• Tue. Apr 20th, 2021

Personal Finance column: Your real estate and your retirement plan

According to the Aspen Board of Realtors, for single family homes in the Glenwood area, the end of September saw new listings and sale prices up compared to 2019, while the number of sales and inventory of homes for sale were down compared to 2019.

There is a lot of activity going on up and down the Roaring Fork Valley. As you look at your real estate shifting from the accumulation stage (building your net worth) to the distribution season (creating income and managing time and expenses inherent in real estate), advanced planning is prudent. If you want to optimize your financial potential as you unfold life possibilities, unpacking the details are paramount.

Connect with your vision



What roof over my/our head is best at this point in my/our life? Think through what is important — it is not solely about numbers. Prioritize the key elements. These may include proximity to family, health care, shopping, culture, learning or outdoor activities. What do your days in retirement look like? Some people enjoy working around their home or yard. Others would like no maintenance. Paint your picture with broad strokes, refining the details as clarity ensues. We were seeing a trend of downsizing before the pandemic and now, with people spending more time in their homes, that may change. Ask yourself the right questions based on creating your unique picture of true wealth.

Crunch the numbers



Many people I talk to want to “age in place” when looking at purchasing a primary residence. What will it take to do so, and what are the financial implications? Consider the costs associated with a remodel or building a home to facilitate the aging process. What will it cost to have someone come to your home? According to LONGTERMCARE.gov, home health aide or homemaker services range from $4,910 to $6,000 a month for partial daily care.

Are there tax implications to a sale? If you are married, you can take $500,000 in gain on your primary home without paying capital gain taxes if you have lived in it two out of the past five years. If you are single, the tax free gain is $250,000. In our valley, you can quickly surpass this tax-free amount. It may make a difference in the timing of your sale if you could be giving 15 or 20 percent to the federal government on amounts above the $250,000 or $500,000. Make sure you keep good records of original cost basis and improvements. Prepare yourself by talking to your tax consultant, financial advisor along with the realtor as you explore your options.

If you have investment real estate, how will capital gains or recaptured depreciation impact your cash out and future cash flow? There are many strategic ways to maneuver. Talk to your Certified Financial Planner and tax advisor about Qualified Opportunity Zones or Delaware Statutory Trusts to see if they may be a fit for your cash flow needs and tax considerations.

Another creative option for the philanthropically inclined is to use a Charitable Remainder Trust to minimize taxes and create a cash flow. This tactic involves creating a trust and transferring partial interest in your investment real estate to the trust. This giving vehicle allows you to make the contribution, receive income for a specified period of time; receive a partial tax deduction and donate the remaining assets upon your death to the organization of your choosing.

Primary, investment, buy or sell — all these real estate financial decisions have important life and financial implications. As much as possible, being pro-active instead of reactive will ultimately keep more money in your pocket to be used as an expression of what is meaningful in your life.

Danielle Howard is a CFP® and CKA® with Wealth By Design LLC in Basalt. Check out her retirement podcasts and blogs at daniellehoward4u.com.