Should you downsize your home for retirement?

Like many Singaporeans, you may be thinking of selling your current home when you retire and downsizing to a smaller property – so you can use the net sale proceeds to supplement your retirement income.

After all, when your children are all grown up and have moved out to start their own families, you won’t need as much space as before. It makes sense to move to a smaller home that would not only be easier to maintain, but could, at the same time, help unlock more capital to finance your retirement.

Before you make a decision, here are a few useful things you should know about downsizing your home.

If you’re aged 55 or above and intend to buy a smaller HDB flat (1-room, 2-room, 3-room or Studio Apartment), you may apply for the Silver Housing Bonus and receive up to $20,000 in cash.

Introduced by HDB, the Silver Housing Bonus is meant to help elderly households supplement their retirement income when they downsize their flat. For more information about this scheme, visit HDB’s website.

If you’re comfortable with a smaller living space, downsizing your home comes with many advantages that people may tend to overlook. For starters, it’s easier to clean a smaller flat and keep it tidy – imagine how much time you’d save each week if there’s only one toilet to scrub instead of two!

With a smaller home, you’d also expect your utility bills to be lower. For instance, keeping one air-conditioner running every night, instead of three, makes a huge difference to the energy consumption of your household. This translates directly into cash savings for you.

Then there are the nitty-gritty benefits of owning a smaller home – lower property taxes, town council fees and home insurance premiums, all of which can add up substantially over time.

Now you know more about the benefits of downsizing your home, you might wish to find out what you need to do. The first thing on your agenda should be to get a property valuation of your current home, so you don’t overestimate its value and get any unpleasant surprises when preparations are already underway further down the road.

To give a small boost to your home’s valuation, you could consider a few simple spruce-ups like a fresh coat of paint, and de-cluttering your home to make it seem more attractive.

Next, you should consider which property type to move into. Besides only thinking of a smaller two-room or three-room flat, you may also wish to research HDB’s Studio Apartments that are specially customised to meet the needs of elderly Singaporeans.

Sold on a 30-year lease in a ready-to-occupy condition, each Studio Apartment is equipped with elderly-friendly features such as lever taps, rocker switches, non-slip tiles, bathrooms equipped with support bars, pull cords linked to an alarm system, and more.

Another advantage is the social interaction you can look forward to with new like-minded neighbours if you do move into a Studio Apartment.

To find out more about Studio Apartments, visit HDB’s website.

Alternatively, you may wish to look for a resale flat at Singapore’s leading property site, PropertyGuru. With our comprehensive property listings, PropertyGuru gives you the confidence and know-how to make better property decisions. Begin your search at www.propertyguru.com.sg.

After you’ve shortlisted a few properties to move into, it’s time to do your sums to estimate how much net sale proceeds you can expect from the move.

From the selling price of your current home (which can estimated using the property valuation you obtained earlier), simply deduct any outstanding loan on the existing property, cash used for the purchase of your next home, any resale levy and CPF top-up requirement (if applicable), and ancillary costs such as legal fees, new furniture and the cost of movers.

As you may find out, it’s not a given that downsizing your home will definitely give you all the funds you need to enjoy retirement – it’s still best to adopt a sensible approach to managing your finances and expectations.

Naturally, you’d expect to have some emotional attachment to your family home, especially if you’ve been living there for many years. After all, it’s probably where you brought up your children, and experienced many wonderful moments with your family.

For a smoother transition, remind yourself of the reasons you’re moving. Perhaps you’d like to stretch your savings for retirement, or you want a home that’s more suitable for your next phase of life. Whatever your reasons are, keeping a positive frame of mind will help you go a long way.

Downsizing your home is potentially a good way to free up some extra cash for your retirement. However, it’s important to plan properly before you start packing, to set your expectations straight. To stay updated on the latest property news, visit www.propertyguru.com.sg.