Saving for Retirement
If You Want More Money for Retirement, Consider Downsizing Your Home
Houses provide shelter, but they also create expense. Even if you own your home outright, each year you pay for taxes, insurance, and maintenance. A rule of thumb is that annual costs (outside a mortgage) are about 3% of the value of a home. If you own a $400,000 home, you’ll spend about $12,000 a year. So say you sell your home and purchase a home for $250,000. Not only can you set aside over $100,000 to use for retirement, you cut your ongoing annual costs, too. Using the rule of thumb, your annual cost will be $7,500, or $4,500 less.
Moreover, if you are still paying for your home, the lower home cost will result in a lower mortgage payment, meaning you can put even more money away for retirement. Bigger is not always better unless bigger refers to the size of your retirement nest egg.