People who buy larger homes generally do for a reason: They need more space to accommodate their growing families. But when happens when your children get careers or families of their own and move out of your home? You may suddenly be sitting on far more space than you need, and you're stuck footing the bill for it.
Empty nesters are often advised to downsize their homes, and that makes sense. Even if your home is paid off by the time your grown kids move out, downsizing can save you a substantial amount of money when it comes to things like property taxes, insurance, and maintenance. But there are certain benefits to hanging onto a larger home, too, so before you rush to unload a larger property you're suddenly occupying solo or with only a spouse or partner, you'll want to keep certain things in mind.
The case for downsizing
The primary benefit of downsizing once your kids move out is simple: You stand to save money, and a lot of money at that. If you're nearing retirement without much in the way of savings, downsizing could be a good way to free up more cash to contribute to your IRA or 401k. Or you can take that money and invest it, whether in stocks, bonds, REITs, or an actual investment property, so that you have more flexibility later in life.
Downsizing could also make it possible for you to move someplace more desirable to you. Perhaps you moved to the suburbs years ago so your kids would have access to a great school system. If they're no longer school-aged, then you may not feel compelled to stay in your neighborhood. And if that's the case, and you're willing to live in a home with less square footage, that could make pricier locales -- say, exciting cities -- a possibility.
Why you may not want to downsize
It's easy to make the argument that once your kids leave the nest, you should rush to downsize. But there's a benefit to keeping that larger home. For one thing, it gives you the space to host family when your kids -- and their kids -- come to visit. And there's a value in that. Furthermore, you never know when your grown children might ask to move back home, whether to save money, make it easier to pay down their student debt, or simply get back on their feet after the loss of a job. If you sell that larger house and move into a one- or two-bedroom condo, that option will be off the table.
Furthermore, it could be the case that you simply like your neighborhood, and that smaller homes aren't available locally. If you're not eager to move elsewhere, keeping your current home seems logical.
And then there's the sentimental side of things. If you have an emotional attachment to your home, you may not want to sell it, even if you technically don't need all of the space. If you can comfortably afford to keep paying for your house, then you might as well spend your money as you'd like.
Speaking of money, it could also be that the time just isn’t right to sell your larger home for a good price. It always pays to check out comparable homes in your area and see what price they’re selling for before making that decision. If you own your home outright, you’ll want to maximize your profits by selling. And if you don’t have a lot of equity in your home, or are underwater on your mortgage, you’ll definitely want to make sure you don’t take a financial hit by selling at the wrong time.
What’s the right choice for you?
Clearly, the decision to downsize once your kids move out isn't clear cut, and there's no right or wrong answer. The key, therefore, is to weigh your personal pros and cons and see which ultimately take priority. Remember, too, that if you decide to keep your larger home, you can always try finding a tenant and renting out a portion of that space to bring in regular income. That will make your home more affordable, and it'll also give you the best of both worlds -- the option to stay put without the financial stress typically involved in owning a larger home.
Finally, if you’ve lived in the same home for a long time and aren’t sure you’ll enjoy living elsewhere, or will cope well with a smaller home, you can rent your existing home for a year, try someplace new, and then sell if it turns out you like your new digs or neighborhood. That way, you don’t rush into what ends up being a potentially bad decision.