kan ., a person ’ s new chosen location should offer lifestyle benefits such as entertainment , transportation and doctors . “ Downsizing cannot be confused with paying less for housing ,” he says . “ Often , downsizing means purchasing a smaller home in a community with homeowners association [ dues ] and amenity expenses that end up costing more than if [ the client ] were to stay in the current home .”

He often cautions clients , too , against automatically moving to wherever their children have moved to , since the kids ’ agenda might be different from the parents ’. The new place will have to be well suited to the older generation ’ s needs — and the kids ought to be truly committed to staying there . “ Wait till they indicate that they will be there for the long haul before going to the expense and trouble of selling your place and moving [ to the area to join them ],” he says .

Clients don ’ t always accept this kind of advice , Grant adds . But it doesn ’ t faze him . “ My job often involves telling clients what they need to hear , not necessarily what they want to hear .”

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50 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2024 WWW . FA-MAG . COM