Q: I am 42 and my husband is 38. We are thinking of selling our house because the value in our neighborhood has gone way up.
Selling would allow us to pay cash for the next house we buy.
If we pay cash for our next property, it would allow us to max out our IRAs and 401(k) plans at work every year. Also, it would be nice to not have a house payment.
Thanks for any advice you could give us.
A: Having the opportunity to be debt-free before you turn 45 sounds pretty good to me. You and your spouse sound like savvy investors who have your priorities in the right place.
If you are in the position to live house-payment free (except for your property tax bill each year), that will give you a lot of extra cash to put away for your retirement.
You might also want to find a house that needs fixing up, in a neighborhood where many homes are being improved. Put a little TLC (tender loving care) into a house that could use it, and you might find in another 5 years or so that this house has also appreciated in value and continued to add to your retirement pot.
The best thing about selling your property now is the tax benefit. You and your spouse can keep up to $500,000 in profits tax-free when you sell, as long as you’ve lived in the home 2 of the last 5 years. You can use this exclusion once every 24 months.
Unless you’re in love with your neighbors and your neighborhood, you’re smart to take a little bit of tax-free cash off the table and set yourself up for a golden retirement. Thanks for writing. Good luck.