As you near retirement, it’s important to consider how real estate fits into your broader financial plan. For example, for many of us, our homes are our most significant asset — but they can also be our biggest liability depending on various factors. So, how will that asset affect your retirement? Many clients wonder if they should — or need to — sell their homes in retirement.
There are many questions to consider to better understand the intersection of your lifestyle needs, the value of your home’s equity, and your investment assets. Let’s explore some of these factors:
- Can you manage the rising cost of living? Do you live in a high-cost region, like the Bay Area? If so, you should assess whether you can continue to afford to live in your home and fund your current lifestyle, or if relocating or downsizing is a more suitable option.
- What are the tax implications of selling? Your home’s value has likely appreciated significantly if you’ve lived in it for a long time. You should evaluate whether paying high capital gains taxes makes financial sense or explore strategies to manage your tax liability in the event of a sale.
- What is the non-financial value? What does your home represent to you beyond equity value and tax planning? If you’ve built your community around it, live near your grandkids, or find the layout fosters aging in place, it may hold more non-financial value, which is worth considering.
Whether to sell your home in retirement depends on many financial and personal factors. As a large part of your net worth, your house is a key variable in your financial planning. We understand this critical relationship, so we integrate real estate analysis into our services, using our real estate background and proprietary software, Opes Advantage. Contact us if you’d like to discuss your situation and explore different real estate scenarios to reach your ideal retirement.
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Erin Whalen
For many of us, our home represents both our most significant asset as well as our most significant liability. One of the questions we are universally asked by clients is, should I sell my home in retirement? Or do I need to sell my home in retirement? To some extent, it’s not just a financial decision. Is it a home in a location where you see yourself retiring, where your community is based, where your family is based? Is it a home that’s conducive in terms of its design for aging in place? It’s also in particularly high cost of living areas a fundamental question of can you continue to fund the lifestyle you want to live, while not needing to access liquidity in your home? Understanding the intersections between your lifestyle, the level of assets you have, and the value of the equity in your home is critical. There are also tax implications for many of us who live in the Bay Area. If you bought your home in the last 10 or 15 years, you may have significant gains that need to be considered as part of your broader financial plan. So before you’re ready to retire, in advance of retiring, really start giving that some thought in terms of what’s the narrative you want to turn out in the future and how does real estate fit into that.
Disclaimer: Case Studies are provided for illustrative purposes only to provide an example of the firm’s client base, process, and methodology. The experiences portrayed herein are not representative of all firm clients. Other individual outcomes may vary based on their individual circumstances, and there can be no assurance that the firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the firm’s financial and investment advisory services. Client tax situations are unique and specific, and you are encouraged to consult a tax professional to analyze your specific situation. This material has been prepared for informational purposes only, and is not intended to provide tax, legal or accounting advice; nothing contained in these materials should be taken as such. The opinions expressed in this article are not intended to provide specific advice or recommendations for any individual or on any specific tax strategy or security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Opes Wealth Management cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Advisory services are only offered to clients or prospective clients where Opes Wealth Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Opes unless a client service agreement is in place.
