Downsizing in Retirement

As the high cost of living and surging power bills around the country begin to ‘bite’, many older Australians are looking at ways to reduce their expenditure in retirement.  With people now living much longer and wanting to make the most of their time in later life, it makes sense to explore some of the many opportunities that may be available for downsizing the family home and moving into a smaller housing option.

Proceeds from Downsizing

From January 2023, the government has made it even more attractive for older Australians to sell the family home and downsize.  From 1 January, an Australian aged 55 and over can now contribute $300,000 from the proceeds of the sale of their home (or $600,000 for a couple) into their superannuation.    Previously, the age limit to make a downsizer contribution to superannuation was 65 years and over.   Greater contributions to superannuation can help to make retirement more comfortable and secure, particularly if made early enough to accumulate interest, so the option to invest a significant lump sum into superannuation provides a genuine incentive. It is important to obtain financial advice to ensure you meet any relevant criteria.

Retirement Living Options

If you decide to downsize and sell the family home, there are a number of options to consider if purchasing a new property, including:

1. Buying a smaller townhouse or apartment

If you feel that you would like a smaller property with less maintenance and lower upkeep, whilst still having privacy and independence, downsizing into a townhouse or apartment may be a good option.  One of the key issues to consider in this scenario is the ownership title.  Many townhouses and apartments form part of a strata scheme.  This means that they are sold as ‘strata title’ and share common property – such as driveways, common walls, gardens etc - with the other units or townhouses in that development. 

It is always important to seek legal advice when purchasing a strata titled property to ensure that you understand your rights and obligations.  For example, you will need to pay ongoing levies and fees to help maintain the common property and there may be specific rules regarding any modifications you can make to the property or how it can used.

2. Buying into a Retirement Village

Retirement villages are a popular option for individuals and couples aged over 65 who may be looking for added security, as well as an in-built support and social network.  Accommodation within retirement villages can include small family homes, townhouses, villas and apartments and they often have a range of lifestyle facilities available such as swimming pools, gyms, tennis courts and bowling greens for example.

Retirement village contracts are typically quite complex and we would strongly encourage you to seek legal advice before signing on the dotted line. 

The majority of retirement village homes are actually leased and there are a number of additional costs associated with living in the village. Whilst this is not necessarily a problem, it is important that you fully understand what you are signing up for, how the costs will impact your ongoing living expenses, and any financial obligations that will arise if you want to sell the property in the future.

Where to start if you want to downsize?

If you are considering downsizing, the property team at Lamrocks can help.  We can prepare the sale contract for your family home and guide you through the process, ensuring everything runs as smoothly as possible. 

We can also review the contract of any other property that you think you would like to purchase – whether that is another house, villa, townhouse or retirement village option – and help you to understand all of the terms and conditions that apply.  If required, we can also negotiate the terms of the contract and assist you with the purchase transaction.

For advice and assistance when considering retirement living options, contact Lamrocks today on tel: 02 4731 5688.