One of the major decisions facing the newly retired is what to do with their home. Some retirees want to downsize so they have fewer maintenance chores, while others can’t imagine living anywhere else. Still others consider using the equity in their home to buy another smaller home and use their former primary home as a rental.
Let’s examine some of the reasons for selling…and staying put:
Influx of Funds: Given the lack of savings many go into retirement with, selling can offer the funds to offset a lack of retirement savings.
Tax Break: If you have lived in your home for the last two out of five years, you can exclude $250,000 of the capital gains from the sale of the house if you are single, and $500,00 if you are married.
Eliminating Maintenance Costs: Do you really need all those rooms and square footage? Are there stairs that could present a problem as you age? Remodeling can be expensive.
Buy Your Ideal Home: Location preferences change once your children are gone. You may need to be nearer to doctors or want to be closer to your grandchildren.
Staying Put: Staying in your home may be cheaper in the long run than renting. Much depends on the amount of equity you have acquired. If the equity is low, you might be better off selling and renting, depending on the rental rates in your area. On the other hand, if a home is appreciating in value, and you can afford the present mortgage, it might be worth holding on to it.
Finally, there is the emotional attachment to a home where you raised your children and celebrated family milestones. These non-financial reasons may be the strongest motivator for staying put.
When it comes to a home, retirement planning depends on your individual and unique financial picture. The positive aspect of this time in your life is that you often have options you might not have had in your working life.
Enjoy the freedom, whatever you decide.