Home equity and the home are the most neglected and misunderstood factors in retirement planning.

Since home equity is one of the largest assets for many people, a lot of money is left on the table.

Surveys indicate that about 40% of baby boomers plan to move sometime after retiring. Many people assume they’ll downsize to a smaller home.

The equity extracted from the sale of their old homes and the lower living expenses of the new homes will help fund retirement.

It’s a good plan, but many people don’t execute it well.

Here are some tips I’ve gleaned over the years for downsizing in retirement:

Before putting your old home up for sale and searching for a new home, consider whether you’ll really be able to downsize.

With married couples, often one spouse is gung ho for downsizing while the other is tepid at best, quietly going along.

Be sure this is really what both spouses want, and that one spouse isn’t going along simply to avoid conflict.

It’s a long-term decision, and you don’t want one spouse depressed or resentful because of the change.

For some people, the old home is a status symbol, a measure of self-worth, accomplishment, or something similar.

Even if they don’t say so, they fear downsizing could be seen as an indication that they aren’t as well off as they want people to think.

After considering the emotions, there are other factors to think about.

There’s a lot of work involved in downsizing. Many couples have decades of belongings accumulated in their homes. Winnowing all that down takes a lot of time and physical effort.

It can also be a very emotional experience deciding which items to keep and which to part with.

Once it’s decided to part with an item, you also have to consider whether to donate it to charity, sell it, throw it away, or try to convince family or friends to take it.

People who’ve streamlined their possessions tell me that you should begin this process at least a couple of years before you plan to move.

Of course, preparing the old home for sale could involve a lot of additional work.

The amount of work required depends on how well you’ve maintained the home, the state of your local real estate market, and the philosophy of your real estate agent.

Most retirees or near-retirees will need contractors to perform all or most of the work, so it will take time and cost money.

Downsizing could also affect your social or family life.

When the children and grandchildren live in the same area as you, it might not be a problem.

When the children live somewhere else, they might visit less often or make shorter visits when your new home isn’t large enough to comfortably accommodate the full family.

Downsizing also could mean you won’t be able to take in an adult child who needs temporary help, or a parent who no longer can live alone.

Consider all these factors carefully before deciding to downsize.

Once you’re convinced the lifestyle changes from downsizing are acceptable, carefully run the numbers to see the financial effects of downsizing.

an article we read