I would set up a series of events to handle the menu update:
Trigger a tween animation that makes the upgrade option disappear — for example, by fading it out or shrinking it.
Once the disappearing tween completes, identify all the menu options positioned below the one being removed and tween each of them upward.
Finally, remove the upgrade option that’s just disappeared.
To detect the options below the one being removed, you can use a tall, narrow sprite placed just underneath it. Then, use a collision check to select all menu items that overlap with that sprite.