Where you are and where you wanna go, those starting points. Usually, there's a very clear sequence on how you'd wanna proceed at that point. Welcome to the Retire On Time q and a podcast. My name is Michael Decker here with David Fransen. This show's all about getting into the nitty gritty, not that oversimplified advice you've heard hundreds of times.

As always, text your questions to (913) 363-1234, and we will reach them on the show. Just remember this is a show. It's not financial advice. Keep doing your research. David, what do got today?

Hey, Mike. I'm looking to buy my retirement house first and then eventually sell my current house. How do you line this all up?

That's a tricky one because you're buying something that you may or may not be able to afford unless you have, you know, a $100,000 or, you know, a million dollars in cash or 500,000, whatever this house is.

Mhmm.

Okay? The the process is is tricky because it also can trigger other unintended consequences. So if you have too large of a taxable situation, you took too much out of your IRA to help pay for the down payment of the house and so on, you also could trigger IRMA. So let's just talk a couple of scenarios here, just a couple of brainstorming ideas for you to walk through. Okay?

So first one is if you know you want the house and you know you can sell your house, having a mortgage on the new house for a couple of months, I don't think is that big of a deal. You want to have the least amount like, just put enough money down, cash, maybe 20% if possible. I think you could do 5% now for conventional loans. It's it's crazy, but Mhmm. You're gonna pay a mortgage, you're gonna pay a fee, but if it's for a couple of months, and then when you sell your house, can pay off your mortgage or most of it, and then refinance it, that's not that bad of a deal.

What you don't wanna do is you don't wanna say, well, I don't do debt, so I'm gonna take a 100 well, not a 100,000. A million dollars out of my IRA to buy it because when you sell your house, that money's not going back to your IRA. I mean, guess, technically, you might be able to swing the sixty day rollover. But if it's sixty days, why wouldn't you just wait Right. And just sell your house and then buy this house.

Yeah. These things, we just forget about the unintended consequences. Okay? If you do need, this is kind of a, you know, example a, subset b. Okay.

Sounds so

Getting technical here. Yeah.

Points. Yeah. Too much tax code. Mhmm. If you're selling your house, right, you wanna buy a new one, and you just you have to you just need cash on hand to make the make the down payment, and all you have is your IRA assets, that's okay.

Do it. And if you're 65 or older or you're you're entering retirement, maybe you still wanna work a couple more years, but it's gonna affect your IRMAA, write a letter to the Medicare Administration or Social Security, really. It's form s s a dot dash four four, and just say it's you're transitioning to retirement, and just write a letter explaining what's going on. Just say our current house is not suitable for retirement. We're trying to transition to a new house for retirement.

This happened. It's not gonna happen again. I think there's a reasonable chance that your Irma won't have to go up. You can protest it, and as long as you're honest to what's going on, you should be fine. I mean, can't speak for the government.

But that's just one way of as you're going into a new house, if something were to trigger, that would happen. And if a year or two before you retire that you were to buy a house or, you know, just put s SSA dash four four, and just know that if when you retire, you let them know you retired, they can drop your IRMA immediately. It's just it's a little known secret that a lot of people don't realize exists. I shouldn't say it's a secret. It's a public document of our government.

But people don't know how ask for it. So that's one of them. Now, the other one that I think is interesting is when people want to move to a different city, many times, they'll sell their house and then just buy a house, and then they're like, I really don't know if I should have bought the house here, and they kind of regret it, and then they end up selling that house and they buy a new house a year later. I mean, if you think about it, and this is a gross oversimplification, which I don't love doing, but if you sell your house and put the money in, like, I don't know, a high yield savings account, yeah, you're gonna pay income tax on the gains and and or on the growth, and that that's kind of a hassle. Right?

But it might be the same as rent.

Oh, right.

And you could just go rent a condo or a townhome or something and really get to know the area. And do you want to live in that area, or do you not wanna live in that area? Yeah. Is that the right neighborhood? Does it because in theory, we think it's gonna be one way, and then reality sets in and it's totally different.

If you're moving to live near family

And that's not well received by your family, you are going to regret wanting to move there because now it's awkward when you move away. It's almost worse.

Like if you move there and realize it wasn't working and then you leave?

Let's say you've got family in I'm from Washington, so I'll just say Washington.

Okay? And you moved up to be near them in Washington State. Okay? Mhmm. Great.

Things are great, but now you're spending too much time together, and your pins are clashing, and you still see them as your child, and and maybe they're just they're doing things differently now, or you're not getting enough attention, or they're getting too much attention, and they can't let or just politics sets in, whatever it is. Mhmm. Right? And you've moved up there, which cost you a lot of money to pack up all your things and move, and closing costs and all of that, and now you're like, we're actually creating a rift in the family relationship. You need to make sure that the grass isn't greener on the other side.

This is kind of a I don't know if this is applicable or not, but it's it's greener on the other side because it's just covered in pea and manure. Right? It stinks. Oh, yeah. That's why it's greener.

You ever heard that? That follow-up? No.

Haven't, but it makes sense.

Yeah. So so sometimes it's actually more cost efficient and more suitable from a relationship standpoint just to stay where you are and occasionally have planned trips. Yeah. Sometimes, it makes sense to move. For healthcare support, for tax reasons, for what there are plenty of reasons why you'd wanna move.

Mhmm. There are plenty of reasons why you might want not wanna move. But renting for a year or two is not a bad idea. Really isn't.

And because you've got the cash on hand, you can buy another house. Don't invest the cash in the stock market if you're gonna buy a house in the near future because that's a really crappy situation. Can you imagine? You take a million dollars from your house that you just sold. Right?

You paid 600,000 for the house, 400,000 in gains, so you get the the housing exemption because you're a couple. So So you put a million dollars in the stock market, yeah, we'll buy a house in two years, and the market always goes up. Right. Right. It doesn't always go up.

Yeah. And then then you're you're renting for a little bit, and the market's tanked 40%. And now you're at what? Your buying power just shrunk almost by half? So you're gonna keep renting now?

Yeah. Yeah. Short term, purchases, don't flirt with the market. Mhmm. Not worth it.

Okay?

Unless you have a crystal ball.

Yeah. Yeah.

Then, I mean, those are hard to come by, but

Those are hard to come by. Ours isn't working, but but hopefully this is a nice think of it not just of buying and transactions. Think of it as a plan that affects your income, your taxes, your relationships, and your healthcare, and so on. And then what is the proper sequence for your specific situation? What are your goals?

That sequence, where you are and where you wanna go, those starting points, usually there's a very clear sequence on how you'd wanna proceed at that point.

Mhmm. Yeah. One of my big takeaways here from this conversation is the unintended, well, I'm gonna use all my pretax IRA funds to fund my down payment, and then, oh, suddenly I have that's all taxed once you take it out of your IRA, right?

It's taxed as income, it triggers IRMA, all sorts of problems.

Avalanche of potential problems. Yeah. Oh, beware of that. Not worth it.

No. Usually not worth it. Very few times. Well, I'll even say this. We had a client who got divorced.

Okay? Was living in apartment, wanted a house. All of his money was in his IRA. So we just structured basically the way that he got a reasonable mortgage. We got the down payment on the first year, and then the the the following years, we just did a structured payout from a certain product that just paid us.

We spread his tax bill over I think it was five to ten years or so, but we paid off the house much faster than the mortgage was. So it became a good deal, and because we lowered the tax burden and coordinated it with the payments and his income, it actually worked out fine. But it wasn't one lump sum, which is what he intended to do before he came and saw us. Yeah. Okay.

He said, hold on. Pump the brakes here.

Yeah. Let's do it this way.

Yeah. You don't wanna be paying that high tax bracket if you don't have to. Right. So that's all the time we got for this question. If you enjoy the question or enjoy the show, don't forget to like, subscribe, and all of that.

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