Downsizing your life: the financial benefits of an empty nest1 January 2023
As your children grow up, they’ll naturally seek to establish their independence more and more. Eventually, they’ll move out to live their own lives, leaving you with the same sized house and less mouths to feed.
With your children taking care of themselves, you’ll probably have more time for yourself. With this freedom, you can start making decisions just for you, like downsizing your residence to free yourself from some financial obligations.
While the thought of selling your home and finding a new one to live in may be overwhelming at first, downsizing may be the right move for a more comfortable retirement.
The financial upside of downsizing your life
After you’ve downsized your home, your mortgage repayments, maintenance bills, utility costs and cleaning costs could be reduced. You may also have more time on your hands as a smaller home means less time spent on cleaning and maintenance.
Overall, you could have more money and time to spend on yourself.
You could be able to live the life you’ve been working towards for your whole career. You could do the things you’ve always wanted, like taking lengthy vacations to bucket-list locations. You’ll be free to take up hobbies you’ve put on hold for decades. Or even pay off debts that have lingered for longer than you would have liked.
A downsizer contribution to superannuation could set you up for the retirement you want
If you’re considering downsizing your home, there are benefits to getting the ball rolling sooner rather than later.
If you’re aged 55 or over you could make a downsizer contribution, a one-off after-tax personal contribution, of up to $300,000 into super when you sell a primary residence you’ve owned for at least 10 years. Your partner can also make a downsizer contribution of up to $300,000. A downsizer contribution doesn’t add anything to your non-concessional contribution cap (that is the cap that applies to the amount of after-tax contributions that can be made to super). Downsizer contributions can be made to Triple S (if you are still employed by SA Govt), Super SA Select account, or Flexible Rollover Product (FRP).
If you and your partner both decide to make downsizer contributions, you could be placing up to $600,000 into super to help you in retirement!
We recommend getting in touch with a financial planner before selling your home and making the big leap. Everyone’s financial situation is a little different with some being more complex than others so consider getting professional financial advice first.