News & Insights

Here’s a stat that stops people in their tracks: Americans aged 55 and older control more than two-thirds of the nation’s home equity, yet nearly 64% live in homes with more space than they need.

That’s a lot of square footage… and a lot of money potentially locked into rooms that go unused.

Related Article: RETIREMENT Downsizing Guide: MOVING INTO A SMALLER HOME

If you’re starting to wonder whether it’s time to trade in “more house” for “more life,” you’re not alone. Downsizing isn’t just a real estate decision—it’s a lifestyle shift. One that could save you thousands per year, simplify your day-to-day routine, and unlock the freedom to live on your terms.

But let’s be clear: it’s not for everyone.

In this article, we’re breaking down the real numbers behind downsizing, what people often overlook, and whether the cost-of-living shift actually pays off after selling your home. Whether you’re an empty nester, preparing for retirement, or just tired of cleaning three bathrooms, this guide is here to help you run the math, weigh the trade-offs, and make a smart, financially sound decision.

What Does It Mean to Downsize?

Downsizing doesn’t just mean moving to a smaller home. It means restructuring your expenses, priorities, and lifestyle around what actually matters to you now—not what you needed 10 or 20 years ago.

Here are a few common ways people downsize:

• Selling a large single-family home and moving to a smaller house or condo
• Relocating to a more affordable city or town
• Transitioning into a 55+ community or apartment
• Trading ownership for renting to avoid maintenance costs

Think of downsizing not just in terms of square footage—but as a financial strategy that frees up cash, reduces monthly expenses, and potentially boosts your long-term retirement plan.

The Financial Benefits of Downsizing

Let’s break this down using a real-life scenario:

Original Home:

• 4-bed, 3-bath suburban home
• 2,600 sq ft
• Mortgage: paid off
• Property taxes: $6,500/year
• Utilities & maintenance: $750/month
• Insurance: $2,000/year
  
  

Downsized Home:

• 2-bed, 2-bath townhome
• 1,300 sq ft
• Purchase price: $275,000
• HOA fees: $150/month
• Property taxes: $3,200/year
• Utilities & maintenance: $350/month
• Insurance: $1,200/year
  
  

Now, let’s put it side-by-side:

That’s a savings of $7,100 per year, not including any profit you might pocket from selling your larger home.

And if you invest even part of the proceeds from the sale? That adds another layer of financial flexibility we’ll cover shortly.

Hidden Savings You Might Overlook

Downsizing can unlock savings in ways that aren’t immediately obvious.

Here’s what often gets overlooked:

1. Time Savings = Money Savings

Less time cleaning gutters, mowing lawns, or waiting on home repairs. That’s hours back into your life—whether it’s time with grandkids, hobbies, or just plain rest.

2. Lower Healthcare-Adjacent Costs

One-story homes or retirement communities often reduce fall risk and mobility challenges—potentially lowering long-term medical costs.

3. Reduced Consumption

Smaller spaces tend to reduce spending on furniture, décor, appliances, and even impulse buys. There’s simply less room to fill!

4. Utility Efficiency

Modern condos or townhomes are often better insulated and more energy-efficient, meaning your air conditioning bills (especially in Florida!) can shrink dramatically.

But Wait—What About the Costs of Downsizing?

It’s not all savings. Here are the potential trade-offs and costs you need to plan for:

1. Realtor Fees & Closing Costs

Selling your current home will typically cost 6–10% of the sale price. On a $450,000 home, that’s around $27,000 to $45,000 in selling expenses.

2. Moving Costs

Between hiring movers, transferring utilities, and possibly storing items, moving can cost $1,500–$5,000 depending on distance and volume.

3. Home Prep & Renovations

Many sellers make light renovations or repairs before listing. Budget $5,000–$10,000 unless your home is already turnkey.

4. Emotional Costs

Let’s be honest—downsizing often means saying goodbye to memories, neighbors, and routines. That can carry emotional weight that isn’t easy to price in.

When Downsizing Makes the Most Financial Sense

✔️ You’re House-Rich But Cash-Light

If most of your net worth is tied up in your home, downsizing can unlock liquidity for retirement or investing.

✔️ You’re Retiring or Semi-Retiring

Lower monthly expenses = less pressure on your retirement income.

✔️ You Don’t Use Most of Your Home

Unused bedrooms and bathrooms are costing you in taxes, insurance, and maintenance.

✔️ You Want a Simpler Lifestyle

If freedom, travel, or minimalism are your priorities, a smaller home aligns with that vision.

Smart Ways to Use the Proceeds from Downsizing

Here’s where it gets interesting. Let’s say you sell your home for $450,000 and buy a smaller one for $275,000. That’s $175,000 before taxes and fees. What can you do with it?

• Build a high-yield CD ladder with your local bank

• Max out your IRA or Roth contributions

• Create an emergency fund or health savings account

• Use a portion to pay off debt or gift money to family
• Invest in conservative dividend-paying stocks or ETFs

Want to stay low-risk? A certificate of deposit (CD) with a competitive rate (especially during high-interest rate environments) can provide guaranteed income over time.

Tip: Talk with your community banker or financial advisor before making major investment decisions. They can help you maximize the long-term benefits of your home equity gains.

Questions to Ask Yourself Before You Downsize

Still on the fence?

Ask yourself:

1. What’s my goal—more cash, less stress, or both?
2. How much home do I truly need?
3. Can I realistically make the move emotionally and logistically?
4. What would I do with the proceeds from selling?
5. Am I ready for lifestyle changes (e.g., fewer guests, different neighborhood)?

Is Downsizing Worth It?

In many cases—yes. Downsizing can lead to significant cost-of-living reductions, simplify your life, and free up equity for things that matter more.

But it has to be right for your circumstances, your finances, and your lifestyle goals. Run the numbers. Talk to a professional. And don’t rush it.

If you’re considering downsizing and want to explore financial options—whether that’s a mortgage on your next home, building a CD ladder, or simply running a cost-of-living comparison—we’re here to help.

Let’s have that conversation. After all, the true value of your home isn't just in the walls—it’s in the freedom it can give you when the time is right.