With mortgage interest rates currently on the decline, experts expect more buyers to enter the real estate market – driving up the average cost of a home. As a result, this may be a good time to cash in on a seller’s market and downsize your home for retirement.
Even better – if you’re single, up to $250,000 of your profit is exempt from capital gains tax. For married couples who file joint tax returns, up to $500,00 is exempt. The big question: what will you do with the proceeds from your home sale?
Pay Off Outstanding Consumer Debt
Ideally, you’ve been able to head into retirement debt-free. However, current research shows that Baby Boomers are carrying record-high debt in their retirement years. Using the proceeds to pay off or pay down credit cards, car loans, and student loans can help increase your cash flow. Start with credit cards and loans with the highest interest rates. More often than not, the interest on this debt is far higher than the interest you’re earning on your Thrift Savings Plan (TSP) and other investments.
Set Aside Cash For Emergencies
If you already have an emergency fund, add some money to it for even more peace of mind. If you don’t have one, go to the bank and put some of your home sale proceeds in a savings account for emergencies. Having an emergency fund eliminates the need to withdraw from your TSP when the unexpected happens.
“If you’re betting on not living long enough to need LTC, you may not beat the odds. Someone turning 65 today has a near 70% chance of needing some type of LTC services in the future.”
Buy An FIA To Create A Source Of Lifetime Income
A Fixed Indexed Annuity (FIA) is an insurance product that establishes a contract between you and a private sector company that promises to provide you with guaranteed income for life. As with other types of insurance, you’ll pay a premium. Think of it as another source of guaranteed lifetime income you can count on.
Purchase Long-Term Care (LTC) Insurance
Long-Term Care (LTC) insurance is not an expense. It’s a way to protect your TSP and other retirement assets. Since FEHB and Medicare will not cover the cost of non-medical, custodial care in a nursing facility or in your home, the cost is entirely out of pocket. Worse, depending on where you live, the average private room in a nursing home can cost as much as $10,000 per month. If you’re betting on not living long enough to need LTC, you may not beat the odds. Someone turning 65 today has a nearly 70% chance of needing some type of LTC services in the future.
To learn more, connect with an FRC® trained advisor.
