Downsizing Your Life in 2024

Strategies, solutions, considerations.

Why Downsize?

Downsizing is a strategic decision often made by homeowners to move into a smaller, more manageable living space. This process involves decluttering, organizing, and simplifying one's lifestyle. We are going to talk about downsizing, your options, and benefits.

According to REALTOR® Magazine, people looking to downsize accounted for 28% of real estate transactions in 2020. This trend shows that more and more people are recognizing the benefits of smaller, more manageable living spaces.

Embrace Simplicity

One of the biggest reasons people choose to downsize is to simplify their lives. A smaller home means less space to clean, fewer rooms to maintain, and less clutter to deal with. This can free up time for hobbies, travel, or simply relaxing.

Financial Freedom

Downsizing can also have significant financial benefits. A smaller home often means lower mortgage payments, reduced utility bills, and less money spent on home maintenance. This can free up funds for other priorities, such as retirement savings, travel, or even starting a business.

Empty Nesters

For parents whose children have grown up and moved out, downsizing can be a practical decision. Maintaining a large home can become unnecessary and burdensome, and a smaller home can be more efficient and comfortable for daily life.

Environmental Considerations

A smaller home can also have a smaller carbon footprint, which is an important consideration for those looking to live a more sustainable lifestyle. Less space means less energy used for heating and cooling, which can significantly reduce your home's environmental impact.

Changing Lifestyle

Downsizing can also be a great option for those looking to make a lifestyle change. Perhaps you're looking to move into an active adult community, or you're simply tired of the upkeep that comes with a larger home. Whatever your reasons, downsizing can open up new possibilities and ways of living.

Financial Considerations

Downsizing can also be a great option for those looking to make a lifestyle change. Perhaps you're looking to move into an active adult community, or you're simply tired of the upkeep that comes with a larger home. Whatever your reasons, downsizing can open up new possibilities and ways of living.

Selling or Renting Your Current Home

When downsizing, you have the option to either sell or rent out your current home. Both options come with their own sets of advantages and considerations.


Selling your home can provide you with a lump sum of money that you can use to purchase your new, smaller home outright or to significantly offset the cost. This can be particularly beneficial if your home has appreciated in value since you bought it. However, selling a home involves costs such as agent commissions and, potentially, capital gains tax on the profit from the sale.


Alternatively, you might consider renting out your current home. This can provide a steady stream of income, which can be especially beneficial during retirement. Being a landlord comes with its own responsibilities, such as maintenance, finding and managing tenants, and dealing with any issues that arise. However, it can also provide financial benefits, including potential tax deductions.

If you choose to rent out your home, it's important to consider the potential implications on your taxes. Rental income is taxable, but you can often deduct expenses related to rental property, such as maintenance, advertising, and even a portion of your mortgage interest.

Additionally, renting also means that you are going to have less money upfront to buy your downsized property.

Budgeting for the Move and New Home

Moving can be expensive, so it's important to budget for these costs. This can include hiring movers, buying packing supplies, and potentially paying for storage if you need to temporarily store your belongings.

While your new home may be smaller, there will still be costs to consider. This can include a new mortgage, homeowners' insurance, property taxes, and potentially homeowners' association fees. Additionally, you'll need to budget for any repairs or renovations your new home may need.

Financial and Estate Planning

Installment Sale Trust

One tool that can be used in this process is the Installment Sale Trust (IST). An IST can be a useful tool for deferring capital gains tax when selling a property. When you sell your property, instead of receiving the proceeds directly, they are placed in a trust. You then receive payments from the trust over time and only pay tax on these payments as you receive them. This can spread out your tax liability over several years, earning a return on otherwise lost taxes, greatly increasing your overall financial benefit. Additionally, we have strategies reducing the tax you'd otherwise owe.

It's important to note that setting up and managing an IST requires the assistance of a professional experienced in these types of transactions.

Using a Financial Planner

A financial planner can be a valuable resource when downsizing. They can help you understand the potential financial implications of selling your home, including capital gains tax and the potential benefits of strategies like the IST. They can also help you integrate the sale of your home into your broader financial and estate plan, ensuring that your actions align with your long-term goals.

A financial planner can also provide advice on other aspects of downsizing, such as budgeting for your move, understanding the costs associated with your new home, and planning for the potential financial benefits of downsizing, such as reduced utility bills and maintenance costs.

Financial and estate planning is a crucial part of the downsizing process, and tools like the Installment Sale Trust and the services of a financial planner can help you maximize your financial benefits and ensure that your actions align with your long-term goals.

Impact on Lifestyle

Downsizing your home is not just a financial decision; it's also a lifestyle choice. Moving to a smaller home can have a significant impact on your day-to-day life, and it's important to consider these changes as you plan your move.

Simplified Living

One of the most immediate impacts of downsizing is the potential for simplified living. With less space to manage, you may find that you spend less time on chores and home maintenance. This can free up time for other activities, such as hobbies, travel, or spending time with family and friends.

Community Living

If you're considering moving to a condominium or an active adult community as part of your downsizing plan, you may also have access to community amenities and activities. This can provide opportunities for social interaction and engagement that you may not have had in your larger home.

Downsizing Possessions

Moving to a smaller home also means you'll have less space for your belongings. This will require you to downsize your possessions as well. While this can be a challenging process, it can also be an opportunity to declutter and simplify your life. You may find that you don't miss many of the items you part with, and that living with less can be freeing.

Additionally, the expensive and unwanted possessions can be placed into the trust as well to defer any capital gains tax made on them.

New Opportunities

Finally, downsizing can open up new opportunities. With the money saved from selling your larger home and reducing your living expenses, you may have funds to travel, start a new hobby, or even start a business. The possibilities are endless!

The Downsizing Process

The process of downsizing involves several key steps. Here's a general roadmap to guide you:

1. Identify Your Needs

Before you start looking for a smaller home, take some time to identify your needs. How much space do you really need? What kind of layout will work best for you? Do you want a yard, or would you prefer not to deal with outdoor maintenance? Identifying your needs will help you find a home that's a good fit for your lifestyle.

2. Find Your New Home

Once you have a clear idea of what you're looking for, you can start the process of finding your new home. This might involve researching different neighborhoods, visiting potential homes, and considering factors like proximity to family and friends, access to amenities, and community culture.

3. Sell or Rent Out Your Current Home

As we discussed earlier, you have the option to either sell or rent out your current home. This decision will depend on your financial situation, your long-term goals, and your willingness to act as a landlord.

4. Sort and Declutter

Moving to a smaller home means you'll have less space for your belongings. Before you move, take the time to sort through your possessions and decide what to keep, what to sell or donate, and what to throw away. This can be a big job, but it's an important part of the downsizing process.

5. Plan Your Move

Once you've sold your home and sorted through your belongings, it's time to plan your move. This involves packing up your belongings, hiring movers, and coordinating the logistics of moving day.

6. Settle Into Your New Home

You did it! After the move, take the time to settle into your new home. Unpack, decorate, and arrange your space in a way that makes you feel comfortable and at home. Remember, the goal of downsizing is not just to live in a smaller space, but to create a home that enhances your quality of life.

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