WWYD? Downsize and retire early?

[TheCoralShaker]

We live in a large 4 bed home that we bought 3 years ago from new build. It's a stunning home and we chose all the fittings. We're a family of 3, only one DC so often we're not using all the space. No more DC planned.

However I've been doing the maths and worked out if we downsized to something smaller in next few years we'd have nearly 200k equity that we could then put into pensions, would have a much smaller mortgage to allow for more holidays/ savings AND all being well could probably retire at 50 in about 10 years time. Is this a no brainer?

I do like our house and a few years ago a big house was the epitome of success to me but my priorities have changed and I'm more keen to retire early/ travel and enjoy life these days rather than be a slave to a mortgage. I will likely get some inheritance in the coming years that would allow me to pay off a mortgage but not sure how much/ when so thinking downsizing early is a better plan than relying on others money.

I would definitely downsize and retire early- it will also probably mean a longer life, as well as better quality of life.
Nothing shows the world you are successful like not having to work!

I think you’re being a bit optimistic re returns. £200k @5% over 20 years is more like £540k rather than £1m. You’ve also got to think about inflation.

How old is your child now? I think that makes a big difference to perspective on downsizing. If you’re in a phase of toddler/baby I wouldn’t take that decision now.

This is what I was thinking.

We're moving to a bigger house in part because our 11 & 9 year olds are getting much physically bigger & for everyone's sanity they need some separate space for gaming/friends etc.

I downsized at about age 40 just as my kids were about to hit their teens, partly for financial security and partly for other reasons.

Pros:
No mortgage, more spare cash, able to work part time.
I will retire at 55 once kids are through uni
Kids can walk everywhere where we are now so I'm not the taxi
Quicker to clean and garden
Cheaper to maintain and heat

Cons:
Big boat-size shoes in the narrow hallway (I miss my big hall cupboard!)
No driveway or garage
Occasional worries about disturbing the neighbours on the attached side, when the teens have sleepovers
A weird attitude from others about downsizing that has made me feel a bit insecure about my choice at times, even though I'm much happier here. There is definitely a societal belief that a large detached house equals success in life, so there were bemused reactions when I chose something different or an assumption that I couldnt afford to keep it. I could have done if I'd worked more and for longer, but I chose time, which to me is more valuable.

You also need to think hard about what downsizing looks like. In my area downsizing from a 4 bed house to a 3 bed house/semi or a 2 bed bungalow will leave you little net gain by the time all the costs are paid.

You have to go multiple rungs down the ladder before you have much left in your pocket and that is a big change to live with at a relatively young age.

Big boat-size shoes in the narrow hallway

@TreesWelliesKnees - this really made me laugh. We're not quite there yet but it's definitely on the cards!!

I would be worried that

a. your financial projections are very overly optimistic

b. if you divorce - and no-one thinks they are going to but it happens to many of us! - would you be better off not having downsized and retired, as your projections very much rely on your husband not having a mid life crisis. What position would you be in if you became a single parent?

c. relying on an inheritance is always risky.

We gave up work at 46 and moved abroad and over time upsized to 5 bed 4 bath property with a pool and then my dad came to live with us. When we moved back to the UK a decade later we had to downsize significantly. We bought a 2 bed detached bungalow after my dad died and DS had gone to university as we wanted the property to be fairly future proofed and didn't want the hassle of having to move on again. It was quite a shock at first but we quickly got used to it and love the massive reduction in cleaning and maintenance from our old house. Rarely miss the pool except on days like this!
It's definitely doable if you're prepared to accept the downsides and that those are outweighed by the upsides.

To think that £200 will grow to £1 million in 20 years is pretty crazy!!!!!

if it was that easy I would be selling my small London home today and moving somewhere cheaper!!!

Well to be fair £200k would grow to £1m in 20 years if you got a consistent 9% return. But the indirect implication of a consistent 9% return is high inflation, making the £1m equivalent to probably about £500k in today’s terms.

What mark up for tax do you get by putting money into a SIPP? That can be very different between people.

I think your growth assumptions are excessive but would still be tempted to downsize if the opportunity to clear a lot of money exists in your local property market.

Excellent suggestion re property for daughter when at uni. Also If it is her name you won’t pay capital gains tax when it is sold. We did this for both of our children and it worked out well although our dd didn’t go to uni until she was 24.