We're 61 and recently paid off our $350K mortgage, but we have only $50K in total retirement savings. Should we downsize and use the cash to boost our nest egg or delay our golden years?

Downsizing your home may be the best solution in limited situations

Selling your home can be the right solution — if it will provide you enough cash to buy a cheaper home and still put a significant lump sum into a retirement plan. If you can't do that, selling your house might not improve your situation all that much.

First, selling your house can cost a lot of money — according to Zillow, estimates average closing costs for sellers in the 8% to 10% range. Although recent changes to real estate commission rules may mean you pay less, you're still likely to be out thousands. If you sell a $350,000 home and pay a 6% commission, you'll walk away with only $329,000. That doesn’t include other costs, such as lawyer’s fees and moving expenses.

You likely won't owe capital gains taxes on your home sale as there's a $250,000 exemption for single tax filers and a $500,000 exemption for married joint filers — providing you meet certain requirements. However, if you didn't live in your house for long or had a capital gain exceeding these amounts, you could lose a portion of your proceeds to the government.

There's also the matter of finding someplace else to live.

If you pay cash for a new home, it will reduce the amount you can invest. If you're getting a mortgage, current rates are down slightly from recent record highs but well above where they've been for most of the 2010s and pre-pandemic 2020s. If you're renting, you'll have a landlord to deal with and rents in metro areas are up over 30% since 2019. With both rent and mortgage rates up so much, a "cheaper" home may not save you a ton.

Before you give up your paid-off house — and the very low financial obligation that comes with it — find out exactly how much extra income the sale of your home will provide.

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Working longer could be the best solution for too little savings

For most near-retirees with too little money saved, the best course of action may be to delay retirement for as long as possible.

Working longer will provide more opportunities to boost your retirement savings through your contributions and employer’s 401(k) match.

For example, let’s say you invest an extra $5,000 annually from age 61 to 70, with your employer matching half that amount. You'd put $7,500 in total into your plan. Earning a 7.00% annual return would bring your $50,000 account balance to $181,757.88 during that time frame. That's more than triple what you'd have if you left earlier.

Delaying also allows you to put off collecting Social Security. Doing so can increase your standard benefit by 8% per year for each year you wait beyond your full retirement age. You also won't have to start drawing down your savings as soon, so you delay when your balance begins dwindling instead of growing.

Of course, working until 70 isn't feasible for everyone. However, if you set this as a goal and aim to work for as long as you can in some capacity, you may achieve a secure retirement in the home you worked so hard to pay off.