Retirement age Britons served warning as downsizers free up ‘surprisingly low’ sums | Personal Finance | Finance

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Downsizing is another way in which some people will decide to free up money for their retirement. However, it’s not for everyone – new research from Hargreaves Lansdown has shown only a third of people (34 percent) said they definitely don’t want to downsize in retirement.

The findings, from a survey of 2,000 people in April 2021, showed one in five people (22 percent) are sure they don’t want to downsize, while 44 percent said they aren’t sure.

For those who don’t want to downsize, the main reason is they’re too attached to their home (38 percent).

For one in five people, moving costs associated with downsizing was a worry.

The research found downsizing is more common among the plans of younger people and higher-rate taxpayers.

One in 20 respondents plan to do equity release rather than downsize, Hargreaves Lansdown said.

Nathan Long, senior analyst at Hargreaves Lansdown commented: “Done right, downsizing is a great solution for a wealthier and less stressful retirement.

“But if you don’t plan carefully, you could end up backed into a corner, with less money, less space and less flexibility than you need.

“On paper, downsizing may seem to make sense financially.

“You can borrow money cheaply with a mortgage at the moment, buy a large house, and if property prices rise, bank a significant profit.

“It’s also tax-free to sell your main home and downsize, although you will be liable for stamp duty on the new property.

“However, moving home in later life is an incredibly emotionally charged decision.

“Few people relish leaving an area where they are comfortable, leaving a home in which they have built up a lifetime of memories, or moving to a smaller house where there is no room for the grandchildren.

“It’s one reason why the older we are, the less likely we are to be keen on the idea.

“While 24 percent of 18–34-year-olds say they plan to downsize in retirement, this drops to just 15 percent of those aged 55 and over, as the decision to move draws closer and we realise how much of a wrench it’s going to be.”

Mr Long went on to warn of the “serious risks” which those looking to fund their retirement by downsizing can face.

He said: “Downsizers who are relying on it to fund retirement also face serious risks.

“You can’t be sure property prices will be high enough when you come to retire, that you’ll be able to sell when you want to, or that you’ll make enough money for it all to be worthwhile.

“The amounts freed up when downsizing are surprisingly low, once moving costs, fees and taxes – plus any renovation and improvements on the new property – are taken into account.”

While it may suit some, Mr Long urged people to avoid being backed into a corner when it comes to funding retirement.

“For some people, downsizing can be a very sensible part of a wider retirement strategy; but it pays to think carefully where it fits in your overall plans, so you’re not utterly reliant on it to make your retirement finances work.”





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