According to the 2011 Census, baby boomers make up nearly 30 percent of the Canadian population. With many boomers now entering the retirement phase, one aspect of financial planning that's often overlooked among this group is downsizing. A survey of 1,500 Canadians released by eBay Canada in 2010 found that 39 percent of parents planned to downsize as soon as their kids flew the coop. (They'd better move quickly: Human Resources and Skills Development Canada reports that about 25 percent of kids come right on back!) For many seniors, however, trading in the lawn mower and snow shovel for condo life isn't as easy as just picking up and moving — especially when it comes to leaving behind a well-loved family home.
With this in mind, even if you don't have plans to move right now, if you're in your retirement years, it's a good idea to give downsizing some thought as part of your financial preparation and planning. Here's how to ease the transition.
1) Clean out the clutter
"We always suggest that seniors allow enough time to prepare and plan for a downsizing. Oftentimes when it comes to making the move, it's not a matter of if but when," said Viraf Baliwalla, the president of Transition Squad, a company that helps seniors and their families through the downsizing process.
Whether you're thinking about moving in the near (or distant) future, there's no time like the present to take stock of everything you've accumulated over the years and clean out the clutter. In fact, consider making it a habit. In this way, when it comes time to move, you'll only have to deal with things you've actually been using, rather than sifting through musty boxes full of unused Christmas decorations and old team jackets — or, worse, paying to move or store them.
2) Separate your stuff
For many people, downsizing means making some tough decisions in terms of what furniture and other items will make it past the threshold of that newer, humbler abode. Baliwalla recommends that seniors start thinking about this ahead of time, separating existing items into things they want to keep, give away or discard. And make sure to consult with family members about valuable pieces of furniture; no matter how much you love your antique sideboard, don't assume the kids will be happy to have it.
"We have a lot of clients with many beautiful things," Baliwalla said, "but many of the kids don't want antique things — they don't fit their style."
If you have a lot of valuable items, an auction or estate sale might be a good solution for ensuring they go to good homes. This can also add a little extra buffer to your retirement bankroll. You may be able to donate less valuable — but still useful — goods to a local charity.
3) Learn to let go
Houses with smaller rooms hold less furniture, often a lot less. This is especially true for those making the move to a retirement home. Baliwalla says that for many people, letting go of things is the most difficult part of downsizing. You can't keep everything, so it's important to start thinking about what you might be able to live without early on.
"Think about sentimental attachment and what you really value, then let go of the rest," Baliwalla said.
4) Do some estate planning
Downsizing is a part of estate planning, and it's a good time to take inventory of what you own and where you'd like it to go when you're gone — or when you move. This is especially important for those with antique furniture, art and other valuables. Without a proper plan, Baliwalla says it's not uncommon for such items to be thrown away by children and other family members who may have to deal with disposing of them under pressure, and may not be aware of their value. This can happen when medical problems force a senior out of their home on short notice.
5) Spruce up the place...a little
For seniors, selling the family home can be a delicate balance. On the one hand, many have a lot of equity stored in their home; selling the property allows them to tap into it for the next stage of their lives. But while it's important to get a fair price for that home, Baliwalla recommends that seniors avoid going overboard with renovations.
"Don't renovate. You'll rarely get more money out of it," Baliwalla said. "You definitely want to make sure that you do some cosmetic touch-ups, but not too much, because the next person will make their own decisions. Touch-ups like fresh paint, new blinds, and other little things that affect curb appeal are best. The key is to spend the minimal amount of dollars for maximum return."
It takes time
Downsizing can mean throwing away the snow shovel and lawn mower, and perhaps even enjoying the extra money you've earned as a long-time homeowner. For many people, however, it's also an overwhelming process. Before you let that pressure get to you, think back to when you bought your house and, over time, filled it with cherished things and wonderful memories. The transition to a new home can happen in the same way — step-by-step and a little bit at a time.
By preparing ahead, you'll be less worried about what you're losing when it comes time to make the move. After all, you'll be taking a little peace of mind with you.
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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.