Planning for retirement? Find out where you'll call home

Diane and Mike did what many retirees do. They sold their place in the city and downsized to a smaller, cheaper place out of town. But in their case, cheaper actually means free.

The couple now lives in the guest apartment on a large acreage near Calgary. In exchange for free rent on a small one-bedroom apartment on the property, they spend the winter taking care of the horses and cats, and checking in on the main house. They will put those savings to good use this summer, spending three months travelling around Europe. It might sound like an absurd idea, especially for two former professionals with a sizeable nest egg. But they are thrilled with their simple, ultra low-cost life.

Housing is one of the biggest expenses you’ll need to pay in retirement. Even if you’re mortgage-free you’re still on the hook for utilities, taxes and maintenance. So as you think about what your life might look like when you’re no longer drawing a pay cheque, challenging your assumptions about where you live could really pay off. Here are some ideas:

Downsize early

Selling the family home and moving somewhere smaller can reduce the amount of carpet you need to vacuum. It can also free up capital for you to use to fund your retirement plans, or purchase a property in a more hospitable climate. It’s a trade-off. But if you downsize at 60 years old, instead of 80, you’ll save on taxes and upkeep and be able to put your capital to work in other ways.

Why it pays to test-drive your retirement

Upsize creatively

The opposite approach would be to increase the size of your home, but in a way that gives you financial flexibility. You could help a family member buy a larger home, or add a separate apartment to enable multi-generational living. You could invest in a property with rental income potential. Or you could channel your inner Scandinavian and live communally with other retirees to build community and share expenses.

Rent proudly:

Sure, the housing market can be a great way to build wealth, especially in the last 10 years. But if you’re retired, building wealth isn’t your primary objective. Preserving it is. Renting gets a bad rap. It gives you flexibility, eliminates the chores associated with ownership, and can be cheaper. And again, you can invest or spend the capital you got from the sale of your home.

Move to the cottage – or sell it

Some retirees love the idea of spending more time at the cottage, or maybe even living there full time. If it enables you to sell your primary residence, or downsize to something cheaper, it could make a big difference. In fact, the financial benefit might be enough to build an addition, add a senior-friendly shower, and maybe even install some new cold-weather comforts—hot tub anyone? Another idea would to be sell the cottage. If the cottage was a place for family gatherings and those aren’t happening as much as expected, perhaps freeing up the capital would make good sense.

Is it better to buy or rent a cottage?

Balance finances and feelings

You’ll need to consider both the money and your mindset: What are the financial implications of the change you’re considering? If you work with a financial advisor, have them run some scenarios for you. What opportunities does it open up? And how does the new plan affect your peace of mind and excitement about the future?

Most people are resistant to change. And challenging your assumptions about where you live may push you outside of your comfort zone. But it is worth taking a deep breath and considering all potential options to see if a rethink might make a difference for your life in retirement.