Here’s why downsizing after retirement often makes absolutely no sense. Are you living a ‘smaller’ life than you should?

Here’s why downsizing after retirement often makes absolutely no sense. Are you living a ‘smaller’ life than you should? 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. Since many older Americans are empty-nesters by the time they retire, all that space is often unnecessary anyway. Must Read - Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how - This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick? - Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP However, the data suggests that this “savvy” move isn’t so popular. Roughly 61% of boomers said they do not plan to sell their homes, according to a 2025 survey by Clever Real Estate (1). So 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. The hidden costs of downsizing 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 and 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’ve moving long-distance, such as from the East Coast to the West Coast, according to Rocket Mortgage (3). Beyond these transaction costs, there’s also capital gains taxes to consider. The Internal Revenue Service (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,” says a Redfin report (5).