Thinking of Upsizing in Retirement? Here’s What It Could Mean for Your Wallet

When most people think about retirement, they imagine downsizing to a smaller home, thus enjoying fewer responsibilities and embracing a lighter financial load. Downsizing often brings perks such as reduced maintenance, lower utility bills, and freeing up extra money that can be spent on travel and hobbies.

But for some, retirement sparks the opposite idea: upsizing. Whether it’s to be closer to family, accommodate caregiving, or finally purchase a dream home, some retirees consider buying a larger, more expensive property.

Key Takeaways

• Upsizing is often driven by personal and lifestyle reasons, not financial benefits.
• Due to having a fixed income in retirement, upsizing could potentially strain retirees’ finances.
• Before upsizing, evaluate if your retirement budget can sustain the long-term financial responsibility of the higher home costs.

Why Upsizing Appeals to Retirees

Retirement is a significant life transition, and for some, a bigger home represents a new beginning. Some retirees may feel ready to invest in this costly change, and the emotional and lifestyle reasons behind this choice are real and valid. However, the benefits aren’t always financial.

“The pros are usually on the personal level, such as happiness, well-being, quality of life, etc.,” said Kassi Fetters, certified financial planner and owner of Artica Financial Services LLC.

People choose to upsize their homes for a variety of personal and practical reasons. Common motivations include:

• To gain extra space for hosting family gatherings
• To support multi-generational living
• To accommodate caregiving needs
• To be closer to adult children and grandchildren
• To enjoy communities with better amenities and lifestyle options

The Financial Reality of Upsizing

While upsizing may feel like a fresh start, it can quickly become a financial strain, even if the reason is to move into a space that better accommodates your lifestyle and goals.

“There aren’t really any financial pros to upsizing your house in retirement,” says Fetters.

This makes sense when you consider how retirement is often structured. Your income at this phase in your life is typically fixed, and larger homes often bring higher expenses: property, taxes, utilities, insurance, and maintenance costs. Even if you’re taking out a loan, you could be stretching your monthly budget. And if you’re purchasing with savings, that money is no longer working for you in the market.

“The cons to purchasing a bigger house are locking up your investable assets in an asset that doesn’t grow at the same rate as the market,” Fetters says. “Being invested in residential (non-renting) real estate doesn’t increase your monthly income, and maintenance/utilities are usually more.”

Also, you can’t forget to consider the market you are buying in. Home supply has increased by 20% since last year, and mortgage rates are down (albeit still high), but high home prices make affordability a struggle.

Before making any decision, model the impact of an upsized home on your overall retirement plan. This is the perfect time to be honest with yourself about whether the new home will be affordable and sustainable in the long term.

“After inputting an upsize into your financial plan, you need to determine whether your portfolio can handle the upsize purchase (including taxes), whether your monthly budget can sustain the maintenance/utilities increase, and whether the upsize negatively affects your future long-term financial goals,” Fetters said.

The Bottom Line

There is nothing wrong with wanting a bigger home and retirement, but it’s important to understand what you may be giving up. Upsizing can enhance your lifestyle, but it often comes at a large financial cost. If you’re emotionally drawn to the idea and have the financial plan to back it up, go ahead but make the decision with full clarity.

“To be very clear, upsizing is a want, not a need,” said Fetters. “However, if you have a detailed financial plan that shows it’s a possibility you can afford, then go for it.”