FAQ: How do I Model a Downsize in Retirement

Modelling a downsize in retirement involves projecting the financial effects of selling your home and possibly purchasing a new one. Below is a guide to two methods:

Method 1: Apply Changes to All Scenarios

This approach applies the downsize adjustments across all retirement scenarios in your plan.

Step 1: Enable Home Sale and Purchase Modules

  1. Go to your Profile section.
  2. Ensure you activate the options for:
    • Planning to purchase a home in the future.
    • Planning to sell a home in the future.

Step 2: Input Home Sale Details

  1. Navigate to the Foundation tab and locate the "Home Sale" module.
  2. Enter details such as:
    • Sale price in today’s dollars.
    • Cost of sale as a percentage of the sale price.
    • Sale date.

Step 3: Input Home Purchase Details (if applicable)

  1. In the "Home Purchase" module, provide:
    • Purchase price in today’s dollars.
    • Down payment percentage.
    • Estimated closing costs (e.g., lawyer, moving fees).
    • Purchase date.
  2. Skip fields that aren’t relevant to your situation (e.g., mortgage insurance).

Method 2: Model the Downsize in a Single Scenario

This approach creates a separate scenario for modelling the downsize, leaving the base plan unchanged.

Step 1: Create a New Scenario

  1. Duplicate your base plan and give it a specific name (e.g., “Downsize Scenario”).
  2. Remove sale and purchase dates in the base scenario to ensure it remains unaffected.

Step 2: Use Advanced Options to Add Sale and Purchase Details

  1. In the new scenario, go to Advanced Options and manually input:
    • Sale date and purchase date for the properties
    • Cost of sale and purchase in today’s dollars (e.g., real estate fees, lawyer costs).

Step 3: Adjust Additional Expenses Manually

  1. In the Projections table manually input real estate transaction expenses under “Other Expenses.”
    • Include costs like real estate fees, lawyer fees, and moving expenses.