A. The largest expenditure in a retiree's life is housing. It's a good idea to exchange a large house to a smaller retirement home if you want to control your retirement expense.
Let's run some high level numbers to see the savings:
If your large house is worth $500,000. And you plan to sell it and buy a smaller house at $250,000.
You need to factor in about 10% of your old house's price for closing and moving related costs, that will be $50,000.
Your net cash gain is $200,000 (=$500,000-$250,000-$50,000).
Using the 5% rule of thumb for retirement income calculation, you will generate $10,000 additional income per year.
If we use the rule of thumb of 3.25% for property tax, insurance, utilities, and maintenance costs of maintaining a house, the bigger house would cost you $16,250 per year; while the smaller house would cost you $8,125 per year. The difference of the two is $8,125.
In summary, this exchange transaction will net you additional $18,125 per year.