Why Many Americans Aren’t Downsizing Their Homes in Retirement

Someone might move because stairs have become difficult to navigate, for example, but choose a similarly sized single-story property rather than a much smaller home.

In other words, the goal may be better functionality, not simply less space.

The Difference Between Downsizing and Rightsizing

This is where the concept of rightsizing becomes useful.

Downsizing means deliberately moving into a smaller home.

Rightsizing is more about choosing a property that fits your current lifestyle and future needs.

For one retiree, that could mean moving from a 3,000-square-foot house to a 1,500-square-foot condominium.

For another, the right decision might be moving from a two-story house to a 2,000-square-foot single-story home.

The second person has not necessarily downsized dramatically, but the new home could be substantially better suited to aging.

This distinction is increasingly important as Americans live longer and spend more years in retirement.

A smaller house is not automatically a better retirement home.

A well-designed home with fewer stairs, accessible bathrooms, lower maintenance requirements, and proximity to healthcare or family could potentially be more valuable than simply reducing square footage.

What This Means for Retirement Planning

The biggest lesson for people planning retirement is that home equity should not automatically be treated as future retirement income from downsizing.

If your retirement plan assumes something like this:

Sell a large home → buy a smaller home → pocket the difference → use the money for retirement

you should make sure the numbers actually work in your local housing market.

Consider at least five factors.

1. Expected Sale Price

Estimate what your current home could realistically sell for rather than relying on optimistic online estimates.

2. Replacement Home Cost

Research the actual price of the type of home you would want after retirement.

A smaller property may not be proportionally cheaper.

3. Transaction Costs