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Selling Your Home to Fund Your Ultimate Retirement: Considerations for Retired Military Officers

Retirement Funding Managing Your Finances

If you’re on the verge of your second retirement it is hard to know for sure if you're "ready" financially. In these instances, certain questions may keep your head spinning:

  • When will I be able to stop working?
  • Will the money last as long as I do?
  • Should I keep this house, even though it’s only me, or only me and my spouse?

Understanding Your Financial Position

As a retired military officer, you have a very valuable asset in your retirement pension. Realizing that you do have a good start, knowing where you stand financially when considering the rest of your financial position is an important step in determining whether or not selling your home is a good idea. Apparently, many retiring Americans decide that it is a good idea. The National Association of Realtors indicates that 54% of people selling their homes are over the age of 54.1

One of the smartest questions you could ask is whether or not you need to or should keep your house, especially if there is way more space than you actually need. There are a number of pros and cons when considering selling your home so close to your retirement, retirement.

Renting vs. Buying

If you decide to sell your current home, you have two options: purchase a smaller home, or choose to rent. The most important thing is to assess the figures and determine whether or not you have enough money to be comfortable once you retire. While financial ramifications are certainly an important consideration, also look at things like the pride of ownership weighed against the requirements to "keep the property up".

Getting Down to the Basics

In order to determine whether or not you should sell your home, you need to see how much you still owe, and the appraised value. This is where you might want to get a realtor involved. When interviewing a realtor, make sure they understand the situation. The current equity in your home plays a role in determining future income.

Should You Sell Your Home?

For some, this is a viable move. A home is an appreciating asset but may cost you more to maintain once you start your retirement. There are additional considerations, including repairs, utility costs, maintenance, and other little things can quickly add up. You may end up spending more on your home during your retirement years than you originally anticipated, subtracting from the funds you could have used to travel or fund your retirement lifestyle. Selling your home can give you additional funds to invest and cover a smaller place or the rent if you choose to do that.

Carefully Consider Tax Ramifications

For many, the profits on the sale of a primary residence are excluded from taxation. Retired military officers have to look a little closer. If you ever rented the house out due to a PCS, then you should have depreciated the property. When you sell the property, the IRS will tax the "recapture" on the depreciation you took or should have taken.

Is Renting the Key?

Renting is very low maintenance, as you won’t have the maintenance, upkeep and other expenses associated with a large home, even if it’s already paid for. You may not have to worry about taking care of the lawn, the pool, or appliances if they fail. One phone call to the property manager and everything is taken care of. Another perk to renting in retirement: you can choose how you want to live.

You can rent an apartment, single-family home, townhome or whatever you wish. By doing this, you will not be obligated to reside in one place. If you want to move to another city or state, you’ll have the flexibility to do so.

The key to determining whether this is a good move is to determine where you want to be and the things you want to do in retirement. The rest is up to you.

1 https://www.nar.realtor/sites/default/files/reports/2017/2017-home-buyer-and-seller-generational-trends-03-07-2017.pdf


If you enjoyed this article, you might like the following blog posts:

Military Tax Benefit: Sale of Primary Residence


6 Mistakes Retired Military Officers Can Make that Will Mess-up Their Ultimate Retirement


Retired Military Finances 201: 1031 Exchanges


This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.


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