Is Downsizing in Retirement a Good Idea?

What Does Downsizing Actually Mean?

Downsizing usually means selling your current home and moving to a smaller, more manageable property. For some, it’s about reducing space.

For others, it’s about moving to a cheaper area or into a home that’s easier to maintain.

Whatever your reason, the main goal is often to unlock some of the money tied up in your property—and to make life a bit simpler in later years.

Why Do People Downsize in Retirement?

Here are some of the main reasons downsizing is so common:

Freeing Up Equity

One of the biggest benefits is financial. Selling a larger home and moving to something smaller could leave you with a healthy cash lump sum.

For example, Rightmove data shows that homeowners moving from a five-bed to a three-bed home could release an average of nearly £500,000. In London, that figure climbs to over £1 million.

That money could be used to:

• Boost your retirement income
• Pay off debts or clear your mortgage
• Fund home improvements or future care
• Enjoy holidays or upgrade your car
• Help your children or grandchildren financially

Lower Bills and Less Upkeep

A smaller home typically means:

• Reduced utility bills
• Lower council tax
• Less maintenance and repair work

Downsizing into a more energy-efficient property could also cut energy bills significantly. Rightmove estimates suggest you could save over £3,800 a year by moving from an older five-bedroom home to a modern, three-bedroom property with a better energy rating.

Easier Living

Larger homes and gardens can become harder to manage over time. Downsizing into a property with fewer stairs, smaller outdoor areas, or single-level living can reduce the physical demands of home ownership and give you more time to enjoy your retirement.

Being Closer to Loved Ones

If you currently live far from family or friends, moving closer can be a real benefit. It can make visits easier, reduce feelings of isolation, and help you stay connected to the people who matter most.

Saga research shows that around 25% of grandparents provide around 36 hours of childcare per month. Moving closer to family can make this easier—and more rewarding.

When Downsizing Might Not Be Right for You

While the financial and lifestyle benefits are appealing, downsizing isn’t always the right move. Here are some things to consider:

Overestimating the Financial Benefit

Downsizing won’t always leave you with as much money as you might hope. Once you factor in costs like estate agent fees, stamp duty, legal bills and removals, the savings can quickly shrink. According to Unbiased, the average cost of moving home is around £10,000.

And while smaller homes may be cheaper in theory, popular options like bungalows and retirement flats often come with a premium.

Leaving a Much-Loved Home

Selling the family home can be emotionally difficult—especially if you’ve lived there for decades. Letting go of the memories, space and familiar surroundings can be a challenge.

This doesn’t mean you shouldn’t downsize, but it’s something to think about carefully.

Losing Your Local Support Network

If you move too far, you may find yourself away from neighbours, friends or familiar community services. This could make you feel isolated, especially as you get older. If you do decide to move, consider choosing a location that still keeps you connected to the people and places you value.

Should You Rent or Buy After Downsizing?

Once you’ve sold your home, you’ll need to decide whether to rent or buy your next one. The right choice depends on your lifestyle, goals, and financial situation.

Renting offers more flexibility, but owning gives security and control. It’s worth thinking through both options carefully before deciding.

Key Things to Consider Before Downsizing

Location

Think about whether you want to stay close to family, friends and familiar services—or whether a change of scenery appeals. Consider proximity to essentials like:

• Public transport
• Healthcare services
• Local shops

If you’re thinking about moving to a rural or coastal area, check how easy it will be to access everything you’ll need as you age.

Cost Breakdown

Start by getting a valuation on your current home. Then look at the cost of properties you’d be happy to live in. Don’t forget to factor in:

• Estate agent and legal fees
• Stamp duty
• Removal costs
• Renovation or adaptation work on the new home

Saga has a useful guide on the hidden costs of downsizing if you want to explore this further.

Inheritance Tax Considerations

If you’re thinking about downsizing as part of your inheritance planning, you may still be able to take advantage of the Residence Nil Rate Band (RNRB).

Currently, this allows you to pass on up to £500,000 tax-free—or £1 million as a couple—if you leave your home to children or grandchildren. Even if you sell your home or move to a less valuable one, the downsizing addition may still allow your estate to benefit from the full allowance.

Professional advice is strongly recommended when planning around inheritance tax.

Is Your New Home Future-Proof?

It’s a good idea to look for a home that will meet your needs not just now, but in the years ahead. Features that can make a big difference include:

• Level access
• Fewer or no stairs
• Walk-in showers or wet rooms
• Wider doorways

Ground-floor flats or bungalows are often ideal if you’re looking for somewhere with fewer mobility challenges.

Getting Ready to Declutter

Moving to a smaller property usually means letting go of some belongings. Give yourself plenty of time to sort through your things. You could:

• Sell items online
• Donate to charity shops
• Offer things to friends or family

Try to pace yourself to avoid feeling overwhelmed.

Alternatives to Downsizing

If you’d rather stay in your current home, there are other ways to release cash in retirement.

Equity Release

Equity release allows homeowners aged 55+ to unlock tax-free cash from their property without needing to move.

The most common option is a lifetime mortgage. There are no monthly repayments—instead, the interest compounds and the loan is repaid when the property is eventually sold.

Equity release reduces the value of your estate and may affect means-tested benefits, so it’s important to get advice before proceeding.

Retirement Interest-Only Mortgages (RIOs)

With a RIO mortgage, you pay off the interest each month, and the capital is repaid when the property is sold. This can be a good option if you want to stay in your home and are happy making monthly payments.

Final Thoughts

Downsizing can be a smart move in retirement—offering financial flexibility, easier living, and the chance to stay closer to the people who matter.

But it’s not right for everyone.

Take time to explore your options, understand the full costs involved, and speak to an adviser if needed. That way, you can make the decision that’s right for you, both now and in the future.