Downsizing: Is it Time to Move On?

Written by James A. Werner, CFP® - Partner, Wealth Advisor, Waverly Advisors, LLC on February 18, 2025

When Your Home Holds More Space Than Purpose, It May Be Time to Reevaluate.

The family home is a truly unique and special asset. Your home carries with it a combination of financial considerations and emotional attachment. For many of us, our home is our single largest asset, but it is more than that.

Our home is a collection of memories. It’s both a time machine to the past and a place for connecting with friends, family and community. So, it is naturally difficult to consider our lives without it.

But for most of us there comes a time when our current home no longer fits into our future.

When distance from loved ones causes once vibrant spaces to sit empty, when our joy for travel is accompanied by anxiety about leaving our home unattended, when the expenses of ownership are no longer matched by the enjoyment of ownership, it’s probably time to consider if the home of our past is still the home for our future.

Downsizing: What’s Drives the Decision?

While there are many factors that go into a downsizing discussion, the primary drivers of the decision are:

Location – Are we simply too far away from the people we care about?
Size – Do we no longer need the space? Is smaller better?
Upkeep – Has maintaining the home become too much for us?
Cash Flow – Can we reduce our monthly spending significantly by moving?
Investment – Can we unlock existing home equity to improve the quality of our life, pursue our bucket list, and provide help to our children and grandchildren?

Downsizing: Maximizing the Upside of Downsizing

The sale of your home carries with it some unique financial considerations and potentially advantageous tax rules and guidelines. You’ll Need to:

Understand how to calculate your taxable gain from the home sale
Determine if you qualify for special personal residence tax treatment
Factor in periods of business use of the property (office in home/rental)
Calculate the tax due on the sale and plan for when and how to pay it
Develop an investment plan for the equity that you unlock when you downsiz

Downsizing: Timing is Everything

Ideally, you would hand in your keys to your former home, pick up the keys to your new home, and follow the moving van from the title company to your new home, but that’s probably not realistic. You’ll likely find yourself in one of these four situations.

Buy first sell later: If you have financial flexibility and want to make the home transition as seamless as possible, you might consider buying your smaller home, before you sell your current home. This works especially well when you are downsizing and moving within the same city.

Sell first buy later: If you need to sell your current home to fund your new one, you’ll have to build some temporary storage/housing into your plan. In some cases, you can sell and lease back your current home to free up the equity to buy a new home without having to move twice.

Sell first rent to shop: For longer moves, you may need to build in some time to get to know the area. Signing a short-term lease provides you with a home base while you familiarize yourself with the area and the housing options available.

Sell first rent to decide: Finding a place that is suitable for purchase, but available as a rental will give you some time to decide if renting for a longer period is right for you.

You’ll need a short-term investment plan while renting and a plan for the long-term when you either find the right home to purchase or simply decide to extend your time as renter.

Here are a few sample scenarios that illustrate some of the concepts we have just outlined.

Case Scenario 1: The Legacy Planner David and Elaine, both successful executives, built their estate with a focus on wealth preservation. With their children now running the family business, they find themselves using only a fraction of their estate. Their sprawling home is far more than they need or want, and the maintenance and property taxes no longer align with their lifestyle. Downsizing to a luxury condominium in the city allows them to eliminate excess upkeep, streamline their daily lives, and redirect their wealth into key financial priorities. They allocate part of their home equity to a trust for future generations, fund a charitable giving strategy, and invest the remainder into vehicles designed to generate steady, passive income. This ensures their financial legacy while allowing them to enjoy a more manageable home that better suits their current stage of life.

Case Scenario 2: The Retired Traveler Tom and Susan have always prioritized travel and new experiences, spending several months each year exploring different parts of the world. As travel costs continue to rise and they desire more flexibility, they realize that their large home is becoming a financial anchor. With so much time spent away, they decide to sell their property, freeing up significant capital. By reinvesting the proceeds into a diversified portfolio, they generate investment income to supplement their travel expenses. This strategy allows them to afford the high-end experiences they desire without compromising their financial security. Their new, smaller home requires minimal maintenance, giving them the freedom to embrace their passion for adventure without the worry of upkeep or the anxiety of leaving their home unattended.

Case Scenario 3: The Surviving Spouse Robert and Linda had planned to live in their estate together for the next 20 years, but after Robert’s passing, Linda finds herself in a home that feels far too large. Though she can afford to stay, maintaining the property alone has become an emotional and logistical challenge. Downsizing wasn’t initially her plan, but after evaluating her options, she decides that moving to a smaller residence will provide a fresh start while also ensuring that she is making the most of her financial resources. Selling the home allows her to allocate funds toward long-term healthcare planning, invest in income-generating assets, and set aside a portion for family gifts and philanthropy. Though the transition is bittersweet, Linda ultimately finds peace in a home that is more manageable and aligned with her evolving needs.

These scenarios are a small sample of the multitude of scenarios that bring downsizing into play. Downsizing done right is about trading financial burdens and responsibilities for financial freedom and flexibility.

We are here to help. If you are considering downsizing and would like to meet with one of our advisors to help you through the decision, we’d love to hear from you!

MEET THE AUTHOR

James A. Werner, CFP®

Partner, Wealth Advisor

James Werner joined Waverly Advisors in June of 2023 after Silicon Hills Wealth Management, the firm he co-founded with Tom Brown, was acquired by Waverly Advisors, LLC. He serves as a Partner and Wealth Advisor at Waverly. James is a Certified Financial Planner with over 25 years’ experience in wealth management and personal financial… Learn More

IMPORTANT DISCLOSURES

THE INFORMATION PRESENTED IN THIS DOCUMENT IS FOR GENERAL INFORMATIONAL AND EDUCATIONAL PURPOSES, AND IS NOT SPECIFIC TO ANY INDIVIDUAL’S PERSONAL CIRCUMSTANCES. NOTHING IN THIS DOCUMENT CONSTITUTES, OR SHALL BE RELIED UPON AS INVESTMENT, LEGAL, OR TAX ADVICE TO ANY PERSON. THE INFORMATION IN THIS DOCUMENT IS PROVIDED EFFECTIVE AS OF THE DATE OF ITS PUBLICATION, DOES NOT NECESSARILY REFLECT THE MOST CURRENT STATUS OR DEVELOPMENT, AND IS SUBJECT TO REVISION AT ANY TIME. INVESTING INVOLVES RISK, AND PAST PERFORMANCE DOES NOT NECESSARILY PREDICT FUTURE RESULTS. NONE OF WAVERLY, OR ANY OF ITS OFFICERS, MEMBERS OR AFFILIATES, IN ANY WAY WARRANT OR GUARANTEE THE SUCCESS OF ANY ACTION THAT ANYONE MAY TAKE IN RELIANCE ON ANY STATEMENTS OR RECOMMENDATIONS IN THIS DOCUMENT.

WAVERLY ADVISORS, LLC (“WAVERLY”) IS AN SEC-REGISTERED INVESTMENT ADVISER. A COPY OF WAVERLY’S CURRENT WRITTEN DISCLOSURE BROCHURE AND FORM CRS (CUSTOMER RELATIONSHIP SUMMARY) DISCUSSING OUR ADVISORY SERVICES AND FEES REMAINS AVAILABLE AT HTTPS://WAVERLY-ADVISORS.COM/. YOU SHOULD NOT ASSUME THAT ANY INFORMATION PROVIDED SERVES AS THE RECEIPT OF, OR AS A SUBSTITUTE FOR, PERSONALIZED INVESTMENT ADVICE FROM WAVERLY ADVISORS, LLC (“WAVERLY”). THIS INFORMATION SHOULD BE USED AS A REFERENCE ONLY. TALK TO YOUR WAVERLY ADVISOR, OR A PROFESSIONAL ADVISOR OF YOUR CHOOSING, FOR GUIDANCE SPECIFIC TO YOUR SITUATION. PLEASE NOTE: THE SCOPE OF THE SERVICES TO BE PROVIDED DEPENDS UPON THE NEEDS OF THE CLIENT AND THE TERMS OF THE ENGAGEMENT.

Share This Post

Back to Resources