Upsizing at retirement

For years, the housing plan for retirement has been fairly predictable.

The children leave, the mortgage disappears, and the four-bedroom house starts to feel too large for two people. At some point you sell it, buy something smaller and release some capital.

I wonder if, for some families, we are going to have to turn that sequence on its head.

I have started to see a different problem in financial planning. People approaching retirement who don't necessarily need less house. For the next ten years, they might need more.

The reason is their children.

This isn't simply a case of twenty-somethings refusing to leave home. The economics of becoming independent have changed.

In 2025, 28.7% of UK adults aged 20–34 were living with their parents, up from 25.4% a decade earlier. 

Among 25–34-year-olds, the IFS estimates that proportion has risen by more than a third since 2006. 

Then look at the other side of the equation. The average private rent in London is now £2,332 a month, and the average London first-time buyer is 35.

It isn't hard to imagine the consequences.

Your 22-year-old comes home after university, gets a job, and realises that renting would swallow a large part of their salary, so staying at home for a few years makes sense.

Then they meet someone.

Suddenly the spare bedroom isn't accommodating a child. It is accommodating two adults, both working from home occasionally, both saving for a deposit and both quite reasonably wanting some independence.

At precisely the age when parents expected the house to start feeling empty, it can start feeling very full. Just as Mum and Dad are phasing into retirement and spending more time at home themselves. 

There’s evidence that parents are starting to think this way. Research commissioned by M&G this year found that 7% of parents of teenagers would consider moving to a larger home so their children could continue living with them into adulthood. 

Perhaps “downsizing at retirement” won't be universal after all.

For some families, the better plan might look quite different: at 55 or 60, you buy the slightly bigger house, or extend the one you have. Perhaps it has an extra bedroom, an annexe or simply enough space for several adults to live together without driving one another mad.

You might even keep a modest mortgage for longer than originally intended.

And then, at 70, when the children really have left, you downsize.

Looked at in isolation, buying a larger house shortly before retirement sounds slightly eccentric. Looked at as a 15-year housing strategy, it makes considerably more sense.

Of course it costs money, with Stamp Duty, additional borrowing, interest and the opportunity cost of having more capital tied up in a house. It isn't the right answer for everyone.

But this is where planning early becomes powerful.

Discover the problem at 60 and your choices may be limited. See it coming at 45 or 50 and you have a decade to decide where you want to live, restructure borrowing, build investments, adjust pension contributions and work out how much support you genuinely want to give your children.

Perhaps the most useful question in retirement planning is changing.

It used to be: when will the children leave home?

It might increasingly be: what do we want our family home to do over the next 20 years?

That is a much more interesting question.

And, fortunately, it doesn't need an immediate answer.

There aren't many financial problems that cannot be made considerably easier with a decade’s notice.

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