Today's grativibe is about combining dreams with a solid plan for future security and happiness.
We are not great savers, we Smiths. But we have a plan and we try hard. We have our big spreadsheets, a financial advisor, our own self-created Big Money Meetings. We should be OK. As we get closer to retirement, whatever form that takes, I am becoming less fearful. But we are ever-vigilant, seeking financial "wins" to make us better off - so we found ourselves doing a downsizing fire drill recently.
We have no youngster in the house now, and we felt like a lot of our monthly cash flow was devoted to this big old house that still needs a LOT of work. It’s hard to transition from the long physical and emotional efforts of making a home to a clear-headed financial decision to leave that home. It usually happens for most folks when they are under some sort of pressure.
The Birth of the ‘5 Year Flip’
With me being 57 and feeling like I had five to eight years of working left, we came up with an idea we call the ‘5 Year Flip’. We’d trade our big-mortgage-and-maintenance house for a smaller house, that needed a little TLC but had nice bones and potential, in a desirable neighborhood. We’d end up with some cash back in our bank accounts with the sale of the current house and an easier mortgage. We could increase our 401k savings, and then we would whittle away at the value-enhancing projects in our new house. Then when we finally retire for real, we sell it and make a tad more money from the increased equity. Smart, huh? Well, now that it’s over, we feel like we were smart, but I’ll tell you the rest of that story after we lay down some really helpful background. We learned a lot in the fire drill.
Should My House Be Part of My Retirement Consideration?
I recently read where the Economic Policy Institute (EPI) reported that "nearly half of families have no retirement account savings at all." Yikes! Not all is lost, though, because it also reported that between ages 55 and 64, the average retirement account is $374,000 and the median account is $120,000. That’s a start.
Over 60% of Americans are homeowners, with all the financial responsibility that goes with that. I think we can safely say that even though retirement savings accounts are not full enough, lots of folks continue to pay their mortgage and increase their home equity. For many people, then, their home is, and must be, a form of retirement savings. Whether it’s down-sizing, selling outright, or moving to a less costly place, it should be part of your planning.
What Do You Get From Downsizing?
To know what you will gain from downsizing, you have to assess what you have now in terms of home value, lifestyle, relationships, and happiness.
Home value: Do you own a house in a high-priced housing market like NY/NJ? California? Denver? Phoenix? Excellent! If you have owned a home in a pricier market for a while, there are many housing markets, some not that far away from where you are now, that are WAY cheaper. If you can move to a cheaper market AND a lower tax state, then double bonus for you! I have some colleagues who have done the expensive-to-cheaper-market-cash-in twice in their lives and it has been a major financial boon.
But if you are like us here in Pittsburgh where we are one of America’s Most Livable Cities because of our inexpensive housing, what’s your best course? Well, you can still downsize or move to lower-tax states, or just buy a house that will be a lot less expense and trouble. However, moving to an area with higher costs will be tricky unless you really saved well. If you are set on a more expensive market, it may involve a smaller residence or sharing a residence.
Lifestyle: We love Pittsburgh for many lifestyle reasons……the sports, the city’s many activities, the many neighborhoods, the restaurant scene, the arts, the seasonal but moderate weather, the outdoor activities. Oh, and no alligators! When we were doing serious daydreaming about a home in Florida a few years ago, upon deeper digging we realized even though we’d get beaches and sun, we would lose a lot of other things. Retiring to a vacation destination used to be a widely held dream, but more folks are seeking areas that are stimulating, have access to great health care, and a community of folks with whom to interact. Also, some couples become ‘reverse snowbirds’, moving back to their familiar home state and friendships after spending an ‘extended vacation’ in a sunny place just after retirement.
What about the way your house contributes to your lifestyle? Do you value a big lot and gardening? Are you close to a park or trail? Do you want a big kitchen and space to entertain? To us that is one of the appeals of our next house; the ability to finally ‘get what we want’ (which includes a big kitchen for Kimmers). Our house has been a work in progress for 14 years now, so if we move, we may build a new house so we have that ‘finished’ feeling and have lower maintenance costs.
Relationships & Happiness: Not everybody loves their home, neighborhood, and city SO much that they are unwilling to leave. We have some absolutely awesome neighbors, but they are slowly moving away for various reasons, and our extended family is all elsewhere now. We also did not have a family grow up in our current neighborhood, so our roots don’t go deep into the community and schools. There are some friends in Pittsburgh that we hang with all the time now----so much so that we joke about all retiring to the same place! It would be very tough to leave them behind.
But our house, despite all it still needs, is *so much* our house, and has so much of us put into it, that alone will make it a tough decision. We are mentally listing all the things we really enjoy here and will want to replicate them in our next place; our big outdoor ‘party deck’, awning, and fire table among them.
Some Other Factors That May Affect Your Decision
How are your genes? If your relatives all live until 90+ then you can certainly think about downsizing, and there is likely another move after that. Will you putter around and keep earning into your seventies? Then downsizing is a great idea. If you don’t need to work you may want to think in terms of your next house being your last house, and that raises all sorts of different questions -- how is the healthcare system locally? When will you be done driving, and how will you get around? Are your children or family nearby? Is your desire to be out in the countryside, on a peaceful large property? When you get much older will you have access to help, groceries, doctors, etc.? The bottom line is you need to think through the timeline of your life – what will you need and want at 60, 70, 80, 90? The needs and the wants may be in conflict with one another and require some careful and insightful decision-making.
And Now the Rest of the Story
OK, so here’s what happened with our attempted 5 Year Flip. I can’t adequately convey the emotional ups and downs of our process--and the last chapter has yet to be written. We had run the numbers of the flip/downsizing, and it would create a very meaningful positive swing in our monthly household cash flow; we were so pumped!
We were looking at a nice 1950-ish midcentury in an outlying part of an exclusive neighborhood. We knew a bid was pending on the house, but it was a short sale situation, so regular real estate offer rules don’t really apply. We have a great agent, and he was able to help us put in an offer that became the accepted offer. Then, we learned that the numbers were calculated incorrectly, so in order to keep it a short sale, they asked us to put in a LESSER offer of a few thousand dollars! Woo hoo! We were riding high! I started cleaning out our attic and planning the logistics of all the ‘staging’ projects on our current house.
Then we did a septic system test. FAIL. We talked to a local septic contractor who happened to have done ⅔ of all the systems in that area. After a lengthy talk about the extreme challenges he has had due to the soil conditions in the area, this quote from him cinched it for us: “How much is a $200,000 house worth if you can’t flush the toilet?” We made the decision to withdraw our offer. Then the selling agent countered with a yet-$10,000-lower offer! We still said no. It was just too risky, and we could not see any solution to the septic issue.
Finally, this is how we know we were smart: Kim recently saw the house again come up on Zillow. All fixed up and listed for $379,000!! Over $200,000 MORE than what we could have bought it for! No notes in the listing about the septic tests failing though, of course. I’m not sure how they fixed it, or even if they did, but after a bidding war (as conveyed to us in a recent conversation with our agent) the house sold for ABOVE asking price at $400,000. I know Kim will keep an eye on it. I am curious if we will even know how that all got addressed, but now we know that we have a talent for picking flippable houses. We still consider the 5 Year Flip a viable option for us, but we aren't actively looking right now.
To explore two of the major options – staying in your home or exploring a ‘slow flip’ like we were considering, I have two books to recommend:
Enjoying a Lifetime in Your own Home by Paula Fuoco, RN, BSN
Flipping Houses For Dummies by Ralph R. Roberts and Joseph Kraynak
Even if you are not immediately thinking of downsizing, there is a TON of wisdom to reap from these just in terms of how you manage your current house projects. We wish you luck and wish you well if you are considering a similar endeavor.
Let us know in the comments what your plans are for downsizing. We'd love to hear your story!

Deborah Campbell says
Fantastic article. Good info that I will fall back on for our future downsizing. I actually need to start, and probably will, with just sorting out things that I have saved for years and will probably never use. It will take longer than I care to think about, but once I get started I will feel very good about getting it done. Thank you for the insights on your initial downsizing experience.