Newsbreak: $100k Savings Possible for Retirees Who Downsize to Low-Value Housing Areas, Vanguard Study Finds

A new study by the Vanguard Group, published on February 20, 2023, found that retirees who sell their primary home and move to an area with lower home prices could save a substantial amount of money. In fact, the typical homeowner saved around $100,000 in 2019 by doing so. While this strategy works for many, it does depend on several factors, such as location. Retirees who own homes in regions where home values have appreciated rapidly over the past few decades, such as the West Coast, Northeast, and select states like Arizona, Colorado, Florida, Nevada, and Utah, are in the best position to take advantage of this strategy.

However, homeowners in Midwestern or Southeastern states like Alabama, Mississippi, Nebraska, and South Dakota might end up losing money on the transaction. Additionally, the strategy could impact Social Security benefits. If a retiree moves to a state where Social Security benefits are taxed, their benefits could take a significant hit. While 38 states and the District of Columbia do not impose state taxes on Social Security income, several states do, including Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

The study advises that downsizing could be an essential channel to shore up retirement funding, but not for everyone. The amount of money a retiree might get in retirement from selling their home depends on various factors, including their location. The strategy may provide a big financial windfall to those who own homes in regions where home values have appreciated rapidly over the past few decades.