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Episode 115 – Should You Downsize? Avoid These Costly Mistakes

For many retirees, downsizing sounds like the perfect plan. A smaller space. Less maintenance. More cash in your pocket. But without proper planning, it can also lead to financial pitfalls that eat away at your retirement security.

In Episode 115 of the Last Paycheck Podcast, Certified Financial Planners® Archie and Rob Hoxton break down the emotional and financial implications of downsizing. They share client stories, real-life scenarios, and their best advice for approaching this major life transition with eyes wide open.

Why Downsizing Is a Retirement Gamechanger

Many retirees are sitting on significant home equity, especially after years of rising real estate prices. Downsizing is often a key strategy to unlock that equity for retirement income or legacy goals. Whether you’re thinking about moving closer to grandkids, entering a retirement community, or just shedding square footage, the why behind your move matters.

But don’t let emotions take over. Acting too quickly—especially in today’s competitive housing market—can create major tax and liquidity issues.

Don’t Make These Mistakes

Here’s what Archie and Rob warn against:
1. Signing a Contract Before Talking to Your Advisor
It’s tempting to move fast when your dream home hits the market. But buying before you’ve sold your current home can leave you scrambling for funds—and potentially incurring massive capital gains if you sell investments in a taxable account.
2. Ignoring Better Short-Term Financing Options
If you’re between selling one home and buying another, consider a:
  • Home Equity Line of Credit (HELOC)
  • Securities-backed line of credit (from a brokerage account) These options can help you access liquidity without selling investments or triggering taxes.
3. Falling for Shady Lending Practices
Some lenders may suggest moving IRA assets to their firm to “qualify” for better loan terms. This is often unethical and may even be illegal. IRAs cannot be used as loan collateral, and no lender should require asset transfers just to issue a loan.
4. Overlooking Accessibility and Future Needs
Will your next home still serve you well at age 80 or 90? Ask yourself:
  • Can I live on one level?
  • Is the home accessible?
  • Are care services or retirement communities nearby?
  • Will I have to move again in a decade?
Rob and Archie compare the best retirement communities to going back to college—built-in meals, friends, and activities—with fewer keg stands.

The Bottom Line

Downsizing can absolutely help fund your retirement and simplify your life—but only when approached with the right strategy and support. Before making your move:

  • Map out your funding plan
  • Talk to your advisor
  • Understand the tax impacts
  • Look at the whole picture—your finances, your lifestyle, your future care

Need help building your downsizing game plan?

Download the Downsizing Decision Audit Worksheet to evaluate your readiness—and schedule a no-pressure consultation with our team.
Download The Checklist
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.