Why Selling Your Home at 65 Could Be Your Biggest Money Mistake
Whether you’ve already retired or are gearing up to leave the workforce, turning 65 can trigger thoughts of another major transition — selling your home. While most retirees stay put, according to the most recent Transamerica Retirement Survey, published last December, those who sell might later realize the move was a big money mistake.
Before listing your home for sale, consider the following ways selling at 65 can negatively impact your finances.
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Your New Home Might Cost More
Most retirees move for a reason other than downsizing or reducing expenses, according to the Transamerica survey. Top reasons for a move, such to be closer to family and friends or live in a better climate, can result in you landing in a more expensive market, and in a home that’s comparatively more expensive than your current one.
Remember to look at all the costs. Homeowners' association (HOA) fees, insurance rates and property taxes can strain your budget if they significantly increase your monthly expenses.
Seller Fees Will Reduce Your Proceeds
You probably remember paying closing costs when you bought your home, but homeowners are often surprised by how expensive it can be to sell. You might need to invest in a spruce-up before you list it, for example, and you’ll likely pay for some marketing costs, including professional photography.
Sellers also have closing costs. In addition to paying broker commission, sellers often split transfer taxes with buyers and in some cases might be responsible for the whole tax. And if you live in a condo or HOA community, you may have to supply the buyer with your condo association or HOA documents and resale certificate, as well.
Don’t forget moving costs. The average local move from a two or three bedroom home costs $1,400, according to Moving.com. Long-distance moves average $5,450.
You Might Owe Capital Gains Tax
Capital gains tax is tax on profit (gain) you earn from the sale of your home — i.e., the difference between the purchase price and the selling price less seller expenses. The IRS lets you exclude up to $250,000 ($500,000 for married joint filers) in gains, but if you’ve been in your home for many years, appreciation could push you over the threshold, especially if you’re unmarried.
The Sale Could Impact Supplemental Security Income
Supplement Security Income provides cash benefits to people with low income. The application requires you to report your financial resources (cash and other assets) to the Social Security Administration. The SSA uses their value to determine whether you qualify for benefits.
While the SSA doesn’t count your home or the land it sits on in its resource calculations, it does require you to report your intention to sell the home. You’ll receive conditional benefits up until the home sells. But if your profit from the sale puts you over the $2,000 resource limit ($3,000 for a couple), you’ll have to repay the conditional benefits, and your regular SSI benefits will end unless you purchase a new home within three months.
Gifting the home or selling the home for less than it’s worth to avoid increasing your resources can make you ineligible for benefits for up to three years.
The Move Might Be Premature
According to Social Security’s actuarial table, a 65-year-old man has a life expectancy of over 18 years, and a 65-year-old woman is expected to live more than 20 years. Your health, lifestyle and personal priorities could change drastically between now and then, possibly tempting — or forcing — you to move again. If so, you’ll have to pay another set of transaction costs. That could result in you losing money on the sale if you move before the home has appreciated enough to cover the cost of both moves.
Look at the Big Picture
Selling your home at 65 makes sense if the move will improve your lifestyle and finances and give you easier access to your support system. Avoid seller’s remorse by basing the decision on a careful examination of the benefits and risks rather than an arbitrary age milestone.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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