I figure I’m not going to want the stairs long term. My bedroom is up, the living areas are down. If I’m lucky enough to live to be 85 and remain in my own home, those stairs will be a bitch. The stairs alone may be the difference between having to leave “my own home” at 75 and being able to stay in “my own home” until 85.
But now, with two elementary aged kids and a dog - I like the sleeping areas upstairs and wouldn’t want a rambler.
A big part of the retirement expense for most people is health care, and that includes retirement homes and end of life services. No one wants to think about how much that retirement home or in home nurse is going to cost, but a few years in a decent home can eat up your retirement real quick, not to mention a long bout of cancer or Alzheimers (which runs in my family). Not that many people are lucky enough to die in their own homes, in their sleep of old age. Plus many people are on expensive prescription drugs as they get older. The cost of health care can easily get close to what your house payment used to be as you get older and decline in health.
What often ends up happening is that one spouse needs hospitalization or nursing care, eats up most of the retirement / savings, and leaves the surviving spouse with little to live on. So my advice is, be the first to die 
You need enough money that you can live without touching the principal. That’s the goose that lays the eggs for you. Kill it off and the money runs out fast. It’s not so much “how much money is sitting in investments” as “how much money does that money earn for me.”
When my husband and I first got married, we made maybe $30,000 combined, both working full time. We both still started 401k’s and contributed 8-10% of our income, right off the bat. Then we figured out how to live on what was left over. If you wait to invest what is left over, you won’t ever have “extra” money to invest. That money can always be used for something else. Now we have just hit 30, our income has increased, and we have a sizeable chunk of money saved up already. Even with my husband having several layoffs and me reducing to part time, it’s the consistent investing that makes the total grow. Even if we just let that money sit by itself, and never add to it again, we will have over $500,000 for retirement. (age 65) The power of starting young and compound interest - already the money earns more per year than what we contribute. It’s not like we had an extra $500,000 laying around to put aside, our actual contributions are a fraction of that.
What I see a lot of people my age doing, is thinking they have lots of time to save later, when they earn more. But putting money aside when it has 30-40 years to sit is making those dollars work much harder for you. If we waited until we were 40 to start investing, we would have to put much more aside to equal those early dollars.
I could see my parents wanting to downsize. Their house is really too big for two people. They have rooms that are almost never used such as the formal living room and the formal dining room. They rarely use the swimming pool. There are guest bedrooms that are almost rarely used. I can’t imagine being 85 and living in that house. They are already retired and they aren’t hurting for cash but why have the extra expense if you don’t have to.
Holy crap - I just checked out a few investment calculators online and it seems that my $500,000 prediction was very low. Assuming a 10% return, we could never put another cent into retirement and still have about a million. Hooray for long-term investing!
The thing is, keeping that investment money now would actually not have a big effect on our standard of living. But when we retire, it will make all the difference in the world.
I can answer these two. (thank you for numbering them.)
I like my house, but it is a house for a family, not an old retired couple. We have a large yard and a good size ranch style house. We will want less to maintain and keep clean. I think in many cases, the house downsizing advice is more for families. So by the time I am 70, I will want a smaller place, maybe sooner.
NJ has extremely high property taxes, the discount for moving from NJ to a state like West Virginia is huge. Currently, about $7,000 per year give or take a $1,000 for us. However, we need to live in NJ for now as we have good paying jobs that are hard to replace, the extra income, allows us to put a lot more into our 401k plans and we moved to the town we are in for the exceptional schools.
Our house is already worth 50% more than we paid and that is in 6 years and with the downturn calculated in. We bought at a good time. When it comes time we should be able to sell it and buy a much smaller place out of state for a fraction of the value. This will be money we can immediately add to our investments to make our retirement easier and have a nice nut to pass on to our kids or grandkids.
The only wildcard is I like being near the shore and “The City”, so we may look for a cheap alternative in our current area. My wife will probably want to be somewhere warming, but hey, global warming might take care of that. 
Jim
Talk to your insurance agency or even to any large non-profit org. (A non-profit org, like Consumers Reports, will even generate a modest tax deduction!).
Well, some employers offer continuous medical coverage as part of the retirement package. My Bro took early retirement from the Fed, rolled his Thrift saving plan over into an annuity (MoNY) and now has a nice amount of retirement income all at only 55. The Feds continue to supply health insurance (but my Bro does have to pay a little).
**Una Persson ** *"As an aside that’s more appropriate perhaps to IMHO, I really wonder about the desire to bank a large part of your investment future in “downsizing” your house.
I agree about not wanting to tear up roots and move out of your home. But you don’t have to. For you, there is a Reverse Mort. You “sell” you home to a bank, and they pay your Mortgage and even add in a monthly check for you (I am assuming here you’ll have some decent equity). They get your home after you die. It’s a great deal if you plan on living for a long time. 
I appreciate the input regarding my question of selling the homes. I can’t argue with any of the reasons; they sound like they make sense to me. In my situation, I live in a part of the country with relatively low taxes, so I couldn’t really move to avoid them.
I will say however I’m not sure if the “more to keep clean” is as valid as one may think, but who knows? It’s hard to see an extra bedroom or two taking a major investment in time to dust and vacuum every now and then, especially if they’re not in active use. How much time does one spend per week keeping a dormant room clean (especially if you’ve closed the vents temporarily to help with HVAC costs)? An hour at most? I’d say more like 15 minutes.
And a note to Dr. Deth - I guess reverse mortgages would be good for someone like me, who can’t (and won’t) have children to leave the house to. Apropos of nothing, I’ve heard they often have huge origination fees, like on the order of $5,000-$10,000 or so…?
Well, I’m not trying to sell anyone on the idea of selling or not selling, just talking out loud about the reasons.
I think everyone’s situation is usually different. In NJ, I have to deal with cooling and heating the house. I cannot really cut off the heat as I have baseboard in only two zones for the entire house and shutting down heat is a risky idea. The AC is not too bad and I already have solar panels, but most people do not.
If we closed off two bedrooms, we would still have many rooms to clean. DR/KIT combo & LR & Family room & Mbr & 3 bathrooms. We could not ignore any of these. They cannot be closed off. More importantly, we have a really large yard, I guess I could let it go wild, that would be an option.
My parents stay in NJ by moving to a retirement community that gets around real estate taxes having modular homes on faux axles and so qualifying as trailers under DMV instead of property. Their annual fees are very low. This appears to be common in NJ and allows residents to stay in the area. The community has many retired folks from NYC too.
Jim
There really is more to keeping up unused rooms than you might think, Una. We have two guest rooms upstairs, and if we don’t tend to them routinely along with the rest of the house, they start to smell … unused. It’s a smell that’s hard to describe. But we have to wash the linens and dust and polish and vacuum and what-not just as though someone lived there. Same for the upstairs bath.
What’s really sad is that the US social security system is so fucked up that $500,000 really isn’t rich, and what’s worse is that so many people don’t have that kind of money saved. If you’re 55 and just been forced into a retirement package, then $500,000 only means you’re just well-off enough not to starve for the next 30 years.
Maybe it’s just me, but I haven’t really ever expected to be able to retire. Nowadays SS won’t help you much, who thinks it’ll be worth much in the next 30-35 years when I’ll be eligible for it?
My work doesn’t have anything in the way of a retirement plan. It’s a small business that used to be a very small business.
The thought of “retiring” in this day and age (much less in 30 years) just never seemed very realistic to me.
-Joe
Maybe it’s unrealistic, but my work is interesting and it’s a big part of my identity and I would like to work until I die.
There’s that, too. I frequently hate my job, but it does give me something to do.
-Joe
Dangerous and ignorant thinking. First, maybe you think you’ll just work forever because retirement is “unrealistic” or you love your job, but there is no guarantee that your company or job will be there as long as you hope. (To say nothing of disability or, heaven forbid, medical catastrophe). Second, even if your employer offers nothing in the way of retirement plans, you can (and should) still fund your own IRA. I’m not saying you’ll live in the lap of luxury but at least you won’t be a pauper if you’re suddenly and involuntarily pushed out to pasture.
You have to shop around, I suggest a trusted company. There are some scamster out there. But like you said, for someone without kids, it’s a good solution.
Dudes: Fund your IRA/401k. I mean it. At least up to however much is deductable or your employer matches.
I loved the “shove it up your ass, hippie” line.
I guess we are rich, according to the OP. I work my ass off, and I expect my investments to pull their own weight. The way things are going, we will be able to stop working in our 50’s (10-15 years from now), having paid for any colleges & grad schools our boys want to attend, plus giving them a nice start in life with the ability to do something they love instead of scrounging for a shitty paycheck. Oh, and we’ll be living in a paid-for house, with a couple of others elsewhere.
If that’s evil, then I don’t wanna be righteous… 
Maybe the complaint is that people don’t call themselves “rich” when they “should.” I don’t, actually, but maybe that’s because I live in a whacked-out area where “rich” has a very different meaning. I see us as upper-middle-class because we still have to work. “Rich” would be not needing the paycheck any more.
I think this is a good point. Personally, I have my own business so being fired is unlikely. The work is not phsyically demanding. The real concern is some sort of disability that stops me from working. I suppose I should get disability insurance – does that cover you past age 65?
I would readily bet VCO3 $1,000,000 I could change his mindset, except that he has no means to pay off the bet.
To win such a bet would require only that he be given a check for $500,000. Check back in 5 years. Win the million.
It’s only other people’s money that seems so immense and contaminated and unfair. The commies took a while to figure this out, but it’s fairly obvious to everyone else.
Some of us had to move during our careers, before retirement. We moved from a nice place in NJ, a town where everyone knows everyone else, to California. Not that this place is bad, but that was better. I think we may move back, snow and all. Anyhow, I want to get out of here before the big one hits.
In California, thanks to Prop. 13, your tax bill would go up if you downsize. But if you have a decent amount of equity in your house, is the comfort of living in the same place worth half a million bucks? We can move from this expensive place to a cheaper one, get the same size house, and still have tons of money left over. I’m not sure if the hassle will be worth it, but I can see it happening. We might also wind up living closer to our kids.
You might feel very differently about it in 20 years. My work is interesting also, and I love it, but I love lots of other things also. I expect to keep my hand in by being involved with technical activities and conferences after I retire. But are you so single-mindedly devoted to work that you can’t see yourself wanting to branch out later?
BTW, while retirement might seem far away, I assure you that it comes faster than you think, and you’ll be grateful later for investing now.