SHOW NOTES: 2021-02-11 MiM

LAST WEEK’S QUESTION: By 2030, it is estimated that women in the United States will control nearly $30 Trillion Dollars of household assets? True or False?


HOST: I know as we approach retirement, or maybe we are in the middle of it, we wonder if we should consider downsizing our homes?

KLAAS FINANCIAL: Many of our listeners are not thinking about downsizing right when they retire, but probably within a few years they begin considering it. Generally, retirees have lived in their current homes for 25-40 years and the thought of relocating or downsizing either scares them or simply exhausts them mentally. When they do a mental assessment of how much STUFF they have in their homes, many times things stop there. When people just think about what they have stored in their basements alone, they move on to a different topic!

Should you consider selling your house, move to a warmer climate, perhaps downsize to a condo for a few years, and then eventually move into an active retirement community? All are valid questions to explore as we enter our next season of life.

The fact is that people tend to get attached to their homes, but you do need to begin to look OBJECTIVELY at YOUR SITUATION. Investigating your future housing needs and alternatives should be among your highest priorities done well in advance of your actual need so that you can plan the lifestyle that you want to maintain. Also, a great question is asking yourself, how many moves do you have left in you?


  1. Everyone (perhaps your adult children) has their own ideas about where a perfect place for YOU to retire, but ultimately you need to do your due diligence. Many people have children and grandchildren that perhaps have set roots in a different part of the country and you may wish to be closer to them, or perhaps equidistant between two or more children. Going to little league games for the grandchildren may be high on the list. We have clients that have moved in retirement to Idaho, Montana, Arizona to live right down the street from their kids and grandkids.
  2. TAXATION: Looking at the future taxation for your retirement accounts and pensions is important. Remember that some states are more favorable with their taxation than others. Taxes in retirement will likely affect you differently than they do now as your working income may be higher than your retirement income, or perhaps vice-versa. If you have pension income that is being taxed in your state, that may be a consideration.
  3. STATE INCOME TAX: There are currently nine U.S. states with no STATE income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no income tax –– an important consideration for retirees. But remember, these states often make up for that with other, higher, taxes, most notably, higher sales and real estate levies, which can hit seniors harder.

In a recent survey respondents listed what’s most important to them when moving to a new area. Cost of living was ranked as the number one issue.

  • How much more or less I could afford there — 44%
    Other areas:
  • Low crime — 20%
  • Cost of insurance, including auto and home — 13%
  • State taxes — 9%
  • A welcoming community — 7%
  • Things to do in the area — 5%
  • A vibrant area — 1%

What makes up the cost of living? Miscellaneous goods and services, Housing costs, Groceries, Transportation, Utilities, Health care, Auto insurance, Home insurance.

The states and area with the highest cost of living are Hawaii, the District of Columbia, New York and California. On the other side, Mississippi, Arkansas, New Mexico, Oklahoma and Tennessee have the lowest cost of living. Looking at the overall Cost of Living in the Midwest as compared to other places in the country both Illinois and Wisconsin rank 2-6% below the national average. In summary, moving to a place where the cost of living is better for you can actually give a boost to your nest egg may be important.

HOST: What about weather? Should that be a consideration? And where are retirees moving?

KLAAS FINANCIAL: It really is. Especially for those of us in the Midwest who are experiencing the wintery weather as we speak. Perhaps we loved the seasons in our working years, but as we look forward to being more active into our retirement years, weather might help us decide a new locale.

  1. Health conditions may also actually help dictate this for you. People with arthritis or asthma find that they often do better where the weather is perhaps warmer and dryer. Other considerations of weather may be fear of slipping on ice which is a real concern as we age.
  2. Recreational activities that you enjoy should be considered …perhaps a few lakes for fishing, outdoor trails for biking, hiking and walking or being close to more golfing. We find that many of our retirees are looking at more three-season climates such as Tennessee, Texas or the Carolinas as being nice options.
  3. Be a Snowbird: Consider keeping your current home, and perhaps renting in a more climate friendly location during the winters.

Where are people moving to? Obviously, one factor causing the moving of so many people last year was the pandemic, plus the fact that 20 million people retired in 2020. According to migration and mobility data from the census survey, nearly 400,000 Americans moved to a different area for retirement. Virginia welcomed the highest number of new retirees in 2020 at 15.1%. The second most popular state was Florida at 13.5% followed by Wyoming at 10.3%, Pennsylvania at 7% and Idaho at 4.9%.

HOST: Do many retirees really downsize?

KLAAS FINANCIAL: According to data from TD Ameritrade in 2018, 42% of Americans plan to downsize in retirement, which can allow your money to last longer which many people express as a concern.

Why downsize in retirement?

  1. SAVING $$: One of the most common reasons people downsize is financial. One general rule is to spend no more than 30 percent of your income on housing. If you’re on a fixed income, downsizing can be an effective way to cut costs and shift funds to other things.Even if you own your home outright by the time you retire, downsizing to a smaller space can still save quite a bit. Remember, other than healthcare, housing will likely be your single greatest monthly expense as a senior, so reducing it as much as possible could help your monthly budget.
  2. For one thing, it costs less money to heat and cool a smaller space than a larger one. If you’re used to spending $250 a month on utilizes for a 2,000-square-foot home, downsizing to 1,000 square feet won’t necessarily cut that bill in half — but you might reduce it by a third, which will help.
  3. Furthermore, it stands to reason that maintaining a smaller space is easier and more cost-effective than maintaining a larger one. The typical homeowner spends 1% to 4% of his or her property’s value on upkeep per year, but if you downsize from a $300,000 home to a $150,000 home, you might see your maintenance costs shrink as a result.

HOST: So how do we actually go about making the decision to change our housing? How can we be sure that it is the right decision?

KLAAS FINANCIAL: This really IS a process. Before you can make a good decision, you really need to evaluate your current situation and compare it to what you think you will need in the future and consider some other alternatives if you do consider moving such as:

  1. Moving to a smaller home or condo, just watch out on HOA costs.
  2. Share living space/move in with a relative
  3. Rent an apartment
  4. Consider a retirement community
  5. Or ultimately, at the end of the day you may decide that you don’t need or wish to move at all.

Assess your current situation and begin to explore your future needs with these questions:

  1. How many bedrooms do you have now? (you raised your family with 4) but how many do you WANT….or really NEED? Same question for bathrooms? How many floors are in my house? Do I want or need this in the future?
  2. Do I have a basement? Do I NEED one? I store a lot in there…where would all that STUFF go?
  3. Do I have a 3-car garage? Will I still need a garage for 3 cars?
  4. Do I have a big yard that takes a day to mow? Do I WANT or need that in the future?
  5. Do I have a pet? Will I need a place for a pet in the future?
  6. What about that network of professional services you have likely established like doctors? Am I near doctors now and health care facilities? Do I want to be? You have likely become accustomed to your own network of doctors, hairdresser, financial advisor etc? Are you able and willing to re-establish a new network of these people or still use their services from afar?
  7. Am I near shopping facilities now? Do I want to be?
  8. Are there social and cultural activities easily accessible? Is this important to me? Making sure that your new location is conducive to the hobbies you enjoy, or offerings for mental stimulation, or places to volunteering is important for your mental and physical health.
  9. Is transportation accessible to me?
  10. Am I close to family? Do I want to be?
  11. Finally, financial considerations on your current home? Is it paid off or is it too expensive to maintain? Or do I need or want to free up equity from my house?