Downsize To Supersize Incentives For Retirees

Does it pay to downsize?

Recently, two separate pieces of legislation were passed by the federal government, the combination of which is set to supersize the incentive for retirees to downsize their homes in 2023. One key change is lowering the eligible ages for making a superannuation downsizer contribution from 60 to 55 from the start of this year. 

The legislation also made several significant changes to the way the proceeds of your home are treated for calculating your pension while you are waiting to buy or build your new home. The changes affect both the assets and income test assessments and apply to people who sell their homes after January 1. One of the biggest drawbacks for many people has been the reduction to their pension while they find or build their new home, so these changes should go a long way to easing that pressure.

With a change in life circumstance, how you live and how you want to live becomes a big question. As the nest empties, a family home usually becomes too large to maintain. Downsizing is usually the next option as it’s more of a manageable asset and can increase your retirement savings.

Let’s weigh up the pros and cons to see if downsizing is right for you.

Pros

• Increased cash flow
• Easier to maintain
• Convenient location for your new lifestyle
• Lower insurance and bills

Cons

• Underestimating cost of a new home
• Less space
• Ignoring tax implications
• Emotional connection

Downsizing your home can be a great way to free up additional and substantial cash for your retirement, but you should seek financial advice to explore the long-term financial impact it will have on your future.

Once the costs are carefully considered it can pave the way for your next adventure in life.