As of January 2025, the average monthly Social Security benefit was $1,976. That amounts to a little less than $24,000 a year, which isn’t a lot of money to live on.
If your only source of retirement income is Social Security, you may find yourself struggling to cover your expenses. And if you’re living in a larger home, you may want to consider downsizing. Here are four ways that could help your financial situation.
1. Your rent or mortgage payment could drop
It commonly costs less to own or rent a smaller home than a larger one within the same neighborhood or community. Sure, there can be exceptions, such as if you buy or rent a home with less square footage that has more updates and amenities. But often, you can save money by virtue of shrinking your physical living space.
The less money you have to pay a landlord or mortgage company, the more you’ll have available for other bills. Housing is often retirees’ largest expense, so cutting it down can be helpful when money is tight.
2. Your property tax bill could shrink
Even if your home is paid off by the time you retire, property taxes are a recurring expense that never goes away. If you own a home and downsize in the same area, it could result in a smaller property tax bill.
That said, some states have property tax freeze or relief programs in place for older Americans. It pays to look into these if you’re having a hard time paying those bills on your limited retirement income.
3. You might spend less on utilities and maintenance
The less square footage you have at home, the less it might cost to heat and cool your space. That could spell big relief if you’re limited to just a Social Security payment each month.
Similarly, if you own your home in retirement, maintenance could be a large expense — especially since, at that point, your home may be aging. Plus, if you’re no longer capable of handling maintenance yourself, you might spend a lot to hire people to do it for you. So the less space you have, the less money (and time) you might spend on upkeep.
4. You might end up with a nest egg after selling your home
Due to a broad increase in home values these past few years, a lot of older Americans who own homes have their fair share of equity in those properties. Selling your home and buying a smaller one in its place could leave you with a nice pile of cash.
Say you can get $400,000 for your home, and you’re able to buy a new one for $250,000. That $150,000 can then serve as your retirement nest egg.
This also means you can put that money into assets like bonds, CDs, and dividend stocks, all of which are capable of generating additional income. It’s a nice way to supplement your Social Security benefits and buy yourself more breathing room from month to month.
Of course, your best bet is to enter retirement with a decent chunk of savings of your own. But if you’ve missed that boat and are now limited to just Social Security, downsizing is a move that could really come to your rescue.
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