Increase in Mid-Life Home Declutterers: Generation Preparing for Retirement by Selling Family Homes
A significant number of Britons aged between 45 and 60 years old, often referred to as Generation X, are turning to downsizing as a means to fund their retirement, according to recent data from the Office for National Statistics (ONS).
Over a third (38%) of future retirees in this age group are heading for an income below the recommended minimum living standard. To bridge this gap, many are increasingly dependent on property wealth, rather than solely relying on the state pension and private pensions. In fact, 78% of Generation X plan to sell their property and downsize to unlock cash from their family home to supplement their pension, as stated by Sarah Lloyd, commercial director at Annuity Ready.
Downsizing offers several advantages as a retirement funding strategy. By selling a larger home and moving to a smaller, less expensive property, Gen X can access significant funds that can supplement their retirement income. Smaller homes also tend to have lower maintenance, utility, and tax expenses, easing overall financial burdens. Simplifying living arrangements can be appealing in retirement, as it means less upkeep and more manageable living conditions.
However, downsizing comes with its challenges. The emotional impact of leaving a long-term family home can be psychologically difficult. Selling and buying property involves fees, taxes, and potential market timing risks. Moving to different areas might reduce access to familiar community networks and amenities. Market uncertainty also plays a role, as property values can fluctuate, affecting the expected financial benefit.
Gen X's financial situation is further complicated as they often have multiple financial responsibilities while approaching retirement. They face an immediate need to plan effectively, including how to manage inherited wealth and the "great wealth transfer" expected as Baby Boomers pass on assets.
Younger generations, such as Millennials and Gen Z, face substantial housing affordability challenges and are more likely to rent or live with family into retirement. They diversify their retirement income sources more pragmatically, combining pensions with property while remaining cautious about relying solely on housing wealth.
Research by Scottish Widows shows that downsizing can help address the mismatch between housing wealth and retirement funding strategies. However, there is a lack of suitable and desirable retirement housing for many who want to downsize. More than a quarter (28%) of Brits plan to use the value built up in their home to help fund their retirement, whether by downsizing or using equity release.
When it comes to borrowing in later life for equity release, the silos in regulated advice mean many people are not being presented with all their options. This highlights a major mismatch between resources and retirement funding strategies, as around 75% of the population own a property as they reach retirement, suggesting many people are sitting on a significant store of wealth.
In conclusion, downsizing remains a viable strategy primarily for Gen X as a bridge between pension reliance and property wealth, with important trade-offs that need careful consideration in retirement planning.
- To bridge the gap between their current income and the recommended minimum living standard, many Generation X individuals are depending on property wealth, instead of relying solely on state pensions and private pensions.
- In order to supplement their pension income, 78% of Generation X plan to sell their property and downsize, as suggested by Sarah Lloyd, commercial director at Annuity Ready.
- Downsizing can offer several financial benefits, such as accessing significant funds that can supplement retirement income, and lower maintenance, utility, and tax expenses.
- However, downsizing also presents challenges, including the emotional impact of leaving a long-term family home, market timing risks, reduced access to community networks and amenities, and potential fluctuations in property values.
