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If you are between the ages of 57 and 75, you may be thinking about retirement or may already be living a retirement life. You may also consider selling some of your assets to add to your cash reserves.
However, many financial experts will urge you to wait or not sell them at all. It may be worth keeping some of your most valuable assets instead of trying to get money in a quick sale. Read on to learn what not to sell in retirement.
Appreciated stocks/assets with large capital gains in taxable accounts
However, it may be tempting to sell your stocks to get some money for this new phase of your life, says Laura Redfern, a certified financial planner. Shadridge Asset Management, LLCSaid that you should not succumb to that urge.
“Slow down and consider your other resources first. Your heirs will likely be entitled to a step up in base after your death,” Redfern explained. “This could mean tax-free gains for them, which are likely to be quite significant. Even the low capital gains tax rate is outweighed by being tax-free.”
Scott Sturgeon, Founder and Senior Wealth Advisor Ored Wealth PartnersRedfern agreed, saying that there might be more to using stocks than having money for your own use.
“Obviously this won’t always be true if it’s needed for cash flow purposes, but properties with large capital gains are great candidates for charitable purposes,” Sturgeon said. “Instead of selling them and paying capital gains taxes, they can be gifted directly to multiple charities or gifted to a Donor Advised Fund as part of a larger charitable strategy.”
So, if you’re able to, give away your valuable stocks to charitable causes instead of pocketing them.
Insurance
“It sounds great: A company offers to take over your life insurance payments for a life insurance policy you can’t afford or don’t want to pay for anymore,” Redfern said. “But then when you die the buyer gets paid, rather than your heirs or family. This could leave your heirs without the financial support you bought it for in the first place.”
Instead, Redfern recommended not selling the insurance and passing the entire benefit to your appointed heirs upon your demise, especially since selling the insurance could prevent you from receiving other benefits.
“Many seniors don’t realize that this type of transaction can prevent them from qualifying for other need-based programs like Medicaid,” Redfern said.
Instead, she recommended asking your insurance company about other features of your policy, and whether you can borrow from your policy’s cash value, change your policy or access your policy’s accelerated death benefit (if you have those options).
“With some types of permanent policies, you can also stop paying premiums for a period of time, instructing the life insurance company to use the cash value to pay for the insurance,” Redfern said.
your home
Once you retire, you may wonder if it’s smart to downsize and sell your home. Although the quick cash you get may seem attractive in the short term, Redfern said it may not be the best move in the long run, especially if you have a reverse mortgage on the home.
“A reverse mortgage is still a debt – one that grows over time rather than depleting. So instead of leaving an asset (your home) to your heirs, you’re potentially leaving a large debt to them, which could be an unexpected and unfortunate surprise,” Redfern said, adding that you’ll still have to pay taxes and insurance on your home, as well as maintain it, so you don’t end up with home-related expenses by taking out a reverse mortgage.
Redfern said if you need cash out of your home, consider another method.
“Consider a HELOC (home equity line of credit) or other line of credit. An independent financial planner can help you strategize and evaluate your overall wealth and other options,” she explained.
sentimental items
It may seem obvious, but trying to make a quick buck off something that has sentimental value isn’t worth it.
“If there are valuable heirlooms that have been passed down through generations, consider gifting them to friends or family rather than selling,” Sturgeon said. “This can be a great way to ensure that those traditions or part of the family stay alive for future generations.”
This way, you can clear away the clutter without losing sight of something that means a lot to your family.