Guide to rightsizing and downsizing for retirement

Singapore is a lucky country, in that we have an 89.3 per cent home ownership rate. Whether it’s a private property or a flat, most of us have an appreciating housing asset of our own; and besides being a roof over our heads, it can help to pad the retirement fund. It’s not uncommon to move from a larger home to a smaller one in our twilight years, with the shift helping to meet our retirement goals. However, there are a few important things to know before you downsize for dollars:

Key considerations when downsizing during retirement
As your replacement home is likely to be the one you stay in for the rest of your life, you want to make sure you’re comfortable, and that the move is a smooth one. Here are the key things to note:

● Look out for waiting periods, especially if you’re changing to a 5-room or bigger flat
● For singles, there may be reason to consider a larger flat
● Consider layout issues like stairs
● Ground floors may actually be preferable when you’re older
● Think through the use of your flat for legacy planning

1. Look out for waiting periods, especially if you’re changing to a 5-room or bigger flat
As of 30th September 2022, a waiting period has been imposed, for those who are changing from private homes to flats. If you sell a private property, you need to wait 15 months before you’re eligible to buy a resale flat.

The government has provided an exception to this: if you’re over 55, and you are changing to a smaller flat, you don’t need to wait out the 15 months. But if you have your eye on something a bit more spacious, like a 5-room or executive flat, be prepared to find temporary accommodation in the interim.

If it’s not convenient to do this, you may want to consider a 4-room or smaller flat instead, as it means you can move in right after the renovations.

2. For singles, there may be reason to consider a larger flat
Even if you don’t need much space, 3-room flats have one big advantage: they are the smallest flat size for which you can rent out a room.

Now you may not think this is a big deal, as you might have zero intentions of taking on a tenant. But don’t discount the value of room rental as an “emergency rescue” for your finances. If you ever become cash strapped, such as if your retirement income drops, having even a single room to rent out can make a huge difference.

So while a 2-room flat is cheaper, you may want to at least consider the possibility of rental. Life is unpredictable, and you need to be extra cautious if you have limited income sources after retirement.

3. Consider layout issues like stairs
If you’ve sold off a private property, you may be able to afford a more spacious retirement unit, such as an HDB maisonette, or a walk-up apartment. These can be quite tempting, as they might match or even exceed the size of your previous private home, at a much lower price.

But don’t forget that, even if you’re fit now, staircases can become an issue in the next decade or two. At some point in your life, going up and down the stairs can become a serious fall risk. With regard to double storey HDB flats, there’s an added issue in that most of them place the large bedrooms on the upper floor; many of them have just the living area and kitchen (and maybe one small bedroom) on the ground floor.

Other layout issues to beware of are very small toilets, and very high ventilation windows in those toilets (quite common to older flats). These have difficult nooks and crannies for you to clean, and it’s quite tough when you start pushing 70 or 80.

Double volume (i.e. high-ceiling units) are also tough for retirees, unless your retirement budget includes professional cleaning services. You sometimes find these high ceilings in the living and dining area of fancier flats, such as DBSS units. While they look really impressive, you probably don’t want to be climbing up extra-high ladders to fix light bulbs or ceiling fans in your old age.

4. Ground floors may actually be preferable when you’re older
The view from above sure is nicer, and admittedly quieter. However, there can be a good reason to pick a ground floor unit, when you’re older. This goes for both private condos as well as HDB flats.

The first reason is that sometimes lifts break down. If you’re on the ground floor, you’re not caught between the risk of having to use the stairs, and the annoying need to wait 20 minutes to go out because the whole block is down one elevator.

And once in a blue moon, all the lifts break down. This isn’t just inconvenient - the delay can be lethal for the elderly, if they suffer a fall or have a medical emergency while the lifts are out. Even when the lifts are working, it’s simply easier to call for help and get it on time, when living on the ground floor.

There’s also the fact that ground floor units tend to be the cheaper ones. This means more savings to enjoy your retirement.

(Incidentally, some people rely more on food delivery services when they get older. If you’re one of them, remember: the best way to get your food while it’s still hot is to be on the ground floor!)

5. Think through the use of your flat for legacy planning
Some retirees may be willing to pay more for a “young” resale flat, such as one that’s just out of its five-year Minimum Occupancy Period (MOP), or one that’s less than 10 years old. The rationale is that they’ll have a flat with a reasonably long lease “for the children.”

Do remember though, that no Singaporean can own two HDB flats. If your children already have a flat of their own, there’s not much use in leaving yours to them, as they’ll just end up having to sell one. This will also come with the added cost of having to list the flat, possibly needing to pay a property agent, handle negotiations, etc.

It might be better to just get a flat that will last for your lifetime, and use other assets to provide for your beneficiaries. They might be better served by financial products like annuities, insurance policies, or trust instruments.

Find out how you can protect intergenerational wealth here.