While the benefits of downsizing may be clear — less stuff and less stress — deciding on a plan of action may be a challenge. For seniors opting to downsize, navigating what to do with your existing home is often the most crucial decision.

Should You Sell Your Home to Downsize?

For many seniors, downsizing becomes a financial necessity. However, if you decide not to sell your existing home yet move elsewhere, figuring out what you can afford is a priority. Calculate both your monthly income and expenses and plan to spend no more than 28 percent of your gross income on a mortgage payment, NBC News’ expert recommends. Setting a budget and tracking incoming and outgoing amounts can help you spend wisely. With those figures in mind, you’re less likely to feel tempted by homes outside your means. Also, consider how much you’ll need for a down payment — a conventional mortgage requires 20 percent or more down. Alternative mortgage programs like USDA or FHA loans can lower the up-front expense, but you still need cash reserves for closing fees and moving costs.

Pros and Cons of Selling a House in Order to Downsize

The benefits of selling your home when downsizing include perks like having the cash to put down on a new house. Plus, depending on the type of property you purchase, you could reduce home maintenance expenses, which average about $1 per square foot per year. Energy bills could be lower, too, if you move to a smaller or more energy-efficient home. Of course, there are drawbacks to selling your house, such as the emotional turmoil involved with leaving memories behind. Local market trends can also impact your bottom line and complicate finances, especially if you still owe on a mortgage. Appraisal via comparable properties is standard in real estate, and comparable factors cover location, economic, legal, and physical aspects. Essentially, your listing price depends on what other homes in the neighborhood offer and the sales price they net.

Selling (or Buying) with Pocket Listings

Not sure you want to list your home for sale publicly — and deal with strangers traipsing through to view it? A pocket listing might be a perfect solution; it allows you to put your home up for sale more privately than in a widely published MLS listing. You can also use a pocket listing service such as HomeQT to search for a new home.

Pros & Cons of Renting Out Your Home to Downsize

One benefit of renting your existing home is that you will have a steady source of income, even in retirement. You also have the option to sell the house later or pass it on to family, if you change your mind. In short, renting isn’t a permanent decision, so it is a less emotional one to make. While rental income typically does not affect your social security earnings, SF Gate notes that the amount of rent you collect monthly can impact your overall income, thereby influencing your Social Security benefit. This is one potential con to becoming a landlord during retirement. Other negatives include landlord responsibilities like pest removal, ensuring that the plumbing remains functional, and performing other maintenance tasks. Of course, you can hire a property manager, but you’ll be giving them a portion of each month’s rent to handle your renters.

Pros and Cons of Passing Your Home to Family

Instead of renting, you may decide to give your home to your family. For many older adults, knowing their children or grandchildren will benefit makes this a less emotionally tricky decision. However, financial complications can make the transition stressful. Depending on how you transfer the home to loved ones, you or they may wind up paying hefty taxes afterward. The famous one-dollar sale is also not a good idea, as it costs you in gift tax and your family member in capital gains tax if they sell the property. Deciding whether to sell, rent, or keep your home in the family can be challenging. But the benefits of downsizing are clear and a significant motivation toward making this tough choice.

Contributed by Jim Vogel of elderaction.org