Building wealth for retirement involves more than funding a 401(k) and IRA, socking away additional savings, and investing in stocks and mutual funds. According to a recent study, over 20% of respondents say they plan to “trade down” their current home for a smaller home to free up additional retirement funds and lower their expenses.
Here’s an example. Say by the time you’re ready to retire your home is paid off and worth $800,000. Selling your current home and buying a smaller home for half the price could generate funds that increase your annual spending by a little over $7,000 without reducing the principal balance of your retirement funds. In effect, trading down could increase your standard of living by more than 15% - again, not counting any lower costs you’ll incur by living in a smaller home.