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Downsizing is often considered a financial slam dunk. On paper, it seems like a savvy move to sell a large home, unlock all that equity and move into a smaller house or condo to save on property taxes and maintenance costs.
The thinking goes that since many older Americans are empty nesters by the time they retire, all that space is often unnecessary anyway.
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However, the data suggests this “savvy” move isn’t so popular. Roughly 61% of boomer homeowners do not plan to sell their homes, according to a 2025 survey by Clever Offers (1).
Why are so many older Americans and retirees avoiding this seemingly clever maneuver? Digging deeper into the numbers shows that, for many people, letting go of their homes simply doesn’t make financial sense.
Here’s a closer look at why — plus a few tips on weighing your options and making the most of your money in retirement.
On the surface, downsizing seems like a simple math problem. Take the fair market value of a large, four-bedroom detached house and subtract the market value of a smaller, two-bedroom apartment. The difference is your ticket to financial freedom.
However, this simple calculation overlooks many of the hidden costs of buying and selling homes. Agent commissions, closing costs, taxes, home repairs, mortgage repayment and other additional costs can all add up to 10% to 15% of your home’s final selling price, according to Experian (2).
It can also cost as much as $10,000 if you’re moving long-distance, such as from the East Coast to the West Coast, according to Rocket Mortgage (3).
Beyond these transaction costs, there are also capital gains taxes to consider. The IRS exempts up to $500,000 in capital gains for a married couple filing taxes together (4). But if you’ve owned your home for a few decades in a relatively high-cost-of-living region, there’s a chance your gains exceed this threshold.
For many millionaire homeowners, this tax is an additional barrier to downsizing.
For others, the mortgage rate is a key concern.
“For the boomers who do have a mortgage, nearly all have a much lower interest rate than they would if they sold and bought a different home with today’s near-7% rates: Even if they downsized, they may have a nearly identical monthly payment,” reports Redfin (5).
The aforementioned report was published in 2024, but the average 30-year fixed-rate mortgage is around 6.30% today — still too high to incentivize a move for many at lower rates (6).
If you’re weighing the merits of downsizing, it’s easy to get lost in a sea of cost-benefit calculations. That’s where a fee-only, fiduciary financial advisor can help.
A professional advisor can provide the clarity you need when crunching the numbers — and also help map out a tax-efficient exit strategy if you do decide to sell your home.
Finding the right advisor is simple with Advisor.com. The platform connects you with an expert near you for free.
Advisor.com does the heavy lifting for you, vetting advisors based on track record, client ratios and regulatory background. Plus, their network comprises fiduciaries, who are legally required to act in your best interests.
Just enter a few details about your finances and goals, and Advisor.com’s AI-powered matching tool will connect you with a qualified expert best suited for your needs.
Even better, you can schedule a free, no-obligation consultation to discuss your long-term goals and financial plan to help you decide if downsizing makes sense in your specific situation.
Still unsure about the costs of downsizing?
Before you rule out a new home entirely, it may be worthwhile to get a few quotes from mortgage lenders. After all, your personal credit profile and equity might get you a better rate than you’d expect — and even a small rate reduction can translate into significant savings over the life of a loan.
To simplify the process, Mortgage Research Center can help you quickly compare rates and estimated monthly payments from multiple vetted lenders. By entering basic details — such as your zip code, property type, price range and annual income — you can view mortgage offers tailored to your needs and shop with confidence.
Once you choose your lender, you can even set up a free, no-obligation consultation to make sure you’ve found the right fit.
There are specific circumstances where downsizing is clearly the right financial and lifestyle decision.
The calculus starts to favor a move when the gap in shelter costs is genuinely substantial — for example, moving from a high property-tax suburb to a lower-tax area with lower carrying costs, where the annual savings run into the tens of thousands. In those cases, the transaction costs can be paid back relatively quickly.
The tax impact also becomes a net positive when your gain falls under the exclusion threshold and you move from an expensive market to a dramatically cheaper one, allowing you to invest a meaningful lump sum that could generate additional retirement income.
If downsizing leaves you with a significant windfall, consider allocating a portion to investments like gold and non-mortgage real estate. These alternative assets can offer a great way to protect your capital against inflation and market volatility — and watch your nest egg grow.
Gold grew in value by more than 58 times between 1910 and 2016 (7) — and that’s before 2025’s historic bull run ended in a spot price well over $5,000 per ounce in early 2026 (8). Historically, the precious metal has acted as a hedge against inflation, and many consider it to be a secure place to invest and protect their wealth.
One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold — making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.
To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.
Institutional investors have long looked to private-market real estate to help stabilize their portfolios. The asset class offers a mix of potential tax benefits, regular cash flow, a hedge against inflation and returns that are less correlated with public equities.
However, many individual investors haven’t had great options for accessing high-quality, private-market real estate. But recently, crowdfunding platforms have opened access to a broader demographic, but outcomes often depend on factors like deal structure, platform incentives and the expertise of the sponsor.
Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
Over nearly four decades, Lightstone has delivered strong risk-adjusted performance — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.
With Lightstone DIRECT, accredited individuals can access the same multifamily and industrial assets Lightstone pursues with its own capital, with minimum investments starting at $100,000.
As you look to generate additional retirement income with the funds you’ve gained from downsizing, consider setting up automatic investing in exchange-traded funds (ETFs).
ETFs offer instant diversification across major asset classes and sectors — no need to select individual stocks or bonds. ETFs can also be tax-efficient, as they typically pass through fewer capital gains to investors.
But the real beauty of ETF investing is its accessibility due to low costs. That means anyone — whether they’ve downsized or not — can take advantage of it. And even small amounts can grow over time with tools like Acorns, an app that automatically invests your spare change.
Signing up for Acorns takes just minutes: Link your cards, and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio of ETFs managed by experts at leading investment firms like Vanguard and BlackRock.
With Acorns, you can invest in a dividend ETF with as little as $5. And, if you sign up today, Acorns will add a $20 bonus to jump-start your investment journey. All you have to do is set up a small recurring monthly contribution to your account.
There are many common scenarios where downsizing doesn’t make financial sense. The costs and taxes can diminish the appeal of moving to a smaller home, not to mention the lifestyle challenge of adapting to a smaller space.
That being said, downsizing isn’t always a bad idea. Proximity to family is perhaps the most legitimate nonfinancial factor.
If your children and grandchildren are far away and your health is trending in a direction that makes independence uncertain, no spreadsheet should keep you rooted to a specific location. On the flip side, leaving decades of social connections purely to save money might leave you feeling alone in your golden years.
Bottom line: Downsizing isn’t a slam dunk, but a closer look at your personal situation could help you make the right decision.
— With files from Vishesh Raisinghani
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Clever Offers (1); Experian (2); Rocket Mortgage (3); IRS (4); Redfin (5); Federal Reserve Bank of St. Louis (6); United States Gold Bureau (7); APMEX (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.