Thinking of selling your home before retirement? With some strategic planning, you can use the proceeds from the sale to create added financial security during your golden years. In addition to generating cash you can use to pay down debt and grow your nest egg, you’ll save money on expenses if you purchase a smaller home. There are several options to consider but let’s start with what you need to know about taxes.
Up to $500,000 In Proceeds Is Tax-Free For Couples
According to the IRS, up to $250,000 of proceeds from a home sale are tax free for single filers. If you’re married and file your taxes jointly, up to $500,000 is tax free. To qualify for the exclusion, the IRS considers how long you’ve lived in the home and other factors. For complete information, download the IRS publication, “Selling Your Home.”
Pay Down High-Interest Debt: A Huge Threat To Retirement
News reports indicate Baby Boomers are entering retirement with far more high-interest debt than previous generations. In fact, excessive debt is considered a bigger threat to your retirement than inflation and the rising cost of living. After a home sale, use some of the proceeds to pay off high-interest credit cards, personal loans, auto loans and any college tuition debt.
Build Up Your Emergency Savings Account
Every savvy retirement plan includes emergency savings for unexpected expenses. Think about putting some of the proceeds from a home sale into an account to give yourself access to liquid cash for emergencies. It’s far better than withdrawing funds from your Thrift Savings Plan (TSP) and owing income taxes on the distribution.
“One of the smartest ways to protect your retirement nest egg is purchasing a Long-Term Care (LTC) insurance policy.“
Purchase An Annuity To Supplement Your Retirement Income
Annuities are insurance products that provide guaranteed fixed payments for life plus tax-deferred growth and protection against stock market volatility. You can use your TSP to purchase an annuity from MetLife (the exclusive annuity provider for the TSP). Or, look into annuities from private insurers that can be customized for your needs with riders.
Other Insurance Products To Consider
One of the smartest ways to protect your retirement nest egg is purchasing a Long-Term Care (LTC) insurance policy. Without LTC insurance, the cost of non-medical, custodial care can run as high as $10,000 per month out of pocket.
Also consider permanent Life Insurance that combines a death benefit with a savings option you can draw from when you need the cash. To learn more about annuities and other insurance products, meet with an FRC® trained advisor who understands federal benefits.
