Nearly two in five over-55s – up to 2.3 million homeowners – plan to sell their houses and expect to raise around £85,300, according to a report by a major insurance company.
More than three quarters (77%) of the over-55 homeowners who are planning to sell say that they aim to release equity from their home by downsizing.
Read our downsizing tips.
While the average amount they hope to release is around £85,300, nearly one in ten are expecting to raise £200,000 or more.
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What are people doing with the money raised from downsizing?
The downsizers are equally as likely to splash out their lump sum on a one-off purchase (42%) as they are to save or invest a sum (41%). Nearly a third are planning to put some of the money into their pension pots.
They also say that they are not planning to keep all the money to themselves. One in eight (12%) plan to use some of the money to help their children get onto the housing ladder while 15% say they will use some of the money to assist their offspring with other financial issues.
Why do people downsize?
The most common reason for trading down cited by 60% of the over-55 downsizers is the convenience and the ease of running a smaller home.
A third say the reason for downsizing is to raise money, while one in five want to save money on the cost of running their home.
Read our guide to things to consider before downsizing.
Retirement income expert Vince Smith-Hughes said: "Homeowners who have been lucky enough to gain from the long-term strength of the housing market should exercise caution if they are banking on downsizing to be the magic wand that provides a decent retirement income.
"In some cases the amounts of cash realised can be lower than expected and the cost of moving house should not be underestimated."
Indeed, the research highlighted that the costs involved with moving house are a significant barrier to downsizing – more than a quarter (28%) of over-55 homeowners say they are likely to be deterred from downsizing by the total bill for buying, selling and moving home.
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Equity release is another option
One alternative to downsizing is equity release, which is popular among those who want to stay in their own home. These schemes allow homeowners to release cash by borrowing against the value of their properties.
The Equity Release Council’s code of practice includes a "no negative equity guarantee", which means borrowers will never owe more than the value of their property.
Nigel Waterson, Chairman of the Equity Release Council, said: “With the average value of over-55s' homes at its highest point for over three years, there is plenty of incentive for people to consider releasing a proportion of that housing wealth and give themselves greater access to funds in later life.
"Rising house prices help to keep the cost of interest in check and the ‘no negative equity guarantee’ protects them against ever owing more than the value of their home.
"Involving family members is a key part of the decision making process for anyone taking this step.
"Advisers who sign up to the equity release code of conduct not only ensure their customers are fully aware of the implications both for them and their family, but also encourage customers to have a conversation with those closest to them before making a final decision."
The changes to pensions and how people can take their retirement income announced in the Budget in March will provide savers and retirees with increased choice when they plan their finances in retirement.
From July next year, anyone who is aged 55 or over will be able to take their entire pension fund as cash – although only the first 25% will be tax-free.
The remaining 75% of the fund would be taxed at the saver’s marginal rate, rather than the current 55% charge for full withdrawal.
With new avenues opening up, those approaching retirement should consider taking professional financial advice.
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FAQs
Downsizing your home in retirement can reduce your housing expenses including mortgage payments, property taxes, insurance, and maintenance costs. Additionally, a smaller home often means less upkeep and maintenance, freeing up time and resources for other retirement pursuits.
What is the 70% rule for retirement? ›
The 70% rule for retirement savings says your estimated retirement spending will be 70% of your pre-retirement, post-tax income. Multiplying your post-tax income by 70% can give you an idea of how much you may spend once you retire.
How many people will turn 65 in 2024? ›
The silver wave: record-high 4.1M Americans will turn age 65 in 2024.
What is the top 1% retirement income? ›
Here is a breakdown of the estimated top 1% retirement savings by age group:
- 30-34 years: $365,000.
- 35-39 years: $730,000.
- 40-44 years: $1,234,600.
- 45-49 years: $1,397,000.
- 50-54 years: $2,311,000.
- 55-59 years: $3,105,000.
- 60-64 years: $3,550,000.
- 65-69 years: $4,574,000.
This question has no definitive answer, as it depends on individual circ*mstances and lifestyle. However, research suggests that many people contemplate downsizing as they approach retirement, typically around their late 50s to early 60s. A Zillow report found that on average, most people who downsize are 55 years old.
Do most people downsize when they retire? ›
Many people choose to downsize for retirement. Now that the kids are grown and you simply don't need as much space, downsizing is a great way to boost your retirement fund and make your living situation more comfortable.
What is a good monthly retirement income? ›
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
What is the $1000 a month rule for retirement? ›
The $1,000-a-month retirement rule says that you should save $240,000 for every $1,000 of monthly income you'll need in retirement. So, if you anticipate a $4,000 monthly budget when you retire, you should save $960,000 ($240,000 * 4).
Is 150k a year a good retirement income? ›
If you're naturally frugal and you plan to live a low-key, minimalist lifestyle in retirement then $150,000 might serve you well. On the other hand, if you'd like to enjoy a more lavish lifestyle or you have a serious health issue that results in high out-of-pocket costs, $150,000 may not go that far at all.
Why won't boomers retire? ›
“For my own personal mental health and well-being, I like being active and working.” Cavedon is part of a growing number of baby boomers, many of whom are college-educated, who continue to work well past 65 not because they can't afford to retire, but simply because they love their work—and don't want to give it up.
Total population aged 80 years and over
In 2020, population aged 80+ years for United States of America was 13,147.18 thousand persons. Population aged 80+ years of United States of America increased from 4,058.7 thousand persons in 1971 to 13,147.18 thousand persons in 2020 growing at an average annual rate of 2.43%.
What percentage of Americans live past 65? ›
There are currently roughly 62 million adults ages 65 and older living in the U.S., accounting for 18% of the population. By 2054, 84 million adults ages 65 and older will make up an estimated 23% of the population.
How much does the average retired person live on per month? ›
Retirement Income Varies Widely By State
| State | Average Retirement Income |
|---|
| California | $34,737 |
| Colorado | $32,379 |
| Connecticut | $32,052 |
| Delaware | $31,283 |
47 more rowsOct 30, 2023
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Is there a downside to downsizing? ›
Now, some possible cons: You may need additional storage. By definition, “downsizing” means moving to a smaller space – and that means you may not have room for all your furniture, artwork and other possessions.
What are the negative effects of downsizing? ›
Employee downsizing can lead to decreased morale and productivity among remaining staff due to increased workload and job insecurity. Organizational culture may suffer, impacting teamwork and innovation. Customer service and quality may decline, affecting overall business performance and reputation.
Will I regret downsizing? ›
Downsizing with only finances in mind can have a major impact on your emotional well-being — especially if it means selling, donating or throwing out the things that bring nonmonetary value to your life. This is also a common issue with retirees who move into a smaller home during retirement.
What percentage of seniors downsize? ›
Roughly 51 percent of retirees ages 50 and over move into smaller homes after retirement,1 but many older adults don't want to move. Sixty-four percent of seniors say they plan to stay in their current homes. Whether you choose to stay in your home or move, housing is an important topic as we age.
