No. of Recommendations: 2
Scott Burns discusses this issue here:

We are intending to move when we retire, so resetting the mortgage basis is not an issue with us.

There are a few things Scott did not analyze as thoroughly as I would have liked.

One is liquidity--having a lot of your assets tied up in a not-very-liquid investment is definitely a drawback. OTOH, if you have enough liquid assets to cover any conceivable emergency, a paid-up primary residence may be a very good thing.

Another is the tax situation. If your income in retirement is high enough to put you into the AMT range, transferring assets into a fully-paid house has some interesting consequences. You get the occupancy return, but since no money actually changes hands it is a completely non-taxable return. This is a nice example of a tax-free return on investment.

What you lose is the leveraged appreciation of the real estate.

I expect that it will take more than a few hours with a spreadsheet and a tax advisor to get this exactly right, but if you have the assets, you get more than one chance at it. For instance, move into a new primary residence with about a 50% down payment and a no-prepayment penalty loan. You can transfer as much money as you want into the primary residence at any time.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.