The cost of retirement keeps climbing

[bobcat]

I know this can be a hot-button topic, but the US is the only high-income country without universal healthcare. Instead, we have put our healthcare in the hands of profit motivated insurance companies. It is estimated that between 50 to 75 billion dollars each year goes to health insurance companies in profit. Not only is that lost healthcare money, but they dictate to you which medications and procedures they will cover. If the medication that works for you isn't one they decide to cover, you have to pay for it yourself. IDK, it seems to me we have gone down the wrong path and fattened the wallets of insurance companies.

 

[MACKTEXAS]

It would not only be difficult to find something smaller in the general area, we would lose our homestead exemption.

I assume you've already investigated this and those were your findings. Although the homestead exemption on the home you sell would be "lost," I thought you could then apply for a homestead exemption on the replacement property, and transfer a prorated portion of the over 65 exemption from the old home to the new. Is that different from what you found out?

 

[C50]

I assume you've already investigated this and those were your findings. Although the homestead exemption on the home you sell would be "lost," I thought you could then apply for a homestead exemption on the replacement property, and transfer a prorated portion of the over 65 exemption from the old home to the new. Is that different from what you found out?

Not all states/counties offer the same kind of senior exemptions, so that's goung to depend on where you move. And of course where you move also affects property tax, also the size of the home and property.

It doesn't make sense to stay someplace because you don't want to give up your homestead exemption, you would be better off on focusing on downsizing and/or finding a more economical area to live in.

 

[StarSong]

Not all states/counties offer the same kind of senior exemptions, so that's going to depend on where you move. And of course where you move also affects property tax, also the size of the home and property.

It doesn't make sense to stay someplace because you don't want to give up your homestead exemption, you would be better off on focusing on downsizing and/or finding a more economical area to live in.

For people who've owned homes that have appreciated considerably, there's also the income tax trap to be considered. No longer is any profit from appreciation safe if you roll that profit into your next home.

We bought in 1985 and our home is currently worth a full million more than we paid. Not unusual in many areas of California.

Even with the $500K home sale tax writeoff and assuming we can locate our upgrade investment documentation, we'd be looking at at roughly $350K of additional taxable income. Between federal and state income taxes we'd be facing over $130K on that "profit." Another little goodie: two years later our Medicare premiums would at least double for a year. So another $5K plus. Again, doesn't matter if we rolled every dime into another home.

If we stay put and keep this house until we die, our kids will get 100% of the proceeds, tax free. We're seeing people in our age group downsizing or moving to assisted living and renting out their homes, preserving the full value of the asset for their children (who'll inherit tax-free).

A lot of seniors are staying put, even if their homes are a bit too large. Downsizing from a 2500 SF house to a 1600 SF would only be about $200K cheaper in our neighborhood. Between that and the tax liability, it makes no economic sense to move.

 

[OneEyedDiva]

I know this can be a hot-button topic, but the US is the only high-income country without universal healthcare. Instead, we have put our healthcare in the hands of profit motivated insurance companies. It is estimated that between 50 to 75 billion dollars each year goes to health insurance companies in profit. Not only is that lost healthcare money, but they dictate to you which medications and procedures they will cover. If the medication that works for you isn't one they decide to cover, you have to pay for it yourself. IDK, it seems to me we have gone down the wrong path and fattened the wallets of insurance companies.

I totally agree.

 

[officerripley]

I totally agree.

Me too.

 

[seadoug]

I assume you've already investigated this and those were your findings. Although the homestead exemption on the home you sell would be "lost," I thought you could then apply for a homestead exemption on the replacement property, and transfer a prorated portion of the over 65 exemption from the old home to the new. Is that different from what you found out?

I actually hadn't looked into it, so thank you for clarifying!

 

[MACKTEXAS]

I actually hadn't looked into it, so thank you for clarifying!

Please don't consider it a clarification. I had questioned it once some time ago at my local tax office, but then I changed my mind about putting my home on the market. If I ever do decide to sell, I would approach them again to make sure I have a crystal clear understanding and that the laws have not changed since my first visit.