Article

From big home to better fit: what to consider when downsizing in retirement.

24 August 2026 Read time: 6 min

Author Charlotte Whelan

Expert Reviewer Anne Graham, CPA, CFP®

Downsizing in retirement can feel like the natural next step as you approach later life.

The big family home that once made sense for kids, work, entertaining and busy family life may no longer suit the way you live now. You may have more space than you need, maintenance is getting harder to stay on top of and being closer to transport, essential services and the things you enjoy starts to become really important.

Downsizing in retirement can be a positive move but it’s certainly not a one-size-fits-all solution. There are (huge) emotional and lifestyle changes that come with selling your family home and moving somewhere new. And it’s not a guaranteed way to free up cash. Selling your home can affect your government benefits and financial situation more broadly.

So if you’re starting to think about downsizing in retirement, here are some things to consider before making moves.

What is downsizing?

By definition, downsizing is the process of moving your household to a dwelling that is either smaller in size, of a lower value, or both. It’s a term typically applied to older Australians as they approach their retirement years.

Why would you downsize in retirement?

There’s no single reason you might decide to downsize but some of the potential benefits include:

Less maintenance – a smaller property can be more manageable, e.g. an apartment with no backyard may require less gardening and general upkeep.
More convenient location – moving can provide you with the opportunity to be closer to your social network, transport and recreational activities.
Planning for future needs – moving can give you flexibility to look at things like stairs, house access, electronic features and the overall layout of your home.

Downsizing can but doesn’t always free up cash.

For some people, downsizing in retirement is partly about freeing up cash or trying to reduce ongoing living costs. And while that can be a benefit of downsizing, it’s not guaranteed.

You can picture the equation in your head: sell the big house with higher operating expenses, buy the small house with lower operating expenses and keep the difference.

In reality, it’s rarely that simple.

Location

Where you want to live can have a big impact on what your next home costs. For example, you might be moving from a larger suburban home to a smaller property closer to the city.

In a lot of scenarios, the location of this smaller property could mean it costs as much – or more than – the home you’re selling.

Type of property

Moving from a house to an apartment or other property type might reduce your ongoing costs, but it can also introduce new ones.

Apartments for example, may have less maintenance costs but they come with strata and body corporate fees which can sometimes be high and fluctuate over time.

A good financial adviser, lender or better yet both working together, can help you understand the full costs and considerations of moving to a different type of property.

Moving costs

Selling, buying and moving all come with associated costs. They can include things like renovation costs, agent fees, styling costs, legal fees, moving costs, stamp duty and the expense of fitting out and furnishing somewhere new.

Once you factor these costs in, the equation of “sell the big house, buy the small house and keep the difference” becomes much more complex.

Retirement is about more than money.

Just because downsizing isn’t going to free up a big chunk of cash doesn’t mean it can’t be the right move for you. The value of downsizing may lie in what the move gives your life, rather than what it puts in your bank account.

A home that’s easy to maintain, a location that’s accessible and convenient and being closer to your people, are all valuable reasons to downsize. Balancing work, purpose and play in retirement is also important.

A holistic perspective and looking at the big picture is what you’ll get from chatting with an integrated adviser.

Age Pension: what to consider.

Selling your home can also affect your Age Pension.

If you sell your Principal Home (the home you own and live in) and are planning to buy another home, some of the sale proceeds intended for your new principal home may be exempt from the assets test for a period of time.

The cash that’s in your bank while you’re waiting to purchase your new home is often considered when assessing income under the deeming rules. And, anything deemed income can affect how much or if you qualify for the pension.

Extra cash left over from the sale that you don’t spend on the purchase of a new home can be treated as an assessable asset.

Short version: selling your home can affect how much Age Pension you receive, so it’s worth understanding the potential impact before you sell.

Downsizer contributions.

For some people, selling their family home can create an opportunity to make a downsizer contribution to their super.

A downsizer contribution allows eligible people aged 55 or older to contribute up to $300,000 from the sale of a qualifying home into super. There is currently no maximum age limit. If you are in a couple, you may each be able to contribute up to $300,000, subject to eligibility rules and the amount available from the sale.

Downsizer contributions are not counted towards the concessional or non-concessional super contribution caps and you can’t claim a deduction for the contribution. It’s worth noting that making a downsizer contribution doesn’t require you to buy another property.

There are other specific requirements and timeframes, so understanding what, when and how the rules apply to you is an important part of the decision. A good adviser can help you here.

When should you start thinking about downsizing?

Downsizing is often associated with retirement but planning can start much earlier. It might be helpful to simply start thinking about how your home is serving you at different stages of life.

I have a young family.

When your kids are young – space is everything. The number of bedrooms, storage, outdoor areas and proximity to schools and family are all likely to influence where you live.

Downsizing isn’t a priority at this stage but it’s still worth thinking about your home in the context of your longer-term financial goals.

I’m a family with older children.

Older children and teenagers still need space but you might be starting to see what life looks like beyond your family home. This could actually be a useful point in time to think about what you might want to do later.

Would you want to stay in the same area? Where are your family and friends living now? How much space will you need?

Thinking about these questions now may give you more options when the time comes.

I have no dependents at home.

Once your kids have flown the nest, it can feel like a natural point to start really thinking about what your home looks like in the future.

What are your travel plans? Where are your family and friends living? How long do you plan to keep working? Does your current home still suit the way you live?

The answers may help you work out whether you’ll eventually downsize or whether making changes to your existing home could be a better fit.

I live alone or with my partner.

If you live alone or with a partner, your reasons for choosing a home – and deciding whether to change it later – may be different. You may not need multiple bedrooms, but you might value extra space for a home office, hobbies, entertaining or having friends and family stay.

Whether you have children or not, the decision to downsize comes back to the same question: does your home still fit the life you want to live? How do you see yourself living in the future?

I’m ready for retirement / retired.

As retirement gets closer, it’s time to get more practical about your future home.

What would it cost to sell and buy? Or sell and rent? Or move into aged care? Where do you want to live? Would living somewhere else make everyday life easier? How might moving impact your retirement income and Age Pension? If you sold, would you be eligible to make a downsizer contribution to super?

There may be good reasons to move. There may also be good reasons to stay. All big questions around downsizing at this stage of life are best answered with help from an adviser.

Looking beyond the numbers.

For many people, a home is so much more than an asset.

A family home carries a lifetime of memories and a strong connection to a familiar neighbourhood or land.

Deciding to leave it can be emotionally difficult – even when the practical reasons for moving make sense. There’s also the physical process of moving to consider. Sorting through years of belongings and deciding what to sell, donate, discard or take with you can be a big undertaking.

The bottom line.

In a lot of circumstances, downsizing can have a positive difference and free up cash for retirement. Like any big life decision however, it’s best not to make a call based on the numbers alone.

There are practical, emotional and broader financial considerations to weigh up — from where you’ll live and how your next home will suit your lifestyle, to the potential impact on your Age Pension and super.

Don’t make the decision to downsize alone.

With the right adviser by your side, downsizing in retirement can feel a whole less complex and a little lighter to navigate.

Talk with an adviser