In this post, Jenny Simmonds and Belinda Woolrych discuss how to know if you can afford to Rightsize.
Knowing whether you can afford a Rightsize is really part of the research and planning that should happen at the very very beginning, all throughout your planning for retirement or whatever stage you’re at, when you’re doing the Rightsize. So to answer this question, it means sitting down with your team, with your group of people, knowing that you’re doing research and discussing what you need, where you’re going to go to, what you’re going to get. Rightsizing is definitely the time where you’re dealing with one of the largest financial assets that you’ll have in your life. So if you’re ever going to engage experts, do it now, sit down and do some modeling – have a look at what is associated with the actual Rightsize. Most people are moving from the larger home into a smaller home. So generally the costs are at least negative or neutral. Most of the time, we’re able to release some capital in there as well to be able to invest. What is allocated in that process are any costs like getting the house ready, it’s for real estate agents, it’s also for stamp duty, if that’s applicable, and things along those lines.
The Team of Experts
It would require a valuation of the property, someone like yourself Belinda who is coming with a fresh set of eyes and looks at your property to see what needs to be done in order to prepare it and optimise the sale. And of course your financial planner. It’s a team of experts around you who do this all the time, who can actually be able to give you an estimate on your house, and a fresh set of eyes to see what needs to be done and from my perspective or financial planners perspective, to let you know what you would need to release and what you can afford to buy for, to meet all of your future goals. Also, trusted family members as well. It’s a good process. So it’s just having who you need to have around you, I’m often dealing with client’s children, family, friends or powers of attorney, just people that you trust to help be part of the team throughout this process. And then of course, probably another one that jumps to mind would be someone who can read and interpret Retirement Living contracts or wherever the next property will be.
If you’re looking to buy into a retirement village or something along those lines, there are very different contractual arrangements. When you’re at that point where you’re looking at the actual properties to purchase, you would need expert legal advice to make sure that you know what you’re signing up for and what you’re getting into, and how to get out of it if you need to, and what the conditions are of the new purchase. The big values are the sale price and interestingly, necessary to know that fairly early on, or at least an estimation so you can get a value for your modelling, not necessarily a real estate agent at that point, just the valuation completed. Obviously the costs of the transaction, where you’re going to. Then, what are the things might be in those future goals whether it is holidays or upgrading a car.
Usually I sit down with clients to try to work out what the regular cost of living is. For example, I know there’s a general guide provided by ASIC that gets updated from time to time and for a couple, what they need to leave them to have a modest sort of retirement. Is it around that $60,000, per annum. But it does vary so I have some couples that can live on $40,000. I have others that need $80,000, plus, so we need to sit down and have a look at what a comfortable regular income means to you.
It really depends on the client’s goals and wanting to change so it’s really important to have that plan. So you know what you can set your sights on for the next step. No surprises and we’re still not being financially strained. There’s some amazing incentives that have become available. The government has recognized that downsizers have had restrictions in being able to get their surplus proceeds into super in previous years. So now, there’s the ability to put in $300,000 as an individual and $600,000 as a couple, into super as a result of downsize, if you’re over age pension age without having to go to work. So there’s things like that, looking at where that is going to go and how it’s going to be managed post downsize that can be discussed beforehand. That really makes the process a little less daunting, knowing what’s likely how things are going to look afterwards.
Today’s blog is a nugget from last week’s Right Size Your Home Online Workshop. Every Friday fortnight at 10:00am, join me as I take you through the Rightsize Your Home framework to help and support you move through the process effectively and efficiently with a practical, step-by-step roadmap on how to overcome the fears and challenges of Rightsizing and plan to make the journey a fun, stress-free and profitable process..
This Online Workshop is full of tips and guidance: How Can I Afford to Downsize?
With over a decade of experience as a Property Makeover and Change Specialist, I have spent many years helping transform homes and lives. My experience in helping those looking to Downsize has led me to write my first book – Rightsize Your Home – The Empty Nester’s Guide to a Stress-Free Downsize, available to download or in hardcover.
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