Is Downsizing Worth It for Retirees? The Real Math

A smaller house sounds cheaper, but the next home is often no smaller. You can see it in the National Association of Realtors’ 2026 report. Among sellers 61 to 70 who bought again, the typical next home was the same size as the old one. That means the move alone doesn’t lower your bills. If money is the reason, your yearly savings also have to pay back what you spend to sell and move.

So price both homes on paper before you list anything. I’ve trained real estate agents for 15 years, including the ones who sit across the table for this move. The families who end up happy with the choice priced both homes first.

This is one piece of my guide on how to sell your home after 65. If you’re still deciding whether to sell at all, start with my article on whether to sell at 65 or stay.

What you’ll walk away with:

• What your home costs you each year, even if it’s paid off

• What it costs to sell and move, and how long a move takes to pay for itself

• The tax rule that decides what you keep

• Two choices besides a smaller house, and when staying is the better answer

• One test that tells you if a home fits your life

Should I downsize my house in retirement?

Downsize if the move gives you a lower yearly cost, a better ordinary day or both. If it gives you neither, stay where you are.

The word itself gets in the way. “Downsizing” sounds like loss. If the word stings, that makes sense. You built a life in that house. I say “right-sizing” because it describes fit. The house you bought when the kids were home was right then. A different house can be right now, because the life you live in it has changed.

Right-sizing usually looks like one of these:

• A smaller single-family home nearby, with the main bedroom on the first floor

• A condo or townhouse, where someone else handles the outside upkeep

• An active adult community, with neighbors at a similar stage of life

Any of the three can cost less than your house, or more. You only find out which by pricing it.

Is downsizing worth it financially?

Downsizing in retirement pays off when staying costs more each year than the next home will. The gap also has to cover what you pay to sell and move. You find that out with six buckets, three costs of staying and three costs of going. Five are numbers and one is a list. Write them on one sheet of paper.

The three costs of staying, each year.

1. The bills you can see. Add up the last twelve months of property tax, insurance, utilities and repairs. Add your mortgage payments if you still have them.

2. The upkeep you can’t see yet. My rule of thumb is 1.5 percent of what your home is worth, every year. On a $650,000 home that is $9,750 a year for things like the roof and the furnace.

3. Care and changes to the house. Think five years ahead and price grab bars, a stair lift or help at home. CareScout’s 2025 Cost of Care Survey puts the typical rate for a caregiver at home at $35 an hour. If you needed help four hours a day, five days a week, that would be $36,400 a year.

A paid-off house is paid for. It isn’t free.

The three costs of going.

1. Selling. My working estimate is 8 to 12 percent of the sale price, once you count commission, closing costs and repairs. On a $650,000 sale that is $52,000 to $78,000.

2. Moving and setting up the next home. I tell people to plan on $20,000 to $80,000. Where you land in that range comes down to how far you go and how much comes with you.

3. What you leave behind. Write down the people and routines you would miss, and how you would replace them.

Then price one year in the next home the same way. Count any mortgage or rent, the tax, insurance, fees, utilities and upkeep. Add any care or help at home you would still need there.

Now do the math. Take your yearly cost of staying and subtract a year in the next home. That is what you save each year. Divide your selling and moving costs by that number. The answer is how many years the move takes to pay for itself.

Here is that math on the $650,000 home, using my estimates. Selling and moving add up to $72,000 to $158,000, one time. If the next home saves you $12,000 a year, the move pays for itself in 6 to 13 years. If it saves you nothing, the move never pays for itself in dollars.

Then write down one more number. Take what you would clear from the sale, after selling costs and any mortgage. Subtract the price of the next home and your moving costs. What is left is the money the move frees up. If the next home costs as much as yours sells for, the move frees up nothing. The selling and moving costs come out of your savings instead.

Any money the move frees up can earn interest or pay for care later. Or it can go to family while you are here to see them use it. Before you give money to family, ask a CPA or an elder law attorney how it affects your taxes and your options for paying for care.

None of this is advice to move. The math is there so that whatever you decide, you decide with your eyes open.

What are the hidden costs of downsizing?

The hidden costs of downsizing are a new monthly fee and a next home that is no cheaper to run. Selling and moving are the costs you can see coming, and they are in the buckets above.

In the Realtors’ report, the typical seller aged 71 to 79 sold a home of about 2,000 square feet. The typical home they bought was about 1,900 square feet. So the next home is often only a little smaller, and its bills don’t shrink on their own.

Then there is the fee. Condos and many newer communities charge one every month. The U.S. Census Bureau looked at homeowners who pay a condo or homeowners association fee. The typical fee was $135 a month in 2024. If you’d buy the next home with cash, look at what owners with no mortgage paid. Their typical fee was $184 a month, about $2,200 a year. About 3 million homes paid more than $500 a month, which is more than $6,000 a year.

Add the fee to your cost of a year in the next home. If that number isn’t lower than your cost of staying, the move has to earn its place another way.

How much of the sale do I keep after tax?

You may owe no federal tax on the gain. That is because the IRS lets you leave part or all of it out of your income. IRS Topic 701 says you may exclude up to $250,000 of gain when you sell your main home. If you are married and file a joint return, it is up to $500,000. You must have owned the home and lived in it for two of the last five years. IRS Publication 523 has the full test.

The gain is smaller than the sale price. Start with the sale price and take off your selling costs. Then take off what you paid for the house and what you spent improving it. What is left is the gain.

A home you leave to your children is treated differently when they sell it. Under IRS Publication 551, the gain is generally figured from what the home was worth on the date of death. It is not figured from what you paid. If leaving the house to your children is part of your plan, ask a CPA how that rule applies.

The full home sale tax rules after 65, including the surviving spouse rule and time in a care facility, are in my guide to selling your home after 65.

(This is general education and not tax advice. Take your own numbers to a CPA before you sell.)

What are the biggest downsizing regrets?

These are the five I’d head off first. They’re about the new fees, going too small, moving away from your people, leaving the belongings for last and deciding in a hurry. Each one has a fix, and every fix happens before the move.

Not counting the new fees

Ask what the monthly fee covers and what it was three years ago. That shows you whether it has been rising, and how fast.

Going too small

List what you do every week. If your week includes a workbench or a garden, the next home needs one too. Then count who stays over. If the grandchildren sleep at your house, the next one needs a bed for them.

Moving away from your people

In the Realtors’ report, sellers aged 71 to 79 most often sold to be closer to friends or family. That was the main reason for 41 percent. “Home is too large” was the main reason for 15 percent. That is why you choose the place first and the floor plan second.

Leaving the belongings for last

My rule of thumb is to start three to six months before the move. Give things to family first, while you can tell them the story behind each one.

Deciding in a hurry

A move made under pressure often gets made by someone else. Run your numbers now, while nothing is forcing you, so the choice stays yours.

What are the alternatives to downsizing into a smaller house?

Buying a smaller home is one of three ways to go. The other two are moving in with family and renting.

Moving in with family

Harvard’s Joint Center for Housing Studies counted adults 65 and over who live with a grown relative from another generation, like a grown child. In 2021 there were 10.9 million. You’d be far from the only one.

Living together works when the plan is written down from day one. One page is enough, and it answers four questions:

• Who sleeps where?

• Who cooks what?

• What does privacy look like?

• What happens if it stops working?

A widower I write about in The Senior Partner, homeowner edition, did this with his daughter’s family. The plan was a casita, a small separate home in their backyard. They spent three evenings putting it on paper before a single box was packed.

It goes badly when nobody plans it. A “temporary” stay becomes permanent and nobody says so out loud.

My article on how to help a parent downsize without taking over is written for your children. Send it to them if they are part of this.

Should I sell my house and rent in retirement?

It can be a good trade. Renting frees the money tied up in your house and hands the upkeep to a landlord. It is a poor fit if leaving a paid-off home to your kids matters to you.

Renting gets the least credit of the three, yet many people choose it. The Harvard report found that in 2021, 54 percent of movers 65 and over rented their new home. Renting does four things for you:

• Upkeep becomes the landlord’s job

• The money tied up in your house is free to use

• You can move again if your needs change

• You stop being a homeowner, which is a job

Renting for a year is also a way to try a place before you buy there.

Price each of the three the same way you priced your house, one year at a time.

When should I not downsize in retirement?

Don’t downsize when your six buckets favor staying and you can make the house work for you. Four signs point that way.

• The next home would cost as much to run as this one.

• The move would take more years to pay for itself than you plan to live there.

• The people you count on are near the house you have now.

• Leaving the house to your children matters more to you than the cash.

Staying put is a fine answer. It is also a plan, and a plan takes some setup. Line up the changes to the house and the help at home before you need them.

The one thing I’d ask you not to do is drift. When the numbers never get run, an offhand comment from a relative becomes the plan.

How do I decide if downsizing is right for me?

Use the Tuesday morning test. Ask what you want an ordinary Tuesday morning to look like five years from now. I say Tuesday and not a holiday, because Tuesday morning is most of your life.

• Where do you wake up?

• What do you see out the window?

• Who is nearby?

• How far are the coffee, the doctor and a walk you would take?

The home that gives you the best answer is usually the right one. Check it against your six buckets. If the answer is to stay for now, put a date on the calendar two years out. Then run the test and your six buckets again. Your costs and your home’s price will have moved by then.

If the answer is to move, read what to ask a senior real estate agent before you call one.

It’s your house and it’s your decision. With the numbers and the test on paper, you make it on your own terms.

Questions people ask

At what age should seniors downsize?

There isn’t one right age. No birthday makes this choice, and the IRS home sale test doesn’t ask your age. Selling later in life is common. The typical home seller is now 64, the oldest age the National Association of Realtors has recorded. Run your six buckets every two years. When a year in the next home costs less, or fits your ordinary Tuesday better, that’s your time. My article on whether to sell at 65 or stay shows you how to run both numbers.

How much money does downsizing save in retirement?

There is no standard figure, because what you save is the gap between two homes. What you save each year is your three costs of staying minus a year in the next home. Count any care you would still need there, too. Set that against your selling and moving costs to see how many years the move takes to pay for itself.

What is the difference between downsizing and right-sizing?

Downsizing means a smaller home. Right-sizing means a home that fits the life you live now. The right home can be smaller or the same size, and you can own it or rent it.

What is the ideal home size for a retired couple?

There is no ideal size. Pick the size your week needs, then check what it costs to live there.

Where the numbers come from

• The size of the home sold and bought, by age of seller, and the main reason for selling. National Association of Realtors, 2026 Home Buyers and Sellers Generational Trends Report, Exhibits 6-9 and 6-10, pages 87 and 88. The association’s own download is free for members and sold to everyone else. The links in this article open the full report as posted by Inman, a real estate news site.

• The typical home seller is 64, the oldest the survey has recorded. National Association of Realtors, 2025 Profile of Home Buyers and Sellers, 2025.

• The $35 an hour national median for a caregiver at home. CareScout, 2025 Cost of Care Survey, released March 2026.

• Condo and homeowners association fees in 2024, with and without a mortgage. U.S. Census Bureau, Nearly a Quarter of Homeowners Paid Condo or HOA Fees in 2024, September 11, 2025.

• The $250,000 and $500,000 exclusion. Internal Revenue Service, Topic no. 701, Sale of your home, 2026.

• The two-of-five-year test and how the gain is figured. Internal Revenue Service, Publication 523, Selling Your Home, 2025 edition.

• How the gain on an inherited home is figured. Internal Revenue Service, Publication 551, Basis of Assets, 2025.

• Adults 65 and over living with family, and movers 65 and over who rent. Harvard Joint Center for Housing Studies, Housing America’s Older Adults 2023, pages 4 and 8.

• Four numbers in this article are the working figures I use in The Senior Partner, homeowner edition. They are the 1.5 percent, the 8 to 12 percent, the $20,000 to $80,000 and the three to six months. Each is a rule of thumb, not a result from a study. The $12,000 a year is an example and not a typical figure.

Figures checked October 2026.