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My wife & I are 80 years old and planning to move into an over 55 age community.
We will sell our current home to purchase a home in the new community, however, the difference between selling and purchasing will leave us with about $200,000 shortfall.
Our combined total investments are:
$2.5 million in our IRA
$1.4 million in our Roth accounts
$2.1 million in our taxable brokerage accounts
Which would be the best source(s) for us to take the money for our new home purchase concerning taxes and additional financial points you are aware of?
Thank you
Martin in South Carolina
Nice work on your nest eggs. I actually did this recently, I am 78. Use the $134,000 from your IRA that you have to take anyway for your RMD, and yes you will have to pay tax on it, unless you have some large medical deductions and the like. The other $66,000, I took from my cash account. If you do not have the cash, sell some stocks, winners and losers to make up the $66,000. And as some have recommended, there are many factors, if you are unsure, get a highly skilled fee only advisor to help you make the call. Best of luck and enjoy your new home.
Over two years the RMDs from the IRAs will come very close to covering the shortfall of $200,000.
I know you don’t want to borrow the money, but with the size of your investments, you should be able to generate a significant amount of cash each year from dividends. I no longer roll my dividends into new stock purchases, but keep it as cash so I can withdraw it as desired (fun money). It might just make sense to use that cash to buy your new house. If you don’t have enough sitting in your account right now, borrow what you need and plan to pay it off in three or four years. Depending on how you are invested, you should be able to generate well over $50,000 a year in dividend returns on your $2.1 million in your regular brokerage account.
If you can take the money from your taxable brokerage without incurring capital gains taxes (losers offset winners), then do that. If you can’t and wish to keep your present tax situation as it is, then pull the money from the rIRA.
If you don’t care about your tax situation, then pull the money from either/both your taxable brokerage or/and your tIRA.
The juice may not be worth the squeeze… In other words you could spend a lot of time and energy to find the optimal solution but it may not be worth the work and anxiety. So split it up… take $66,666.66 from each. It is not the best solution but it is easy and quick. At 80 with the resources presented I don’t think you should worry about squeezing that last nickel. You have enough to start flying first class and you should.