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Old 10-24-2009, 09:27 AM
 
Location: Fairfield, CT
5,847 posts, read 8,609,403 times
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Use of home equity should not be part of any retirement plan. That's the sort of thinking that led to our financial collapse. The only safe way to untap the equity in your house is to sell it. In certain situations, you could get a reverse mortgage, but it has high fees and is only recommended for people who are quite old. That should be the last resort, not part of a planned strategy.
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Old 10-24-2009, 01:14 PM
 
71,651 posts, read 71,777,271 times
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exactly how i feel...... but you will always get those that will fight you on it.
i think for a whole lot of people looking at the house and its value bolsters the old balance sheet and they feel better.

we have some nice collectable art pieces, and they could probley command alot of dough at an auction, but we love the pieces. we enjoy them , we have them hanging on the wall and unttil the day comes i sell them they dont appear on any balance sheet anywhere as an investment.
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Old 10-24-2009, 04:38 PM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by dazzleman View Post
Use of home equity should not be part of any retirement plan. That's the sort of thinking that led to our financial collapse. The only safe way to untap the equity in your house is to sell it. In certain situations, you could get a reverse mortgage, but it has high fees and is only recommended for people who are quite old. That should be the last resort, not part of a planned strategy.
Use of home equity with a mortgage and minimal available equity for a younger person is one thing. Use of equity in a fully paid for house by a retired couple with a fixed secure income is another story. Seniors with pensions (especially government) and SS are great loan risks if they have good credit scores.
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Old 10-24-2009, 04:39 PM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by mathjak107 View Post
exactly how i feel...... but you will always get those that will fight you on it.
i think for a whole lot of people looking at the house and its value bolsters the old balance sheet and they feel better.

we have some nice collectable art pieces, and they could probley command alot of dough at an auction, but we love the pieces. we enjoy them , we have them hanging on the wall and unttil the day comes i sell them they dont appear on any balance sheet anywhere as an investment.
Is that what your attorney is telling you when you value your estate and plan accordingly? Remember look back guidelines for estate and medical bill planning.

Last edited by TuborgP; 10-24-2009 at 04:40 PM.. Reason: more info
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Old 10-24-2009, 05:09 PM
 
71,651 posts, read 71,777,271 times
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actually if you look back at one of the very first postings i had in this thread i had said that i wouldnt count my house or collectables but the taxman and my heirs would.

my wife had seen some paintings she loved decades ago at an auction so she bought them... turned out they were erte's before he was well knowm...boy how ofton does that happen....
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Old 10-24-2009, 09:30 PM
 
29,782 posts, read 34,876,173 times
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Originally Posted by mathjak107 View Post
actually if you look back at one of the very first postings i had in this thread i had said that i wouldnt count my house or collectables but the taxman and my heirs would.

my wife had seen some paintings she loved decades ago at an auction so she bought them... turned out they were erte's before he was well knowm...boy how ofton does that happen....
It is possible to avoid the taxman as much as possible. Also the link I posted gave good, very good reason about how to use your equity in prior to retirement to help build your nest egg. They talk about taking the money from a HELOC prior to filing your taxes to do your Roth and then using your refund to pay your HELOC back. Also some folks are eligible for interest free HELOCS for the first few years. Since you have the makeup rule with your 401K you could take 22k out of your HELOC and substitute that for a 22k contribution to your 401k if you are planning to sell the house at say 62 and relocate. You avoid paying taxes on the money taken out of your pay for the 401 and the money from the HELOC is tax free. Do it for five years and retire sell the house and pay the HELOC off. Even though the article didn't mention it I suspect if you have over 500K equity in your house and want to avoid paying capital gains taxes on the amount you get from the sale over the amount you might be able to work it to get that overage out as equity and not capital gains. Would that work?
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Old 10-24-2009, 09:37 PM
 
29,782 posts, read 34,876,173 times
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Quote:
Originally Posted by mathjak107 View Post
actually if you look back at one of the very first postings i had in this thread i had said that i wouldnt count my house or collectables but the taxman and my heirs would.

my wife had seen some paintings she loved decades ago at an auction so she bought them... turned out they were erte's before he was well knowm...boy how ofton does that happen....
Lowering Your Estate Tax through Gifts
the equity in your home is part of what might get your estate over the million dollar threshold. It might be strategic for some to minimize the impact of. It is all situationa based.
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Old 10-24-2009, 09:57 PM
 
8,204 posts, read 11,918,472 times
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Originally Posted by TuborgP View Post
Even though the article didn't mention it I suspect if you have over 500K equity in your house and want to avoid paying capital gains taxes on the amount you get from the sale over the amount you might be able to work it to get that overage out as equity and not capital gains. Would that work?
No.

Taking equity out of a house via a HELOC has absolutely no effect whatsoever on whether someone would have to pay capital gains tax.
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Old 10-25-2009, 01:46 AM
 
71,651 posts, read 71,777,271 times
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correct, if i remember the form its the price you sold at minus the price you paid, less any equity you took out...... otherwise everyone would just borrow out the overage and skip paying capital gains.. how about if they could do that on investment property where its all taxable.. just borrow it out and poof, no taxes due...

we wish it worked like that

Last edited by mathjak107; 10-25-2009 at 01:55 AM..
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Old 10-25-2009, 06:05 AM
 
8,204 posts, read 11,918,472 times
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Quote:
Originally Posted by mathjak107 View Post
correct, if i remember the form its the price you sold at minus the price you paid, less any equity you took out......
Or more specifically, it is your net sales price (after subtracting closing costs, realtor fees, fix-up costs, etc.) minus your cost basis, which would be your purchase price plus any capital improvements you made to the house during the time that you owned it (new furnace, roof, a/c, etc.).
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