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If you’re between the ages of 57 and 75, you might be thinking about retirement or already living a retirement life. You might consider selling off some of your assets to add to your cash pot.
However, financial experts would beg you to wait, or not sell them at all. Some of your most valuable properties might be worth holding onto, rather than trying to get money in a quick sale.
Read on to see what not to sell in retirement:
Appreciated Stock/Assets with Large Capital Gains in Taxable Accounts
Though it might be tempting to sell off your stock to get some money for this new phase of your life, Laura Redfern, a certified financial planner at Shadowridge Asset Management, LLC, said you shouldn’t give into that urge.
“Slow down and consider your other resources first. Your heirs would likely be entitled to a step up in basis after your death. This could mean a tax-free gain for them, which has the potential to be quite significant. Even a low capital gains tax rate gets beat out by tax-free.”
Scott Sturgeon is the founder and senior wealth advisor at Oread Wealth Partners, and agreed with Redfern, saying there might be something else to use stock toward rather than keeping the money for your use.
“Obviously if it’s needed for cashflow purposes this won’t always be true, but assets with large capital gains are great candidates for charitable purposes. Instead of selling them and paying capital gains tax, they can be gifted directly to many charities or gifted to a Donor Advised Fund as part of a larger charitable strategy.” Sturgeon said.
So, if you can afford to, give your appreciated stock to charitable causes, rather than pocket it.
Life Insurance
“It sounds great: a company offers to take over your life insurance payments for a life insurance policy that you can’t afford or don’t want to pay for anymore,” Redfern said. “But then the buyer gets the payout when you die, rather than your heirs or family. This could leave your heirs without the financial assistance that you purchased it for in the first place.”
Instead, Redfern recommended not selling the insurance and letting your appointed heirs get the full benefit when you pass on, especially since selling the insurance can prevent you from receiving other benefits.
“Many seniors don’t realize that this type of transaction could prevent them from qualifying for other need-based programs such as Medicaid,” Redfern said.
Instead, she recommends asking your insurance company about the other features of your policy, and if you can borrow from your policy’s cash value, convert your policy or access your policy’s accelerated death benefit (if you have those options).
“With some types of permanent policies, you can even stop paying the premiums for a while, directing the life insurance company to use the cash value to pay for the insurance,” Redfern added.
Your Home
Once you’ve retired, you might wonder if downsizing and selling your home is smart. Though the quick cash you’d get in the short term might look appealing, Redfern said it might not be the best move in the long run, especially if you have taken out a reverse mortgage on the home.
“A reverse mortgage is still a debt — one that increases, rather than decreases, over time. So rather than leaving your heirs an asset (your house), you are possibly leaving them a large debt, which could be an unexpected and unfortunate surprise,” Redfern said, adding that you still have to pay taxes and insurance on your home, as well as keep it maintained, so you don’t eliminate home-related expenses by taking out a reverse mortgage.
Redfern said if you need cash from your home, consider another method.
“Consider a HELOC (Home Equity Line of Credit) or other line of credit. An independent financial planner could help you strategize and evaluate your overall assets and other options.” Redfern said.
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Sentimental Items
It might seem obvious, but trying to make a quick buck off something that holds sentimental value isn’t worth it.
“If there are valuable heirlooms that have been passed down from generations, rather than selling [them], consider gifting them to friends or family,” Sturgeon said. “It can be a great way to ensure those traditions or part of the family lives on for future generations.”
This way, you can cut the clutter without losing sight of something that means a lot to your family.
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