A recent study has found that 2.3 million UK homeowners aged 55 and over – almost 40% of people in that age bracket – are planning to downsize their home in order to raise money during their retirement. However, if downsizing wasn’t always the plan for these people, then it potentially shows poor financial planning for their later years.
The average amount that is hoped to be raised is £85,300, but around one in ten expect to raise £200,000 or more. The reasons for downsizing also vary, with 42% of respondents saying they plan to blow everything they raise in one go on a luxury spend, with almost as many (41%) saying they would either invest the money or put it into savings. Around one in three meanwhile said they intended to boost their pension pots with at least some of what they raise. 12% of those who responded said they would use the money to assist their children in purchasing their first home, with a further 15% intending to help their children with financial issues other than buying property.
Not all of those who said they were planning to downsize were doing so to raise money. Whilst a third did give this as their main reason, a fifth said they hoped to make savings on the cost of running their home, whilst 60% said they wanted the extra ease and convenience of a smaller home. However, moving to a smaller home of course comes with its own costs, and 28% of those who responded said they were put off the idea of downsizing by the expense of buying, selling and moving.
Of course, if those who are planning to downsize would actually have preferred to stay in their existing home, then proper financial planning prior to retiring would have ensured they could have still done this.
Moving to a smaller property is not the only way to raise money from your home either. Equity release, a scheme which enables homeowners to generate cash through borrowing against the value of their property, is popular for those who don’t want to give up where they currently live. Whatever you’re thinking of doing in order to enjoy your retirement, planning well ahead and getting sound advice before doing anything is always the best idea.