Home prices in many markets have gone up recently. This is leaving many retirees with sticker
shock when it comes to trading up, or even trading down.
Consider Anna and Olaf who are in the process of selling their $400,000 home. They’ll be left with
net proceeds of approx. $364,000 after paying 9% in sales expenses (transfer taxes, real estate
commissions, etc.). The new house they want to purchase costs $500,000, leaving them $136,000
Option 1: sell or liquidate $136,000 worth of investments or retirement assets. They will need
to “gross up” the withdrawal for taxes if the funds are in a taxable account such as a convention-
al 401(k). Assuming a 25% tax bracket, they will actually need to withdraw $181,333 from the
account, pay their 25% income taxes, and walk away with net proceeds of $136,000. Ouch!
Option 2: use a $136,000 Home Equity Conversion Mortgage (HECM), also known as a
“reverse mortgage”. In this case, there would be no monthly mortgage payment. Anna and
Olaf could preserve their retirement assets and buy their new home without any impact on their
Please contact me for more information or if you’d like for me to run the numbers for your situation.