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Posted by on Dec 11, 2012 in Boomers, Sellers Waiting For Comeback, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links | 10 comments | Print Print


The McMansion generation is in downsizing mode.

Millions of Americans age 50 and older are looking around their spacious homes and are deciding they don’t need all that room anymore. The kids are gone, maybe a spouse, too. And they could really use the money from a sale to bulk up their retirement funds.

But downsizing isn’t always simple, painless—or even all that beneficial financially. With the real-estate market still fragile, many baby boomers are getting a lot less than they expected for the old homestead. All too often, they have little cash left over after buying a new place, and their monthly expenses don’t fall as much as they thought—or may even rise instead.

Then there’s the emotional pain of scaling back. Many baby boomers are finding they lack the stomach or stamina to dismantle their lives. They can’t bear to sort through or part with all those boxes in the basement, or argue with the adult children who want to keep the house where they grew up. Sometimes they downsize only to find they miss their old lifestyle and stuff.

“Don’t make any broad assumptions that downsizing is going to save your retirement,” cautions Jeff Bogue, a certified financial planner in Wells, Maine. “It may help your finances, but I’ve seen plenty of people who find that it doesn’t pan out as they had thought.”

It’s a challenge lots of boomers are going to face. All told, more than 40% of Americans ages 50 to 64 plan to move within the next five years or so, according to the Demand Institute, which is jointly operated by the Conference Board and Nielsen Co.

Dominated by “the many baby boomers who delayed retirement during the recession,” prospective downsizers exceed would-be “upsizers” by nearly 3 to 1, says Louise Keely, chief research officer at the Demand Institute.

Here’s a look at some of the problems you might face as you scale down—and how to overcome them.


Many baby boomers are looking to downsize to make up lost ground in their retirement portfolios. But even when the housing market was robust, many downsizers had little left over after paying off the mortgage and covering moving costs.

Consider a study from Boston College’s Center for Retirement Research that looked at older adults who moved in the 1990s and early 2000s due to a change in circumstances, such as a job loss or divorce. The report found that while these movers generally chose to downsize, they didn’t get much in the way of a financial windfall. In fact, on average, they plowed almost all of their home equity into their new homes, freeing up an average of just $26,000.

These days, with the real-estate market still depressed in many parts of the country, missteps can be especially costly, says Honore Frumentino, a real-estate agent at Prudential Rubloff in Northbrook, Ill.

Marian Crapanzano and her husband, John, both 67, recently forfeited a deposit on a condominium in Rockland County, N.Y., because they couldn’t sell their three-bedroom home in nearby Stony Point. “We had our house on the market for eight or nine months, and we didn’t have any offers,” says Ms. Crapanzano, a paralegal. “People weren’t even coming to look at it.”

To protect against getting stuck with two houses, downsizers should sell one before buying the next, “even if it means moving twice,” says Jeanne Bradford-Odorico, a financial adviser in San Diego.

The real-estate market can also trap those who move only to find they aren’t crazy about their new surroundings. That’s something Joanne Abrahamian, 60, discovered when she downsized to a three-bedroom home on a golf course in Kanab, Utah, in 2008. A retired executive assistant for Verizon Communications Inc. from New Jersey, she had vacationed in Kanab and liked the area’s lower cost of living, but she didn’t appreciate just how remote the town of 4,000 is. “I have to drive an hour and a half to do my major shopping,” says Ms. Abrahamian, who says she also misses the “seasons and the ocean.”

Because of Kanab’s depressed real-estate market, however, she is stuck. Since 2008, the value of her new home has plunged to $195,000 from $295,000. As a result, Ms. Abrahamian’s mortgage now exceeds her home’s value by $34,000.


Putting a big house on the market, and clearing out decades’ worth of possessions, can be cathartic. But for most, it is overwhelming.

Among homeowners age 60-plus, 60% recently told researchers from the University of Michigan’s Health and Retirement Study that they have “more things than they need,” according to David Ekerdt, director of the Gerontology Center at the University of Kansas, who crunched the numbers. Three-quarters said the sheer volume of their possessions has made them “somewhat” or “very” reluctant to move.

For others, emotional attachments get in the way. Dan Garramone, 59, says he started to think about selling his six-bedroom home in Deerfield, Ill., shortly after his wife, Debra, died five years ago. But whenever he raised the topic with his four children—now ages 23 to 28—he says he “got flak.”

“It’s their childhood home and they were in transition, trying to figure out what they were going to do after college,” Mr. Garramone says. “The last thing they needed was yet another change.”

In May, with his youngest child preparing to leave the nest, he sold the house and moved to a two-bedroom condo in nearby Wheeling, Ill. To make the move easier for his children, he put his wife’s silver, crystal and furniture in storage and promised to pay the $90-a-month rent for a year. “After that,” he says, “they will have to decide what to do.”

Betsy Rubin, 57, has been downsizing since 2003, when she and her second husband, Michael Aaron, 56, combined households. The following year, Ms. Rubin’s mother died, leaving the Chicago resident with the task of emptying her parents’ apartment. “I’m sentimental,” says Ms. Rubin, who still has about 50 boxes in the basement of her townhouse. “Things take on a deep meaning for me because of their connections to people, places and events.”

Ms. Rubin says she has relied for assistance on her cousin, Alice Abraham, 51, a senior-move manager in Jamaica, Vt. To help Ms. Rubin part with a broken rocking chair that had been in her childhood room, Ms. Abraham says, she “gradually inched the chair closer to the front door” until, one day, it was on the sidewalk.

Marcia Ramsland, a professional organizer and author in San Diego, suggests taking pictures of a home before dismantling it. “You save the memories and don’t have to save all the stuff,” she says.


The potential problems don’t end once downsizers move into their snug new abodes. With fewer square feet to heat, mow and pay property taxes on, many downsizers assume they’ll slash their monthly expenses. But unless you’re willing to move to a part of the country with a lower cost of living, the savings may prove modest, cautions Beth Blecker, CEO of a financial-planning firm in Pearl River, N.Y.

Among older Americans who pull up stakes, a “large majority” settle within 20 miles of their previous homes, according to a 2009 Boston College study. While this lets them stay close to friends and family, it also leaves them paying similar prices for food, utilities and other essentials. “If you move to a retirement community with a pool and fitness center, your monthly expenses may even go up,” Ms. Blecker adds.

Indeed, those who downsize often find it difficult to cut back on the lifestyles to which they have become accustomed. “Most people are really attached to their lifestyles,” says Esteban Calvo, co-author of the Boston College study that looked at home equity and now an associate professor at Diego Portales University in Santiago, Chile. “They tend to look for a home that will allow them to maintain the same routines.”

In 2011, Jim and Donna Hayes sold, for $400,000, a 2,300-square-foot home with a pool and basketball court they had built in Cherry Valley, Calif. With Jim turning 80, they figured it was also time to unload their motorcycles, jet skis, four-wheelers and recreational vehicle.

“We decided we were through with them,” says Ms. Hayes, 72.

But shortly after moving to an age-restricted community three miles away, the couple started to re-create aspects of their old life. They spent about $50,000 to install plantation shutters, tile floors, an entertainment system and new appliances in the two-bedroom home that had cost them $245,000.

They also bought a 2012 Holiday Rambler Ambassador for $230,000 and paid more than $50,000 for a storage facility. “You have to keep moving,” says Ms. Hayes. “You can’t just sit around the house.”

The Hayeses say they have no regrets, since the move has freed them from the responsibility of maintaining a large property. James Beman, the couple’s grandson and financial adviser, says the spending hasn’t put his grandparents at risk financially.

“But with interest rates being so low, they are definitely eating into their assets,” he adds. “Downsizing isn’t always going to save money. In the end, it doesn’t always make financial sense.”


One of the biggest problems people encounter after downsizing is also one of the most obvious: It can be crowded. “You’re used to all this space, and suddenly, it feels like you’re living in a milk carton because you kept too much,” says Julie Hall, an estate-sale professional and author from Charlotte, N.C.

Susie and Ron DePaul knew space would be tight when they moved east to be near their daughter and son-in-law. They were leaving a three-bedroom home in San Diego for an 800-square-foot furnished rental in Brooklyn, N.Y. So, they took only what they could cram into the Volvo sedan they drove cross-country in June. The native Californians sold or gave away everything else, including Ms. DePaul’s aunt’s antique end tables and their bedroom set.

“We have plenty of room for what we brought,” says the 61-year-old Ms. DePaul, a retired elementary-school principal. But the couple has less privacy than they’re used to. “It’s hard not to be able to go into the backyard when I feel I need to get away,” Ms. DePaul says.

In recent years, new breeds of professionals have sprung up to help people declutter, organize and move their possessions. Among their recommendations: sort your belongings a little at a time so you don’t get overwhelmed; don’t make judgments about what your spouse should or should not keep; and take only what fits your current lifestyle. “If you don’t entertain anymore, don’t bring a ton of serving platters to your new home,” says Ann Bass, a senior-move manager in Asheville, N.C.

Ms. Bass, 60, also advises clients to arrange their homes so each person has some personal space. She speaks from her own experience: In 1998, Ms. Bass and her husband, Bill, a retired engineer, sold their 1,700-square-foot home near Scranton, Pa., and relocated to a smaller house in North Carolina.

In the process, Mr. Bass, now 81, traded a 28-by-44-foot garage for a “man cave” in the basement, and Ms. Bass installed her sewing machine and home-based office in the guest room.

But in September, these arrangements were upended when Ms. Bass’s 96-year-old mother moved into the guest room. To prepare for her mother’s arrival, Ms. Bass purged clothes, record albums and sheet music. Then she reorganized the family room to carve out space for her office and hobbies.

“Everyone still has a little corner,” she says.


  1. What about Prop 13? If you have a 1980 assessment basis you’ll actually pay much higher property taxes even on a much smaller house.


  2. The author assumes that down-sizing means going down in price too – which if moving to the right California county means you can take your old tax basis with you (San Diego included).

    But they didn’t talk to any realtors.

    If someone wants to downsize from a McMansion to a one-story, they really need to leave town – and probably leave the state – to make it worth it.

    The smaller one-story homes in nearby neighborhoods aren’t going to be that much cheaper that there will be a financial windfall.

    If you are moving to free equity for the future living expenses, downsize enough that it lasts you for the duration.


  3. I think a lot of them will stay in place and use reverse mortgages to prevent the loss of living standards. Figure inheritances will be a thing of the past except for the rich.


  4. El Dorado County just joined the list of Prop 90 counties. I am in the process of doing a Prop 60 transfer and the layers of bureaucracy can be daunting. I need the approval of four different people to get it approved. But who said government was efficient.
    As a side note, if you are a married couple you can do it one time. But if you are a gay couple they can do it twice. Don’t know how that was enacted.


  5. These two posts combine together nicely, and answer some of the inventory question.

    Not as many people are leaving the state, and downsizing is much tougher than it sounds.

    There is probably a wide variety in the types of people who are actually moving, but I think we can describe the CA real estate market with a single phrase (given the high taxes and housing costs):

    Rich(er) people replacing poor people.


  6. From my observations around here in the Palos Verdes area of Los Angeles County, the Chinese are buying. Big time. And the Mercedes Benz dealership is doing brisk business. It kind of reminds me of what happened in the 80’s with the Japanese. Who own Pebble Beach now?


  7. Don’t you have to be 65 or something to move your tax basis with you? Are there other restrictions?


  8. 55 is the limit.


  9. Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever a change in ownership takes place. This usually results in higher property taxes for the homebuyer.

    In November 1988, the state‘s voters approved Proposition 90, which is designed to induce greater turnover of homes owned by senior citizens.

    The measure provides anyone over the age of 55 with relief from Proposition 13 by allowing them to move from one county to another without undergoing a change in their basic property taxes.

    The first rule is that one spouse or owner must be 55 years or older.

    Second you need to confirm that the County you want to move into participates in the transfer of the basis – this is Prop 90. Many Counties will allow you to transfer within the County – this is Prop 60, and take your basis with you, subject to conditions, but only a few allow you to transfer from one County to another County. Call the County Assessors Office to be sure because occasionally Counties will change their acceptance policy.

    CONDITIONS: Props 60 and 90 apply if you “trade down” (i.e. the new home costs less than the sales price of the old home).

    > If you buy a New Home 1st; then sell the Old Home, you must buy down in price.

    > If you sell the Old Home 1st; then buy the New Home:

    In 1st 365 days after the sale of Old Home, you may go up 5% in the purchase price of New Home.

    If you buy a New Home more than 1 year from the sale of Old Home, but less than 2 years, you may go up 10%.

    Ex: If you sell your home for $2 million then within the first year you can buy a home for $2.1 Million OR you could buy a maximum $2.2 million between 1-2 years after sale of home.

    If either spouse is over age 55 (when the old home is sold), PROP 60 allows replacement of a primary residence with a new home of equal or lesser value (but see below) within the same county and transfer of the Prop 13 assessed valuation from the old home to the new property. This is allowed once in your lifetime, and a spouse who has done it before ‘taints’ both spouses.

    PROP 90 allows counties to elect to accept transfers of Prop 13 values for moves from other counties when a primary residence is replaced with a less expensive (but see below) home. If you are over 55 and move into a county which accepts Prop 90, you may take your old, lower Prop 13 value, regardless of from which county you move.

    Using Prop 90, you can sell your $400,000 San Francisco home [assessed value $80,000] and move to a new $300,000 home in San Mateo; the new San Mateo assessed value will be $80,000!


    Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, Ventura, and El Dorado.

    CAPITAL GAINS: The other issue that you MUST talk to your Tax Accountant is the possibility of Capital Gains in the sale of your home. If you have had your home long enough to still have your Proposition 13 in effect, your basis is probably very low. In the sale of your home, you will have an exclusion of $250,000 each, ($500,000 per married couple), from taxable gains. Gains over that amount – chances are pretty good that you may have a taxable gain event.

    To read about the Howard Jarvis Tax Act, go to


  10. And how did Prop 30 pass on a bare majority?



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