Downsizing involves selling your larger home to move into a smaller one to explore more flexibility, new opportunities and potential financial benefits.

If you’ve been thinking about downsizing as part of your retirement plans, exploring these five questions could help you plan ahead.

1. What are your reasons for downsizing?

You might be considering moving so you can be closer to your family members or build new social connections by living closer to other retirees. Perhaps you like the idea of less maintenance with a smaller property or you don’t want to climb stairs every day so you’re looking to move to single-storey home. You might want to boost your retirement savings with the potential profits of your house sale or perhaps you like the idea of having a home you can ‘lock and leave’ as you make travel plans.

Everybody has different reasons for downsizing. It’s important to understand what motivates you, so you can plan for the type of property and location that would suit your goals.

2. When is the right time to downsize?

When you’re planning to put your home up for sale and look for a smaller option, it’s important to consider your timing.

There’s no ‘perfect’ time to buy or sell property but market fluctuations and industry trends could have an impact on your decision. It could take some time to sell your home or find your new home. You also need to be ready to spend time sorting, organising and even selling or giving away some of your furniture and possessions which may not fit comfortably in your new home.

3. How will downsizing impact your finances?

Overall, selling your family home might give your finances a welcome boost in your retirement - but it’s important to consider the costs too. In the short term, you need to factor in the costs associated with storage, removalist fees, and real estate fees and commissions.

In the longer term, it’s important to understand how the sale of your home could impact your tax situation and your Age Pension, if you’re eligible. The value of the home you live in is not included in the assets test for the Age Pension, so it won’t impact your eligibility - but proceeds from selling your home will be considered in the income test. This could impact the dollar amount of Age Pension payments you might receive as part of your retirement income.

To learn more about the tests that apply to your eligibility for the Age Pension, visit the Services Australia website.

4. How will downsizing impact your super?

You might already use any extra income throughout the year to boost your retirement savings. Did you know you might be able to put some of the proceeds of your home sale towards your super too?

In 2018, the Australian Government introduced a downsizer measure. If you’re eligible, this measure means you could make a contribution to your super of up to $300,000 from the proceeds of selling your home or $600,000 if you’re part of a couple. This extra sum could help to boost your super balance.

5. Have you spoken to an expert about your plans?

As with any major life change, it’s worth speaking to a qualified expert in the relevant field about your plans. The more you know about your situation, the more you can make informed decisions about your future.

If you’re considering downsizing, you might like to consult with your tax accountant or financial planner to get financial advice specific to your situation.