Q: My finances are stable, so why should I downsize my home in retirement?

There comes a time in everyone’s life to face retirement. Retirees downsize into a smaller home or into an apartment when their larger homes become unmanageable. Mowing a lawn may not be as simple at 80 years old as it is at 35.

In addition to manageability, the IRS provides an incentive. There is no capital gains tax on the first $500,000 of gain on the sale of a primary residence in which a couple has lived for two of the last five years.

Before downsizing, ask yourself these questions: How well can I maintain the house in retirement? Will I be able to maintain it in a fashion that makes it sellable five to 20 years down the road? If I downsized, would I have more liquid assets?

“Consider what your income will be each year. Retirees are going to live on about 80 percent of the income they had been living on while working. If your expenses outnumber your income, it may be time to downsize,” says Alyce Hackett, a CFP and founder of Lifestyle Resources, a financial planning firm in Morristown, New Jersey.

Other factors to consider include cost of living adjustment and your emotional response. Although it may be cheaper, you may suffer emotionally living in a small town if you’ve lived in a big city all of your life.