Are you a baby boomer banking on your home being your retirement fund? You’re not alone. With less than a third of employees in the private sector having the luxury of a pension plan at work, many Canadians approaching retirement are considering downsizing.

Downsizing is a common trend among empty nester baby boomers who sell their current oversized house to move to something more affordable and lower maintenance, commonly a condo, to unlock equity.

With November, Financial Literacy Month here, let’s take a closer look at downsizing and why it may not make sense for everyone.

Budgeting for the Costs of Downsizing

When contemplating downsizing, it’s important to make an informed decision. There are real costs to downsizing. Both financial, emotional and personal ones.

Just because you sell your family home for $800K and buy a condo for $500K, doesn’t mean you’ll net out $300K in savings when all is said and done. You’ll need to pay closing costs – real estate agent commission, real estate lawyer fees and land transfer taxes to name a few.

You’ll also need to budget for moving expenses. Even if you’re downsizing from a spacious house to a smaller condo and you’re taking less stuff with you, chances are you still have too much stuff to do a DIY move, so hiring movers will be an added expense.

Don’t forget about buying new furniture either. It’s a common theme I’ve heard from people and they forget to budget for it while making their plans.

Then there’s the cost of commuting. If you’re moving outside your beloved neighbourhood and you want to stay in touch with everyone, you’ll likely end up spending more on transportation. Not only does that mean spending more on gas, a senior couple who may have been able to get away with only one vehicle, may decide to keep both vehicles to maintain independence (because the last thing you want is to feel stranded at home with only one car).

Then there are the emotional and personal costs of downsizing. Speaking of moving away from your cherished neighbourhood, you’ll find yourself further away from family, friends, not to mention your favourite restaurants, the local gym and Toastmasters club. Make sure you’re ok with that.

A few years ago, my mother made a snap decision to sell the family home and buy a townhouse in Niagara Falls. After realizing how far she’d be away from family and friends in Toronto, she decided to stay put. Luckily, it was a preconstruction home and she was able to get out of the deal without it costing her anything. Not everyone is that lucky. That’s why you’ll want to think long and hard if downsizing is right for you before pulling the trigger.

An Alternative to Downsizing – A Reverse Mortgage

Downsizing may be the ideal solution for a lot of seniors, but not everyone is keen on it. A recent Ipsos survey by HomeEquity Bank finds that almost half of Canadians aged 55+ (48 percent) say they have no plans to downsize. In fact, as part of the group that plans to stay put, 93 percent say that they’re happy with their current living arrangement.

Unfortunately, not everyone has the luxury of staying where they are. Some seniors simply haven’t saved enough for retirement and are faced with the difficult decision of selling the family home or working beyond the traditional retirement age of 65 (which may not be an option if your health is on the decline).

Thankfully there’s a third option worth considering – a reverse mortgage. Reverse mortgages are available to Canadians, aged 55 and older who own their home, with a minimum property value of $150,000.

A reverse mortgage may be the ideal solution for you, but they don’t make sense for everyone. Before deciding to take out a reverse mortgage, I suggest that you consult with an independent mortgage broker to make sure a reverse mortgages is right for you.

Note: This is a sponsored post by CHIP Reverse Mortgage from HomeEquity Bank,  but was written and edited by me.

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.