Hope that piggybacking on this thread is OK.
I am in a similar situation. I am considering buying a new (to me) home in another state. But I would like to do the purchase prior to selling my current home (for a variety of reasons, some good, some not so good).
In any case, I am now retired (for the second time, sort of), so living on pension(s) plus occasional withdrawals from a taxable account/accumulated savings. So far I am not taking social security or doing tax-deferred withdrawals (only Roth conversions). Because of this, looking at typical online "how much can I borrow" mortgage calculators shows that my current "income" (pension plus dividends from taxable accounts) isn't enough to get a mortgage on the new place, even after using the cash I have on hand (about 250K at the moment but will have about $350K later this summer after some CD's mature).
The true affordability of doing this isn't really in question (from my perspective at least) as properties I am looking at are under 10% of my net worth. Even assuming I was taxed at 50% on my net worth, that would still put the purchase under 20%.
I could sell appreciated assets or take money from a tax-deferred account but both of these approaches have tax implications: Most of my holdings in my taxable accounts have large % capital gains, and of course any distribution from a tax-deferred account is taxable as ordinary income.
My projected taxable income (job before retirement/cash out (mostly to a Roth), adjunct teaching pay (mostly going to tax deferred), old pension from mega-corp, new (small) pension from teaching gig -> puts me close to the 161K IRMAA threshold. [I was able to get it reduced to the $349.40 Part B + $33.30 Part D levels via appeal given I had retired (reduced hours)]. Single Filer. Thus, any appreciable sale of stock (e.g. 150K capital gains) or IRA withdraw will catapult me up additional IRMAA brackets and/or even beyond the 32% federal bracket...plus state tax considerations.
So, what to do? Some things I've been thinking of:
1) Stop this silliness - SSTOP looking at new places until I sell the current house, use the proceeds towards the new location. Issues: This will take time, and will likely require a double move (ugh). Also prices seem to be moving up in the new location (faster than the current). Leaves me in a high tax state vs. a lower tax situation.
2) Buy cheap at the new location - give up on finding the kind of place I really want and concentrate on something "good enough" so that I would be able to buy it for cash. Even if I desire to move/upgrade I would be *there* and the logistics would be better - plus taking capital gains or tax-deferred withdraws would be less costly in terms of taxes due to lower/no state taxes.
3) Do a Pledged Asset Loan - This would likely be the easiest logistically. Borrow a couple/few hundred K on the PAL, pay it back after eventually selling my current home. This would allow me to purchase the new place for "cash". Negative is that the rates are fairly high, about 9%-9.5%? So if I (as an example) borrowed $250K, my interest-only carry cost would be just under $2K/month.
4) Cash out some of my precious Roth IRA funds. I could likely fund the difference (between cash on hand and purchase price) by pulling funds from my Roth. I would need to calculate (and make sure I fully comprehend) the 5-year rule regarding Roth Conversions, but at first glance I think I would be OK. Negative: This would seriously deplete my Roth $.
5)Apply for social security (My FRA is 6/2024). This would up my income and making getting a mortgage for the gap (purchase price minus cash down) possible. Negatives: I now have social security income (which will make further Roth conversions more difficult) and more importantly stop my social security benefits growth. Ugh. However, I found the "Withdrawal of Application" option:
https://www.ssa.gov/forms/ssa-521.pdf. If I were past June (FRA), I could do a Suspend of benefits?
https://www.aarp.org/retirement/social-security/questions-answers/suspend-social-security-then-restart/. For both of these, I would need to understand the ramifications/process better....
6) Gift assets to my child including appreciated stock and go partners on the property. The idea is my child, who is now a resident of the new location would do a joint purchase of the new place with me. My child would get the place anyway (eventually when I kick) and while this loses the step up in basis (in terms of the child's half), the state in question has an inheritance tax (so if I don't kick soon, it saves that %). Advantage: Child is in a lower tax bracket and lower capital gains situation. I estimate the child's tax impact on a 100K LTCG is worse case 19-20K. I would likely gift more (to make up for the tax impact on selling the appreciated securities.) I would gift cash for part (enough for my child to be half owner with me). This of course requires my child to freely and without coercion want to do this...as the money gifted from me is well, a gift. (I would have to file a Form 709.)
Advantages: Disadvantages: Somewhat complicated, assets are no longer mine (not really an issue), other that I'm not thinking of?
