Healthcare in America — On the Sidelines – Retirement and That Piggy Bank, Your Home – Video

Retirement and That Piggy Bank, Your Home

Here is something many people approaching retirement probably should know, but may never have thought about.

Your home may be your largest retirement asset. And in some parts of the country, what was once an ordinary middle-class house has become an extraordinarily valuable asset.

Over the past several decades, and particularly during the housing boom surrounding and following the COVID years, real estate values in many areas have risen dramatically. A house purchased 20 years ago for $300,000 might today sell for $550,000, $700,000 or considerably more.

I have seen an even more dramatic example in the Seattle area, where a house originally purchased for around $300,000 eventually sold for just under $800,000.

I can give you two examples from my own history.

I bought a 1,300-square-foot Craftsman home in Torrance, California, in 1975 for $32,000. Today, Zillow estimates that same house at roughly $1.6 million.

And then there is the house I sold in 1967 for, again, $32,000. It was in Manhattan Beach, one block from the ocean. Zillow now puts the value of that property at roughly $5.5 million.

Those are real numbers.

And they help explain something you see in expensive parts of the country: homes that have been in families for generations are often passed from one generation to another rather than sold. The family may not be able to afford to buy a comparable house today, but selling the old one can mean giving up an asset they could never replace.

But that isn’t really the point of this sidebar.

The point is what can happen when you finally decide to turn some of that home equity into retirement money.

Your House Can Affect Your Medicare Bill

====================================================================

We tend to think of retirement as a simple equation: Social Security + pension + IRA + 401(k) + whatever is left in the bank.

But retirement income doesn’t exist in isolation.

The tax code, Social Security, Medicare premiums, required distributions, investments and even the sale of your home can all interact.

And sometimes the biggest surprise isn’t the tax bill when you sell the house.

It is the Medicare bill that arrives later.

So if you are approaching retirement, or already retired, and you are thinking about selling a home that has appreciated substantially, don’t look only at the sale price and the capital-gains tax.

Look at what that sale does to your income.

Because your house may be your biggest piggy bank.

And Medicare may be standing nearby, waiting to see how much you put into it.