#47 Downsizing – Our Retirement Strategy

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“Downsizing” is often cited as a retirement strategy to both reduce expenses and access the equity in a current “pre-retirement” home. This article will examine the concept of downsizing, and share the author’s personal strategy to downsize as part of his retirement plan.

Why do you live in a castle, when all you need is a cave?

When we launched our 5 year retirement plan, my wife and I decided to downsize in retirement. We went a step further, and bought our downsizing home several years ago. Our choice; a modest and comfortable 2,000 square foot log cabin about 10 miles South of the Tennessee border, in the town of Blue Ridge, GA.  It’s a picturesque place in the mountains of North Georgia, an area we love for it’s wide variety of outdoor activities (hiking, mountain biking, kayaking, camping, white water rafting, fly fishing, etc.).  We think it will be a perfect place from which to start our retirement.


Turns out we did something right. According to numerous articles I’ve read recently, it’s wise to get your mortgage on your retirement home while you’re still working, especially given the tighter mortgage requirements implemented after the 2008 meltdown.

When we bought our cabin, we calculated our price range by evaluating our equity in our existing “pre-retirement” home, and buying a house of lower value than our current home’s equity. For example, if our existing home were worth an estimated $300k, and we had a $120k remaining mortgage, our top price for our retirement home would be $180k ($300k market price – $120k mortgate = $180k equity). This decision would give us the flexibility to fully pay off our retirement home when we sell our primary residence, if we chose to do so.

The second thing we did, more by chance than strategy, was buy our second home in a hot vacation rental market. Blue Ridge is just 100 miles North of the 4.5 million people who call the Atlanta metropolitan area home. Turns out, a fair amount of those folks also like Blue Ridge, and often spend their vacations staying in rental cabins in the mountains.

We entered the rental market through various trial and error processes, and finally settled on using the online service of FlipKey.com. Here’s a LINK to our cabin’s rental site, with a screen shot pasted below :

FlipKey cabin rental

We initially considered using a “full service” rental company. However, after doing some homework we realized there was no need to pay the rental company ~15% of revenue when we could easily handle the process ourselves via FlipKey for a modest 3% charge.

The results have exceeded our expectations, with our rental income now essentially offsetting 100% of our second home’s expense, while allowing us the freedom to spend time there whenever our schedules allow. We’ve also been very fortunate with our renters, with no damage in over 3 years of rentals.

Next summer, we plan on putting our primary pre-retirement home on the market. If it sells quickly, we’ll move to the cabin next summer, and I’ll get a small apartment near the office to avoid the 100 mile commute during my last year or two of work. I’ll drive down Monday morning, and back home Thursday night.

We’ve intentionally chosen to sell the house a year prior to our earliest possible retirement date. Our logic: if we wait until a few months before retirement and the home takes longer than planned to sell, we run the risk of having to work longer than we’d prefer due to the mortgage obligation. If it sells quickly, we can implement the “downtown apartment” plan and take comfort in knowing exactly how much equity we’ve realized from the home sale as we finalize our retirement cash flow plan.

Bottom line: we were intentional in designing a detailed downsizing strategy as part of our 5 Year Retirement Plan, and we’re currently at the 50% implementation level. We know the path forward, and will be patient in implementing the remaining 50% over the next few years.

If your retirement plans include a downsizing move, take the time now to think through the process in detail. Determine where you’d like to live in retirement, and then start taking the steps to put yourself there.

Author:  Fritz Gilbert – Founder @ The Retirement Manifesto


  1. Excellent!!!! When I read your pieces I get so excited for you and your wife and the amazing retirement life you are going to enjoy because of all your hard work and preparation! I have passed along many of your posts to family and friends and love how they inspire and encourage folks to give some serious thought to steps they need to take now to create the life they want to have in retirement!

    1. Mona – thanks so much for your encouragement! I sincerely appreciate you sharing my articles – there are so many who can learn from those who have gone before. Thanks again!

  2. Fritz – How did you consider the fact you’ll be moving away from your local friends and maybe family? This was one of our biggest concerns when we relocated/downsized. We were fortunate to move into a neighborhood that we now have friends close enough to celebrate holidays and go on vacations with only a year later. Our sons are still a long ways away but we have no idea where they will settle down and how long they will stay in any one place. Fortunately it’s easy for family and friends to come visit and we live in an area (Central Florida) with lots to do when they are here. I am grateful that things are working out better than we had expected but it is something that future retirees should also consider when make the downsize plans.

    1. Bert,
      Fair points, all. In a way, we have a bit of an advantage in the fact that we’ve moved 9 times with my job, so relocation is less painful for us than many. Also, we’re only moving 2 hours away, so friends will be close enough to visit from time to time. As for family, only our daughter is in the area (our extended families are already scattered, with none close), and she’ll be finishing college so there’s no way to know where she’ll land. We’ll have time in retirement to visit her wherever she is, and hope she’s close. Good points, thanks for your comments.

  3. Very solid plan. I am sitting 8 years out from possible retirement from teaching, but have already starting envisioning downsizing. We live in a 100 year old house with 4 bed rooms and a big yard, and while I am proud of my house, it is a lot of work and money to maintain. We still can’t get used to the fact that my son only has a few months left using his bed room. He graduates high school in June, and my daughter only has 3 years after that. We don’t need this big a house now, and certainly won’t need it in 3 years. I like your idea of finding the right smaller house now, before selling your current house. Coordinating the sale and purchase of 2 houses at the same time seems rough. I like the idea of putting your new house in a location with rental demand.

    1. Jumpy – thanks for the comment. “8 years out” is certainly the right time frame to begin thinking about your plan, and a looming “empty nest” is certainly a significant enough event to consider downsizing. We bought our rental house when our daughter was about the age of your daughter, and it served us well.

      Good luck in your plans, keep me posted as things develop!

  4. Thanks for the article. We are 100% planning to move back to the country. I grew up there and miss it every time I go ‘home’. We have enough equity to make a straight swap. And over time, city properties should outperform values in the country, so no rush to buy now. Just need to build up the investments so we have the passive income to launch.

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