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Advice on buying new home in retirement.
Old 01-03-2018, 09:11 AM   #1
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Advice on buying new home in retirement.

Hi all. Bit of background -

DH & I plan to retire this year. Also sell our current home and move to GA. Our retire date was 4/1/18 but now I think we should give notice when we get an offer on our home.
We need to do some work on our home to get it ready for sale. Paint, replace some dated items, purge closets, etc. Goal is to have home on market mid March. There are a lot of homes on the market, my neighbor has had his house on the market + 6mos.

My question is how to finance new home. Assume net of $200k from sale of current home. Budget for new home $450k. We have 2.6mil in retirement funds and 250k cash. So options are:
1.Withdraw from retirement funds but that would incur a big tax hit.
2. Use cash. We do have about 40% bonds in retirement funds that we can use if the market tanks soon after retirement.
3. Mortgage. We have really enjoyed not having a mortgage the last 5 years.
3. Split the difference and withdraw needed funds from cash/retirement funds.

Any advice would be appreciated. Thanks!
Additional info. I am 56 and DH (60) will have a pension of $45k. We will have subsidized retiree health insurance. He has been with Mega Corp for 37 years. DH will take SS @ 62 $20k, my SS @ 67 $30k.

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Old 01-03-2018, 09:16 AM   #2
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How are you planning to pay for your HI? This matter in my opinion...unless you will have reportable income of over 60K.

How old are you? why don't you edit your first post and update that info?

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Old 01-03-2018, 01:00 PM   #3
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Made the edits as suggested. Thanks -
Basically looking for any pros or cons on the options listed.
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Old 01-03-2018, 01:19 PM   #4
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Looks like great timing to me as far as ability to take some retirement funds from your DH's account since he's over 59 1/2 during the years when your taxable income will be lower (while getting reduced wages due to retirement) and before his SS is claimed. I don't know what your income will be for 2018 (partial year work and partial year retired) but, again, 2018 and especially 2019 may be perfect for taking a withdrawal from the ira/401k since he'll be over 59 1/2. With tax law changes also, that should help ($24k standard deduction).

It might make sense to pay off the house or pay cash for it up front to avoid the house payment. This will make your income stretch farther and make your financial world simpler. Take nice trips with withdrawals and live within your means with the $45 k plus the ss he takes at 62. The reduced health insurance is a huge plus!!

Congratulations on your accomplishment!
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Old 01-03-2018, 01:45 PM   #5
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> Is the $200K from the sale of the current home tax-free?
> What will your annual income requirements be?
> How much of the cash do you consider necessary?

If you can live within the '4%' rule for distributions, then I'd just pay it off using the cash. Otherwise, I'd take a $100-150K loan, then pay it off in 1-3 years to minimize taxes on distributions.
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Old 01-03-2018, 03:01 PM   #6
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Yes the $200k is tax-free.
We are budgeting $130k a year (30% discretionary).
I like the mortgage idea and paying it off quickly so I can spread out the tax hit.
On the other hand, with the market gains in 2017 - withdrawing it all now is tempting. Hmmm lots to ponder.

Thank you both for your ideas. I might need to run some tax projections to try and help with the decision. I really appreciate any other ideas that can help me make a more informed decision.
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Old 01-03-2018, 03:35 PM   #7
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I would rent a home in the location you intend to settle. Renting would give your home time to sell, give you a 6 month to 1 year window to decide if you like the new area, and give you time to find the best deal on a replacement home. I would go the no mortgage route, but then I always hate debt.

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