Many of us are rethinking how and where we live due to the pandemic. What does that mean for you or your living arrangements?
The coronavirus pandemic has many people thinking about work and home differently than before—a change that could last well beyond the pandemic. One potential impact of that change: Downsizing, or rightsizing, is no longer limited to those nearing or in retirement.
“We’re seeing adults of all ages and situations re-examining their work and home life,” says John Knowles, market growth and development consultant with Wells Fargo Advisors. “It’s a trend that could be here to stay for the foreseeable future. How many people do you know that may not return to the office, or will continue working remotely? Will they continue to live where they live if they can improve quality of life in a different location at a lower cost of living?”
Rightsizing can be attractive to a wide variety of people, such as empty nesters, singles, newly divorced people, or those in their second marriage. The rewards can be emotional as well as financial, regardless of the reasons that triggered the decision. Rightsizing could mean moving to smaller, more practical quarters or relocating into more spacious digs, depending on your needs.
Are you thinking about rightsizing? Below, we explore work and life situations that can have people thinking about rightsizing now, as well as what to consider when it comes to how the change could impact your financial future.
Making a career switch
You may be feeling adventurous as the pandemic starts to subside in the U.S.- possibly considering such things as leaving a stable job to explore something new, creating a new business and moving elsewhere. Though the trend has been spurred in part by rising vaccination rates and a recovering job market, the movement to take risks to follow your dreams been known for years as YOLO (you only live once).
But before changing a well-established situation, you might want to consider discussing it with a financial advisor to make sure you have a solid long-term plan. “A financial advisor can help you make sure your long-term goals for your family or retirement years remain on track,” Knowles says.
Wanting to be closer to family
Many adults are re-evaluating their living arrangements so their baby boomer parents or grandparents can move in with them or move nearby. Though that trend was initially spawned by feelings of isolation during the pandemic, it’s expected to last into the foreseeable future.1
Multigenerational living has nearly quadrupled in the past decade: 26% of Americans live in a household with at least three generations compared to 7% in 2011, according to a January 2021 survey of more than 2,000 adults by Harris Poll on behalf of Generations United.2
Having multiple generations under one roof can help reduce expenses, giving you the freedom to travel or enjoy quality time with loved ones more often. It can mean no longer having larger, separate homes that have separate maintenance costs. Another bonus? The potential to share house and yard work because others are pitching in.
Families with multigenerational residences are also reaping benefits that go beyond finances. According to the survey, 79% said their living arrangement had strengthened bonds among family members and made it easier to care for children and elders.2 More than three quarters of respondents reported the new living arrangements had “positive impacts” on their physical and mental health.2
Pursing their passions sooner
With home prices up 17%3 this year compared to 2020, and personal income rising 21%4 in March 2021 compared to the previous month, a growing number of working, affluent Americans are moving to a dream location to pursue their passions.5 That could include volunteering for a favorite cause or spending more time on a favorite hobby.
Or they could be pursuing a simpler, less stressful life, such as updating or enlarging that log cabin vacation home in the mountains or that cottage near the ocean so it can become a permanent residence.
No matter the reason, Knowles says make sure you do your homework to help you live the kind of life you dream about. That includes understanding the tax levels in the state you’re looking at for relocation. Remember to get the whole picture: while some locales have low or no state income tax, they may levy higher sales or property taxes.
Consider seeking input from trusted advisors
Rightsizing could have implications on your current finances, estate plans, retirement goals, or other priorities. That’s why Knowles suggests you consult with an attorney and a financial advisor. They can help you make sure you have the information you need to make the right decision for your situation.
1 Baby Boomers, Isolated During Covid, Rushed to Move Close to Their Kids, Wall Street Journal, April 14, 2021.
2 Family Matters: Multigenerational Living Is on the Rise and Here to Stay, Generations United, January 2021.
3 Housing Market Update: Home Prices Surge 17% Amid Historic Housing Shortage, Redfin, April 16, 2021.
4 Personal Income and Outlays, Bureau of Economic Analysis, March 2021.
5 Affluent Americans Rush to Retire in New “Life-Is-Short” Mindset, Bloomberg, April 4, 2021.