Real estate resizing and retirement planning

Widows and widowers should not let their guilt or friends dissuade them from selling the family home nor prevent them from using the proceeds to improve their life and retirement.

Executive summary

Humans are very easily led by our emotions. In some ways, this sets us apart and makes us unique in the animal kingdom, but it can also have a detrimental effect on retirement planning.

After speaking with a widow who was firmly opposed to selling her family home after the death of her spouse. I was drawn to releasing my five reasons to sell the family home to fund a better financial future.

Selling your family home:

Improves retirement cash flows,
Provides the cash flow required to purchase a long-term care insurance policy and minimizes the financial risk from a sickness requiring expensive long-term care stay,
Makes it easier to “mentally” move forward on your own,
Provides the opportunity to declutter possessions that may hold you back, and
Allows you to explore new relationships.

If you are newly widowed and unsure whether to resize your home, or even rent, please give our office a call and we can discuss your options. We have the expertise and life experiences to help guide you to achieving your goals. READ MORE BY CLICKING HERE.

The emotional ties to bricks and mortar

I recently began working with a 62 year old widow who owns a small investment portfolio and a valuable family home in Toronto’s west end. After completing her retirement projection, we concluded she would deplete her liquid investments long before a woman’s average life expectancy of 84 years¹.

We began discussing the possibility of selling the family home and either renting or buying a small condo. The proceeds from the family home would allow her to maintain her lifestyle expenditures well into her late 90s (including the cost of rent) but would leave a much smaller inheritance to her two children.

Her response to our suggestion was surprising: she hated the idea, in fact, she indicated the family home would be sold, only after her death.

I was curious and I asked her to help me understand why she would accept a lower standard of living during retirement in exchange for a larger inheritance for her children. The widow had many reasons for maintaining the family home, but I can summarize her argument into three points:

Firstly, she felt guilty about using the proceeds from the family home to improve her lifestyle. Downsizing was something she and her late spouse had planned to do together and now as a widow, she felt guilty if she unilaterally profited from the proceeds of the family house.

Secondly, she loved her kids and wanted to help them buy a family home in the GTA. A large inheritance, even if it wouldn’t be available until she died, would be a big financial help for her two boys.

Thirdly, she feared her friends and family would criticize her decisions to sell the family home and improve her retirement. She could hear them whisper: she’s taking advantage of the situation.

I tried to change her mind, but she wouldn’t budge.

Written from the heart

I write this blog for all widows and widowers who want/need to sell the family home but can’t overcome their guilt or are experiencing difficulty moving forward after the death of their spouse.

Here are five reasons to sell the family home after the death of a spouse/partner:

1) The proceeds from the family home may improve your retirement lifestyle.

As a widower myself, I believe my family home is an asset (like stocks or bonds) and can be used to fund my pre- and post-retirement lifestyle.

My late wife and I financially supported our three children through private schools and post-graduate degrees and today, I feel my job (financially speaking) is complete. If financially possible, I will assist my children, but I will not feel obligated to leave an inheritance of any size.

Instead, I plan to sell the family home and either scale down or rent and use the proceeds to supplement my retirement lifestyle and I will not feel guilty for doing so.

How I feel: I will use the home proceeds to improve my retirement lifestyle and my children are welcome to enjoy whatever assets (if any) are left.

2) The house proceeds may provide funds for long-term care.

During my tenure, as a (now retired) board member of a prominent long-term care provider in Toronto, I learned two valuable lessons 1) long-term care is very expensive and 2) very few people plan for a 3-4 year stay in a facility.

Currently, long-term care facilities cost between $1,500 – $2,500 per month for a publicly-funded facility and approximately $5,000+ for a private facility. You don’t need a calculator to determine that a 3-5 year stay at a facility can easily wipe out all/most of your retirement savings.

Everyone wants a long and healthy life but few plan for unexpected health issues especially during the later part of life.

According to the Council on Aging of Ottawa, October 2008, “For those over age 65, 43% will, at some point in their remaining years, require long-term care and spend time in a nursing home or long-term care facility for an average length of stay of three to four years. One in five will stay more than five years².

By selling the family home, widows have the opportunity to allocate a portion of the proceeds toward a long-term care insurance policy, thereby reducing the financial risk of a 3-5 year stay in a long term facility.

How I feel: I’ll direct a portion of the proceeds from the sale of the family home to a long-term care insurance policy thereby mitigating the costs of a prolonged long-term stay.

3) Selling the family home may help a widow or widower move forward.

Many widows and widowers have difficulty moving forward after the loss of a spouse, I know, it’s difficult. The first year after Mary’s death, I couldn’t think straight, I had difficulty sleeping and I had no idea how I would rebuild my life.

Slowly the fog lifted, my memory and decision-making abilities improved, and I began planning how I could move forward, without Mary.

I love our family home and if Mary had not died, we would have probably lived in the home for many, many more years. But the more I pondered my future, the more I realized I wanted and needed a fresh start, and that included selling the family home.

For me, every room in the house holds happy (and a few sad) memories of Mary and our children. I find it difficult to rebuild under these conditions. By planning “Where” I will move and “When” I will move, I find myself getting excited about my future and my grief becomes more manageable.

We were married for 33 years and we enjoyed a strong relationship but sadly, she’s gone, and I must find ways to move forward on my own. Don’t misunderstand me! My grief from losing Mary will never disappear but I find that my grief doesn’t consume me when I’m positive about my future. Thus, for me, that means selling the family home and building a new family home in a new location.

How I feel: I will not allow grief to prevent me from moving forward with my life as a father, son, and friend. I’m sure Mary would be happy if I found ways to move forward.

4) Selling the Family home may allow a widow to declutter their physical life.

It’s been nearly two years since Mary’s death and her clothes, shoes, winter coats, cosmetics, and other personal items are exactly where she left them before entering the hospital. In some ways, I still hope that one day, Mary will walk through the door and yell “Rick, what did you do with my personal stuff?” Of course, this will never happen, and this line of thinking prevents me from moving forward.

Here’s my plan for decluttering the family house:

Prior to selling the family home, my three kids and I will select and remove any item we wish to keep. For example, I will hold the paintings, photo/video albums, some of the China and silverware, the kids may also claim some of their favorite childhood items.

I don’t expect we will keep much of the “stuff” in the family home, remember it’s my objective to find ways to “move forward”. At the moment, my household “stuff” clutters my mind with thoughts about the past and prevents me from thinking clearly about the future.

The next step involves hiring a company with expertise in selling household contents. They will be responsible for selling anything of value and emptying the house so it can be sold. The net proceeds from the sale will be donated to the Princess Margaret Hospital in Mary’s name.

My friend and coach, Dan Sullivan says, “Make your future bigger than your past” and I hope to follow this mantra. Selling unnecessary stuff unties me from the past and allows me to plan for a bigger and better future.

On a side note, my home is perfect for a family looking to grow. I would love to know that it is creating new memories for a new family, and with a few modifications, it would be ideal for a family that may have physical disabilities or other accessibility issues, such as those homes that Jeffrey Kerr, licensed RE/MAX realtor and Vice President of Winwood Country Homes, Inc specializes in. Listen to my podcast to learn more.

How I feel: I will move forward by decluttering my physical world and allow space for my mind to develop new ideas and set new goals.

5) Selling the family home may open the opportunity to welcome someone new into a widow’s life.

Moving forward for me also includes finding someone special who is willing to share the rest of their life with me.

I assume many widows/widowers have no psychological issues with inviting someone into the matrimonial home, but to me it feels like a betrayal of my vows. If I bought a new home, it would be mine, and I’d be free to invite whomever into my home and my life.

How I feel: Moving forward is as much psychological as it is, emotional and physical. If I’m to have the right mindset to move forward, I have to be in the right setting to move forward.

Final thoughts

I understand first-hand that it is difficult to move forward after the death of a spouse, and as creatures, humans can be led by our emotions. While this sets us apart, it can also hold us back, which is why I recommend that widows and widowers sell their family home to provide a solid foundation on which to move forward:

It improves retirement cash flows,
It provides the cash flow required to purchase a long-term care insurance policy and minimizes the financial risk from a sickness requiring expensive long-term care stay,
It makes it easier to “mentally” move forward on your own,
It provides the opportunity to declutter possessions that may hold you back, and
It allows you to explore new relationships.

If you are newly widowed and you’re not sure what to do with your family home or how to plan for the future, please give us a call and I will personally introduce our office and our services. In fact, if you have any goal in mind — big or small — that requires some financial planning, but you’re struggling with where to start, reach out to our team. We have the expertise and life experiences to help guide you to achieving your goals.

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