Why your 40s can be a good time to downsize your home

  • Andy Dean/iStockphoto

    By Cameron Huddleston/GOBankingRates

    Homeownership often is considered an important part of the American Dream. But a home -- the mortgage, in particular -- is also the biggest expense for most households. As a result, homeownership can make another aspect of the American Dream -- a comfortable retirement -- hard to achieve.

    High housing costs force about one-third of adults 50 and older to pay more than 30 percent of their income for homes, forcing them to cut back on essentials and retirement savings, according to a report by the Harvard Joint Center for Housing Studies and AARP Foundation. And homeowners with mortgages are more likely to work longer and retire later than those whose mortgages are paid off, according to Boston College's Center for Retirement Research.

    In short, your home could be hindering your ability to retire. That's why downsizing to a smaller, less-expensive house well before retirement can make sense. Don't wait until your 50s or 60s -- make the move in your 40s, said Richard Arzaga, a certified financial planner and CEO of Cornerstone Wealth Management in San Ramon, California. "If the goal is stronger financial position when you get into your older years and retirement, the sooner you downsize, the better position you'll be in," he said.