Sites

For baby boomers, a guide to downsizing: the finances, the decluttering, the big move

Ask the Expert Plus 55 Living Residences
Jim-Davis-Downsizing-Realtor
Cynthia Pill (right) talks with real estate agent Mary Guilloty and broker Marie Presti in the Waltham town house her daughter is purchasing. Her daughter, Karen Fiello (not pictured), is downsizing from a 5,000-square-foot home in the Syracuse, N.Y., area. Jim Davis/Globe Staff

A collaboration with The Boston Globe’s Help Desk:

Since her divorce 10 years ago, Karen Fiello has been saving and preparing to move from her 5,000-square-foot home in a Syracuse, N.Y., suburb into a smaller abode in the Newton area, where she grew up and where her mother and siblings live.

Fiello is not the typical downsizer — she’s not quite yet an empty-nester (her son is a high school senior), and she’s only 50 years old. And, unlike most downsizers, by moving into the hot Greater Boston housing market, Fiello will be spending more for less. She’s purchasing a 2,500-square-foot town house in Waltham with room for her daughter to live in while attending graduate school and for her son to visit once he goes off to college in Maryland.

“The amount that I’m buying for in Waltham is more than double what I’m selling my home for,’’ Fiello said. “I knew coming back to the Boston area was going to be a little bit of a sticker shock, but I wanted to be here; this is home.’’

(Downsizer Bella English takes the ‘tear test.’)

Marie Presti, Fiello’s broker, said the biggest takeaway is that when it comes to downsizing, the earlier you start the process, the better.

“I would meet people who owned a home, and they were stuck trying to decide what to do,’’ said Presti, broker/owner of The Presti Group in Newton. “Some couldn’t figure out the numbers. Some people couldn’t figure out where they wanted to go — ‘Near my daughter or near my friends?’ When you get stuck it’s hard to get unstuck.’’

Presti began teaching a downsizing class 10 years ago, as the first wave of baby boomers entered their 60s, and is of the ethos that “It’s not about downsizing, it’s about right-sizing.

“It’s not always about getting into a smaller space, but a cheaper space,’’ she said. “It could be the same square footage but in a cheaper town.’’

The first step people should take is to determine their cost of living, Presti said, which should guide the decision of whether to age in place, move into a senior retirement community, buy a house or condo, or rent.

“People always assume downsizing equals a lower property tax. It may, but not always,’’ said Paul Romano, a financial planner with Skyeburst Wealth Management in Newton. And they don’t always know the costs of condo living, Romano said. “For many, this is the first time they would be living in a condo.’’

If you’ve owned and lived in your home for at least two of the past five years, you may be able to claim the maximum capital gains tax exclusion from its sale: up to $250,000, or $500,000 for married couples filing jointly.

For many, this means they may not have to pay capital gains tax at all. But for others, particularly if they’ve lived in communities where homes are going for at least $1 million, they may be able to exclude only some of the gains from a sale, said Deborah Rogers, a CPA at Waldron H. Rand & Co. in Dedham.

Some exceptions do apply, Rogers said, so homeowners should consult their tax preparer before selling. People selling a primary residence and moving into a vacation home they already own may not be able to claim the maximum exclusion. And if someone has lived in a home for less than two years and has to move out for reasons the IRS considers “unforeseen circumstances,’’ such as a job change or divorce, he or she may still be able to claim the exclusion.

Keeping records of all of the capital improvements made to a home is crucial, Rogers said. Things like a new roof, kitchen, deck, or sprinklers can be claimed on your capital gains forms. Repairs and fix-up costs, such as installing a new toilet or painting, don’t count.

Start with your purchase price, including all the costs associated with acquiring your home, add in the costs of improvements, and subtract any tax credits or insurance reimbursements you’ve received, Rogers said. “So if you’re thinking about [downsizing], get those records and start pulling them together.’’

Once a financial plan is in place, Presti said, meet with a broker to determine your housing options, from a rental to a retirement community.

“There’s a gamut of options in between those,’’ Presti said. “In Greater Boston, the price of housing is one of the most expensive in the entire country to downsize into; however, if you own a home currently, your equity is one of the highest in the country. How much of that do you want to put into your [new] house, and how much do you want to live off of?’’

Romano, the financial planner, said a lot of his clients inquire about moving to warmer climates, but one of the biggest mistakes he sees is people rushing through the process to go to a new state only to realize they miss their friends and family.

“Then they say, ‘Maybe I need to buy another home to spend summers up here and winters down there,’ and suddenly their lump sum is gone,’’ he said. The solution, Romano said, is to rent for a full year in the place you think you may want to live to see if you’ll like it. “The worst-case scenario is not liking where you ended up and needing to come up with a third plan.’’

Then there’s the issue of decluttering a home.

“Some folks think they’re going to pack their whole house,’’ said Kristen Kenney, marketing director at the senior retirement community Brookhaven at Lexington. “We tell them start [purging] now. Do you really need that extra spatula?’’

Kenney said many of Brookhaven’s residents use senior moving managers, a rapidly growing industry. The National Association of Senior Move Managers, a trade organization, has grown from 20 companies at its inception in 2003 to 1,000 spanning the United States, Canada, Australia, and the United Kingdom, according to associate executive director Jennifer Pickett.

“A senior move manager is a third party that can make quick work of [decluttering] — keep, donate, toss is how you get started,’’ Pickett said. “We estimate that our members did about 250,000 moves last year, up from about 150,000 over the past three years.’’

Newton downsizing consultant Kathleen Wright, said she has seen a rise in younger clients.

“People are deciding as soon as they’re empty-nesters,’’ said Wright, who has set up a downsizing guide on her website, essentiallyyoursconsulting.com. “They’re moving sooner, which I found as a surprise.’’

Decluttering can be an overwhelming and emotional process, said Joan E. Roover, founder of the Waltham move management company A Thoughtful Move.

“When downsizing, it’s important [for people] to be organized about it and pace themselves, because it’s one thing if people do some purging on a routine personal basis, and another thing if people have lived in a home 30, 40, 50 years,’’ Roover said. “Some people keep every check they’ve ever written — we’ve found them dating back to the 1950s.’’

And don’t assume your adult children will want your stuff.

“People don’t collect in the same way their parents and grandparents did,’’ Roover said. “Millennials would rather put money into travel and education rather than in crystal and sterling that their parents collected through the years.’’

Downsize-Waltham-Town-House-Jim-Davis
Outside the town house Karen Fiello is purchasing in Waltham. —Jim Davis/Globe staff

Fiello, who hopes to move to Waltham from her home in the Syracuse area in July, said she has been “purging like crazy’’ for nine months, including stuff from when her children were little. The effort is twofold: She will have half the space in Waltham, and she needs to declutter her home before she lists it.

“I have a sentimental attachment to a lot of things in my home, but I have to put my emotions aside and be more realistic,’’ Fiello said. “I wish that I hadn’t held on to so much stuff over the years.’’

Subscribe to the Globe’s free real estate newsletter — our weekly digest on buying, selling, and design — at pages.email.bostonglobe.com/AddressSignUp. Follow us on Facebook and Twitter @globehomes.