4 Ways to Downsize in Retirement

Aug 20, 2018 10:20:00 AM / by Darwin Bayston, CFA


A common decision that faces nearly all seniors at some point is when to begin “downsizing” for retirement. Many older Americans who have lived in the same house for decades eventually conclude they just don’t need as much room in retirement as they needed while raising their families — and in fact the extra space isn’t worth the expense and time required for its maintenance. The fact is that downsizing isn’t a concept limited to the size of your house or the amount of possessions sitting in boxes. Downsizing can be a strategy applied to far more than selling a large family home and moving into a smaller place for the next chapter of life, it can be a smart retirement strategy when used in other aspects of life as well.


  1. Vehicles

    Many American families acquire and maintain multiple vehicles over the years, often one car for each driver in the family. For married couples, it’s common to own two vehicles — one for each spouse — for so long that it simply becomes part of your daily reality and annual budget. But if you take a moment to consider the math, the costs of operating a vehicle are nothing to dismiss. In addition to the expense of a purchase or lease, there is the ongoing expense of insurance, gasoline, maintenance and vehicle registration fees. Perhaps it’s time to consider downsizing your vehicles by trading down to something more economical or by selling one of those cars and sharing a single vehicle.


  2. Accumulated Stuff

    Over the years, we tend to accumulate a vast amount of possessions, from the sentimental (family treasures) to the mundane (old clothes). These things just quietly pile up in the garage, the spare bedroom and maybe even the old tool shed. Not only do all of these material things create clutter and make it harder for retirees to simplify their lives, but often times they represent missed opportunities to raise some cash! Consider downsizing the quantity of accumulated stuff in your home by hosting a series of yard sales to sell off as many of those old items as possible. You can always round up the unsold items afterwards and call a favorite charity to come pick them up for a mass donation of non-cash items.


  3. Home

    To be sure, the most common example of downsizing in retirement is to relocate from your current family home to a smaller place that is less expensive to own, less costly to maintain or in a superior location for your golden years. This can be a very challenging transition to make in life, so take plenty of time to think through all of the adjustments that you will need to make if you choose to downsize your home. Moreover, you should think carefully about the “total cost of ownership” considerations before even committing to buy a new home at all; when you run the numbers, you may find that it is less costly for you to rent rather than purchase a new home right away. Of course, this is a deeply personal matter so each retiree will have different emotional and psychological reactions to navigate.


  4. Hidden Assets

A great potential downsizing strategy often overlooked by seniors is to generate additional cash for retirement by unlocking value from hidden — or “illiquid” — assets. Many seniors are familiar with how to achieve this objective with real estate, such as taking a reverse mortgage on your home to create a line of credit that can be tapped at any time, or with art or jewelry that can be sold in various ways. Another option growing in popularity with seniors is to sell an unwanted life insurance policy for an immediate cash payment.


For more than 100 years, Americans have had an established legal right to sell a life insurance policy, but most seniors are not aware of this option. If you’re over the age of 70 and have a life insurance policy of at least $100,000 that you no longer need or can afford, you may be able to sell it to a third party investor in a life settlement transaction. The policy owner receives a cash payment, while the purchaser of the policy assumes all future premium payments and receives the death benefit upon the death of the insured. This can be a great downsizing option for seniors, especially those who are struggling with unexpected health care bills or a shortfall in retirement income needs.


To learn more about life settlements, call the LISA office today at 407.894.3797. We’ll be happy to answer any questions you have and to steer you in the direction of qualified professionals who can assist with your unique needs.

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).