When is the right time to downsize?

Downsizing from a larger family home to a smaller one can be a strategic choice or a reluctant necessity when approaching retirement. It’s essential to weigh the reasons and potential consequences of such a move.

Triggers for Downsizing

Downsizing can be prompted by several factors. Changes in health, mobility, and lifestyle goals may render a large home impractical. For instance, maintaining a sizeable property can become burdensome in later years. The death of a partner might also make the family home feel too large and difficult to manage. Some retirees prefer a “lock and leave” residence to facilitate extensive travel. Others might need to downsize due to financial pressures, such as retiring with a mortgage or concerns about having sufficient income during retirement.

Planning for the Downsize

With adequate time and planning, downsizing can be financially beneficial and align with personal goals. While many people are reluctant to leave their family homes, accessing the equity in their property might be necessary to fund their retirement. The family home is excluded from Centrelink’s asset assessment, which can be advantageous. However, balancing this with the need to fund living expenses is crucial. Planning the timing of retirement and the move allows for a thoughtful search for the right home and a smoother transition. It’s important to note that releasing equity through downsizing can make more assets assessable for Centrelink purposes.

Downsizer Contributions into Superannuation

If you are 55 or older, you may contribute up to $300,000 from the sale (or part sale) of your home into your superannuation fund as a downsizer contribution. This non-concessional contribution does not count towards the annual contribution cap and provides a tax-effective way to boost retirement savings. To qualify, you or your spouse must have owned the home for at least 10 years, and contributions must be made within 90 days of receiving the sale proceeds. While superannuation provides as beneficial tax environment for retirement funds, it’s important to consider individual circumstances before making such contributions.

The Home and Financing Aged Care

When moving into aged care, selling your home might be necessary to fund accommodation payments. Renting out the home is an alternative to retain it within the family estate, though this can place maintenance responsibilities on family members. For couples, if one spouse moves into aged care and the other remains in the home, the property is exempt from the assets test, allowing for a reassessment of living arrangements.

Engaging a CERTIFIED FINANCIAL PLANNER® professional can provide valuable guidance in planning for downsizing, ensuring that both financial and lifestyle goals are met effectively.

The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA.  The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article.  Nor does it endorse or assume responsibility for the information accessible via any links provided in the article. Please consider seeking advice from a qualified professional to ascertain how the information in this article and the links provided may relate to you.


Dawn is the winner of IFA’s Excellence Award 2023, Industry Thought Leader of the Year 2023, Transformation of the Year 2022, Great Advice Award 2021, 2019 Female Excellence in Advice and named one of Australia’s 50 most influential Advisers from 2020-23. She is passionate about collaborating with people to help them achieve their life goals and describes her financial advice style as heart led, where financial knowledge and goals are achieved through an inclusive, trusted relationship between adviser and client. She has spearheaded the launch of the Start Well Program and Podcast at The Wealth Designers which aims to lift financial literacy for children of clients and young people in the community. Dawn is a part time PhD candidate at Edith Cowan University, researching the superannuation behaviour of Gen Z. Dawn is also the podcast host of Your Money Story which shares underrepresented money stories within the community
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