Does Upsizing in Retirement Help Build Generational Wealth?

While many Americans in the past have chosen to downsize in retirement, it may be becoming more common to upsize instead. 

Today’s housing market is threatening the future of generational wealth, according to Realtor.com, which cites that the cost of a modest starter home is pushing $1 million in more than half the country. With these high prices, younger buyers are being priced out, and many must turn to family for financial help. 

Instead of downsizing, some retirees have chosen to upsize by buying bigger homes with their adult children, allowing them to pass on wealth to the next generation.  

However, for some, this still isn’t the answer. For retirees who still have a mortgage, selling and upsizing typically results in giving up a lower interest rate and buying at today’s higher rates.  

Realtor.com also mentions the capital gains tax exclusion, which now protects less as homes have gotten more expensive, cutting down purchasing power. 

Moreover, upsizing can come with other challenges, including higher property taxes, higher insurance, higher utilities and more maintenance. Multigenerational buying can also create issues fueled by family dynamics, including disagreements about who pays what and what happens when life changes occur.  

Still, with the right plan in place, upsizing in retirement may be the solution for many retirees looking to pass down generational wealth. Between a retiree’s equity and their adult child’s income, purchasing can be easier while allowing the younger generation to build wealth in an unaffordable market.