Downsizing in retirement: how much does selling up add to your pay?

Downsizing turns part of your home into money you can spend, and for many New Zealanders it is the biggest lever they have after NZ Super. In our worked example, a couple who sell and buy something smaller at 75, releasing $300,000 after costs, could spend about $1,239 a week for life instead of $1,052: $187 a week more, in 9 of 10 simulated markets. As a rule of thumb from our calculator, each $100,000 released adds about $62 a week. The catch is that the move has to actually happen, and the costs of selling, buying and moving come off first. Rules checked 12 November 2026.

What releasing equity means

Your equity is what your home is worth less any mortgage. Many retirees have a lot of it. The Retirement Commission's 2024 policy brief on home equity release found that 65% of households aged over 65 own their home outright, and that the average home equity of households aged over 65 is about $370,000. For most of them, it is money they cannot spend without moving.

Downsizing releases some of it. You sell, buy (or rent) something cheaper, pay the costs, and the difference goes into savings. From there it works like any other savings: it earns a return and you draw on it. The money you release is the sale price, less the purchase price, less every cost of the move.

The costs of moving

These add up, and they come off the top:

• Real estate agent's commission and marketing on the sale.
• Legal and conveyancing fees, on both the sale and the purchase.
• Building reports or inspections on the new place.
• Movers, storage, and getting the new home set up: curtains, appliances, small repairs.
• Any bridging finance if the purchase settles before the sale.

Get quotes for your own move. As an illustration only, if a couple sold for $950,000, bought for $620,000 and spent $30,000 on the move, they would release $300,000. That is the figure we use below.

Worked example: releasing $300,000 at 75

Our example couple are both 55, with $250,000 in KiwiSaver between them and $50,000 of other savings. They own their home, retire at 65 and plan for the money to last to 95. Without downsizing, their retirement pay (what they could spend each week for life after tax, in today's dollars, holding in 9 of 10 simulated markets) is about $1,052.

They plan to downsize at 75 and release $300,000 to savings. The downsizing calculator gives:

Notice the pay rises from 65, not from 75. The calculator finds the most you can spend at the same level every year, knowing the money arrives at 75. In the first ten years you draw a bit harder on your other savings, and the downsizing money tops them back up. That is sensible if you are confident you will move. If you are not, plan without it, and treat it as a reserve.

Timing and amount

Up to about 80, the age barely changes what each dollar adds. By 85 it does: there are fewer years left in the plan to spread the money over, and if you leave it late, more of it ends up as an inheritance rather than spending. Health matters too. A move at 70 is usually far easier than at 85.

For a single person

Downsizing often matters even more for single people, because the single NZ Super rate ($555.15 a week living alone) leaves less room. A single person aged 55 earning $70,000, with $150,000 in KiwiSaver and $40,000 of other savings, has a retirement pay of about $673 a week. Releasing $250,000 at 72 lifts that to about $822, an extra $149 a week for life in 9 of 10 markets.

For a surviving partner, downsizing is often part of the conversation after a death. There is no need to rush; our guide on when a partner dies covers the early steps.

NZ Super, tax and other effects

• NZ Super does not change. It has no asset test for the person getting it, so selling your home and holding the money in savings does not reduce it.
• The Accommodation Supplement does have a cash asset test. The limits are $8,100 for a single person and $16,200 for a couple. If you go from owning to renting and hold the released money as cash or investments, you are unlikely to qualify while you have it.
• Tax on the returns. The released money will earn interest or investment returns, which are taxable. In a KiwiSaver or managed fund, tax is at your prescribed investor rate (PIR). More income can move you from 17.5% to 28%; our tax on retirement savings guide explains the thresholds.
• Where to hold it. Money you will spend over 20 years or more can usually take some investment risk; money you need in the next few years should not. Our fund type in retirement guide covers the trade off.

Working out your own figure

The calculator needs one number from you: the money released to savings, after every cost. A simple way to build it:

The figures in the right hand column are an illustration only, not market data. Use an appraisal for your home, real listings for the kind of place you would buy, and quotes for the costs. Because house prices move, enter the figures in today's dollars, as the calculator does for everything else.

Then try a few versions. A smaller release, say $100,000, still adds about $63 a week for life in our example. A later move, at 85, adds much less. Running two or three versions side by side, and saving them in the calculator, shows how much the decision is worth to you before you talk to an agent.

Is downsizing right for you?

The numbers are only part of it. People downsize to be closer to family, to have less house and garden to look after, or to move somewhere warmer, flatter or nearer a hospital. Others stay put because their home and community matter more than the extra income. Both are reasonable choices.

Some questions worth asking:

1. How much would we really release after every cost? Get an appraisal and quotes.
2. Would the smaller place still suit us at 85? Stairs, access and transport matter.
3. Do we want to leave the home, or its value, to family? If so, downsizing may suit better than borrowing against the home.
4. Could we rent instead of buy? That releases more now, but read our renting in retirement guide first: rent for life costs a great deal.

The main alternative for people who want to stay is a reverse mortgage, which lends against your home without a sale. It works very differently, with interest that compounds. Our reverse mortgages guide compares the two. For how released money fits with other one-off amounts, see lump sums and inheritance.

This is general information, not financial advice. Before selling, talk to a lawyer, and consider a licensed financial adviser for how to invest what you release.

Questions

How much does downsizing add to my retirement income?

In our calculator, each $100,000 released adds roughly $62 a week for life, holding in 9 of 10 markets, for a couple retiring at 65 and planning to 95. Your own figure depends on your timing and plan.

Does downsizing affect NZ Super?

No. NZ Super has no asset test, so selling your home and holding the money does not change it. The Accommodation Supplement does have a cash asset test.

When is the best time to downsize?

Up to about 80, the timing barely changes what each dollar adds in our example. After that, there are fewer years to spread the money over. Many people find a move easier in their late 60s or 70s.

Can I downsize and still leave an inheritance?

Yes. The smaller home itself is still part of your estate, and in most markets our calculator's plan leaves some savings unspent too. If an inheritance matters to you, plan to spend a little less than your full retirement pay, or release less.

What costs should I allow for?

Agent's commission, legal fees on both sides, reports on the new home, movers, and setting up the new place. Get quotes; they come off the money released.