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INTRO: Hi, I'm Ed Slott,
and I'm Jeff Levine.

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And we are two guys who just love
to talk about retirement and taxes.

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Look, our mission is simple to educate
you, the savers, so that you can make

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better decisions because better decisions
on the whole lead to better outcomes.

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And here's how we're going to do that.

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Each week, Jeff and I will debate
the pros and the cons of a particular

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retirement strategy or topic with the.

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Helping you keep more of
your hard-earned money.

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Yeah, but we won't know which side of
the debate we're taking until we flip

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a coin winner of the coin flip gets to
pick which side of the debate they want

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to argue, and both of us will have to
argue in favor of our respect positions,

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whether we agree with them or not.

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At the end of each debate, there's
going to be one clear winner you, a more

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informed saver who can hopefully apply
the merits of each side of the debate

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to your own personal situation to decide
what's best for you and your family.

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So here we go.

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Welcome to the Great Retirement Debate.

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Jeffrey Levine: Welcome back to the Great
Retirement Debate, Ed, I am fired up

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for our next episode and ready to argue.

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So tell me, Ed, what are we arguing about?

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Ed Slott: Well, here's
an interesting point.

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Should I downsize my home in retirement?

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I get that question a lot from clients,
especially older ones like me, and I have

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to remind our listeners, Jeff and I have a
generational divide, so our point of view

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could be, uh, skewed towards that age.

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Jeff's about 30 years younger than me,
so I may have a different point on that.

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Uh, as usual, we'll flip a
coin to see which side of

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the debate we'll come out on.

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You ready?

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Jeffrey Levine: I will say, Ed, we're,
we're finally getting to the point

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though, where we have about the same
amount of hair between the two of us.

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Ed Slott: Yeah, that's
why we do audio podcasts.

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Jeffrey Levine: That's all right.

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You, were headed, you know, it was
kind of a weird race here, you know?

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First I had more hair than you had more
hair, and now we're tied, so, yeah.

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Ed Slott: Right.

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Jeffrey Levine: Alright, well
that's an interesting one, Ed,

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your topic, i'm gonna call it, I'm
gonna go, uh, I'm gonna say tails.

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Ed Slott: All right.

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Tails.

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Jeffrey Levine: Tails!

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I finally win one.

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You know what?

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My natural inclination would be
to argue in favor of downsizing,

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but I'm gonna go the other way.

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Um, and I'll, and I'll, and I'll
say, I'm gonna go the other way

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because of a particular interaction,
uh, with a client of mine.

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And that is, I'm going to say, I'm
gonna argue in favor of not downsizing.

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My beginning point that I'd love to
make, uh, just to kick it off, is

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when I envision myself, you know,
one of the things that uh, I can

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share now is recently I've built a
house, uh, that is, is meant to be a

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forever home and it's a larger house.

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Uh, you know, there's plenty of room
for our family now, but also plenty of

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room for our family as our family grows.

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I'm lucky enough to have three
healthy boys, God willing,

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one day they all grow up.

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I mean, the oldest right now is only
eight, so it's many years from now.

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But God willing, they all grow up.

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They find, uh, you know, people that
they love to spend their lives with.

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And maybe at least one or two of them,
maybe all of them, uh, end up, you know,

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bringing home grandchildren one day.

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I'd love for this place to be the
place where we can all gather.

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Each and every year for those important
holidays, continue family traditions, etc.

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And I had a client who,
who did this in retirement.

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He actually upsized because of that.

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Ed Slott: Oh boy.

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Jeffrey Levine: He wanted to
have a place for his family

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to come spend in retirement.

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He said it was the best
decision that he's ever made.

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And I look at all the memories
that he's created in that house

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with his family, and I just want
the same for myself and my family.

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Ed Slott: I can see that.

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But again, as a grandparent and
say 30 years you're a senior.

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Uh, you know, I have to..

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Jeffrey Levine: Say that one more time.

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I just like to hear that.

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Ed Slott: Yeah.

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I want people to know
where I'm coming from.

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It used to be the American
dream was to own your own home.

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Now it's getting the kids out of it.

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Uh, I think if you have a large
home now you talked about your

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three boys bringing everybody home.

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What if they're still living there?

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Uh, , you know, it's very common now.

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In today's economy, people coming back in.

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I like the idea of downsizing, just
to simp again, simplify my life,

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get rid of otherwise my, my kids
will end up cleaning up the mess.

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All these little things.

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You know, I had this, uh,
when my mom died, we're going

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through all this stuff now.

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She did downsize after my
father passed away, but my

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father was more in your school.

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He loved having the house and everybody
came over the house, but after he passed.

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So it may be what situation you're
in, uh, as a single person, you might

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be better off downsizing because you
don't have to worry about if you have

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a home cutting the lawn and doing all
these chores around the house and just

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having, making life simple, less bills
to pay and less things to take care of.

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I always say same thing
with your investments.

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People always ask me about having
all these IRAs have 50 IRAs, you

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only need one IRA, you know, . So
sometime it just makes life simpler.

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If you downsize, plus you can get
your money out of the house at the top

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of a market and, uh, even rent, you
might not even have to buy something.

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Jeffrey Levine: Well, you know,
the, those are, uh, interesting,

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interesting points, Ed.

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And I think one of the things that I
would, uh, you know, that that kind of

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hits me as you talk through that, is the
idea of simplifying life as you get older.

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And I understand that, and in fact,
that's probably the most common

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argument I hear from folks is, I don't
want to take care of this anymore.

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It's too much house for me.

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I've gotta worry about this
breaking and that breaking.

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But I think one of the other things
that's important to realize too,

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is that as you get older, you know,
there is some benefit to routine,

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particularly for those who begin to
lose, you know, cognitive abilities, etc.

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There's a lot of evidence that would show
that, you know, maintaining a consistent

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routine can help improve quality of life.

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You know, think about going from one place
to another and then all of a sudden not

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remembering, you know, where you know
where the bathroom is or where you store,

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you know, the, the drawer that you have
your brush in for the last 40 years.

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It's kind of, you know, It's just
mem it, it, it's automatic for

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a lot of people at some point.

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And then to have to pick up and move into
a new environment can be challenging.

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And all the gains that are made,
let's say, from not having to pay

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the, you know, the lawn bill, well,
so much of that today can be automated

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with auto payments and so forth.

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Or with a good power of attorney being
able to take care of that for you.

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But those little things and the comfort
of being in a place that you have

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known for so long is also one that
I would, you know, would point out.

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Ed Slott: And you could be comfortable.

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Those are all good points and
absolutely health is a big,  is

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the, the big factor in all of this.

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Do you have the wherewithal?

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It depends.

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Maybe you're taking care of a
spouse or maybe as I said, a

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spouse has died and you're alone.

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You might like to be in more of a
community in a smaller apartment or

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condo complex where there are people
around that things are taken care of.

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So it's, uh, I think health
is a big thing, and lifestyle.

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Maybe you wanna travel more and you
don't have to worry about locking

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up the house every time you go away.

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You just, you know, if you're
in an apartment or a condo or

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co-op or something, you lock
the door and you're on your way.

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You don't have to worry
about any of these things.

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So again, I like the idea, uh, not me
personally, but the idea of simplicity and

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not having to worry about other things.

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As you get older, people don't wanna
worry about a lot of other things.

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You know, there's something to be said
for a, a nice big, comfortable house,

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but you can have those same comforts,
uh, in a smaller home or an apartment

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or a condo or something like that.

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And, uh, sometimes in some of
these things, as you've seen, uh, I

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mean, they're all over the country.

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I was gonna say Florida,
but they're all over.

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Uh, you have amenities, you have
your own small unit, but you have

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access to all kinds of amenities and
activities and other people, and that's

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really important if you're alone.

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Jeffrey Levine: Now I got
another one for you, Ed.

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I'm gonna have to go to the financial
side of this because I have a feeling

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arguing on, on, on the practical side,
it's gonna be a losing battle for me.

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So I'm gonna go to the financial side
of this for a moment and say, If you

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have, uh, you know, purchased a house
that has gone up significantly in value,

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the, there is under current tax law, an
exemption for a certain amount of gain.

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If you are a single individual,
you have up to $250,000 of

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gain that can be tax free.

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If you are married and file a joint
return, you can have up to $500,000.

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But as home prices continue to increase,
and we've seen substantial increases

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in recent years, and as we start
off with larger amounts, it takes

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a smaller percentage gain to exceed
those 250 and $500,000 thresholds.

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And if you are going to go and sell your.

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And your gain exceeds those excludable
amounts, that gain is actually taxable

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to you even though you're not able
to like depreciate unless you're

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taking a home off this deduction,
but you're not generally able to like

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depreciate your own personal home.

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And if you lose money on your house,
you don't get to take a a, a loss.

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You do have to pay taxes, uh, income
tax, that's capital gains tax, plus

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the 3.8% sur tax if your income
exceeds certain amounts on the

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gain from the sale of your house.

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But if you hold onto that house and you
enjoy it throughout your lifetime, when

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you pass away, your heirs will be able
to get that house with what they refer

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to as a step up and basis, meaning..

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Ed Slott: Right.

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Jeffrey Levine: You could have bought your
house for 500,000, you know, 40 years ago

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now it's worth two and a half million.

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You have $2 million of gain and
that entire 2 million can escape

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taxation forever, as long as
you hold onto it until you die.

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Ed Slott: Well, you know, that's true.

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And I thought about that for myself.

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Do I wanna sell the house or
maybe just hold on to death

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and get the step up in basis.

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My heirs won't have to pay any tax on
it, but that's more about them than me.

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Uh, it's about my lifestyle
and maybe I don't want to

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keep a whole house like that.

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And first of all, uh, there's
no guarantee the market, well,

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I shouldn't say there's no.

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There is no guarantee the market will
always go up, even though traditionally

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for like our lives, 50 years.

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I mean, I think of it, my father bought
the house, my mother sold for 16,000.

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She sold it, you know, only a few
decades later for half a million dollars.

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It's crazy.

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Same house.

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Uh, so there, there is that, uh,
but, the reason I was thinking of

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maybe downsizing is to aleve other
people of all the record keeping, I

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was thinking of all the improvements.

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You talk about the gain, but the
longer you're in a house, the, the

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more likely it is you put tens, if
not hundreds of thousands into it.

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I mean, if you're in a house 30, 40,
50 years, there's certain things,

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Jeffrey Levine: New roof, new heater.

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Ed Slott: Yeah, you, it wouldn't
be standing if you didn't put tens

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of thousands of dollars into it.

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So maybe this is the time to, you
know, it won't de tax, your issue

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won't be as much as you think.

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First of all, a married couple.

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If you're thinking while you're
married, you do get the 500,000.

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It's double.

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So, uh, that, that may
cover a lot of the gain.

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Remember, the 500,000 is not off the
selling price, the gain, and the gain,

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the selling price less your original
cost, plus all of those improvements.

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Now, true what Jeff said, you
don't need to know any of that

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if you hold it till death.

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Everybody, uh, the beneficiaries
get the step up and basis, but then,

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uh, that's like I said about the
beneficiaries, making it easier for

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them and a little easier for you maybe
cause you don't wanna change anything.

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So you keep piling on your junk in the
house for somebody else to take away.

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And at some point, I think I'd like to
just simplify and, uh, you know, get a,

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a smaller place and maybe there might
be some tax to pay, but it all depends

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on how much you put into the house,
but then it's, it's a lot simpler.

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You don't have to worry
about all these things.

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And a lot of the things I said
before about, uh, especially if

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a spouse has died or you are, you
don't have a spouse and, you just

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wanna be active with people there.

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You know, you, you know, these
places here, the villages in Florida,

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these people love that stuff.

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Jeffrey Levine: Yeah.

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They love a lot of things, ed.

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Uh, I mean, I'm sure you've seen the
reports that it is the, uh, you know,

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Ed Slott: Yeah, yeah,
don't even go there..

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Jeffrey Levine: Yeah.

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Right.

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Yeah, go ahead and Google
the Villages folks.

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If you don't know what I'm talking about.

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Ed Slott: All what Jeff is talking
about is that they love life.

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Jeffrey Levine: Yeah, they love love, yes.

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Yeah.

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Yeah, that's, uh, it's
an interesting place.

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Uh, you know, I would also say, Ed,
you know, one other thing on, on the,

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the, the financial side of this is
that, you know, most people when you

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think about retirement, they've got a
tremendous amount of assets, or, or at

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least a lot of people who are probably
listening to this type of podcast

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have a, a significant portion of their
assets tied up in financial assets.

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Things like stocks, bonds,
mutual funds, ETFs, etc.

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And if you sell your house and
you walk away with a boatload

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of cash, what are you gonna do?

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You're probably gonna go and invest
it in stocks, bonds, mutual funds,

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ETFs, your house while you own it, is
effectively a, a non correlated asset

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with the market, with stocks and bonds.

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In other words, it's a, it's a
diversifier to your portfolio.

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And while someone listening may say,
yeah, but I can't spend my kitchen.

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You can in a way, right?

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There are home equity loans, there
are reverse mortgages, which,

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uh, are much, much more cost
affiction and much more regulated

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than they were in previous years.

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Not advocating for it today, maybe on a
future podcast, I'll have to, uh, but you

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know, there are all these things that come
up from time to time and, and ultimately,

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you know, that is, your house is an asset.

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There is a way to access
the value in your house.

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While you are still there, and even if the
market, the stock market that is, is down

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the real estate market, your house may
still be valuable enough that you can take

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a loan from that of substantial amounts.

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And in fact, sometimes you may even want
to access the money in your house as

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a loan to avoid selling when the stock
market is down to give it time to recover

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before you sell those financial assets.

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Ed Slott: Right.

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Uh, that's, that is a good
financial argument that you can

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tap the funds, but you still have
to deal with maintaining the home.

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And I know some people tell me
they keep the home because they

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wanna leave it to their kids.

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At 90, uh, I heard this is not
a statistic, it's just something

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somebody said, but it makes,

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Jeffrey Levine: It's just
something you made up, but it

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sounds good for the podcast.

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Ed Slott: Somebody else made up.

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He was talking about reverse
mortgages, that's what

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reminded me when you said that.

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He said, and there's
probably some truth to it.

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99% of homeowners, parents, uh, think
their kids want the house when they die.

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99% of kids don't want the house.

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They want the money.

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Jeffrey Levine: Yeah, I
would agree with that.

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And I mean, forget about that.

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What if you differ in opinion?

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Right?

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I mean that's, uh, you know, that is one
that, uh, you know,  you'll notice that I

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definitely didn't use that as an argument.

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That it's what the kids want.

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Ed Slott: What do you mean different
opinion with the two spouses?

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Jeffrey Levine: No, the two kids.

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Right.

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Like what if

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Ed Slott: Oh, the kids.

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But I, I, when you said that,
I was thinking of my parents,

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they did differ in opinions.

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My father wanted to stay in the house.

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He was just like, your first
argument, this is my palace.

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This is where everybody comes.

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I'm not moving.

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But he died early, , and it
didn't take a year or two.

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My mother said, I'm outta here.

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I'm doing what I always wanted
to do, get my little apartment.

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She sold the house and she
didn't even buy anything else.

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She just rented and it worked out great.

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The money lasted up for
the rest of her life.

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Jeffrey Levine: Sounds like a win.

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Ed, I don't know.

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It's a good discussion.

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I, I don't have, I have I convinced you,
are you rethinking selling your house now

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or do you still think you'll downsize?

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I think that may be the
ultimate judge of how we debate.

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Ed Slott: Yeah.

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I still would like to downsize cause I'd
like to do it on my terms, see what goes

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and, you know, take care of everything.

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So I don't leave other people a problem,
but there's another side to that.

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Leave them the problem.

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Jeffrey Levine: Yeah.

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That's what I'm gonna do.

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Ed Slott: A step up and basis.

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They can hire accountants and attorneys.

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They'll have plenty more money.

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Yeah,

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Jeffrey Levine: I've got probably 30, 40
years before I have to make that decision.

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But that's my, that's where I'm
leaning at least for right now.

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Ed Slott: All right.

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Jeffrey Levine: Yeah.

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There we go.

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00:16:12,355 --> 00:16:16,255
Well, you know, another, another fun, uh,
discussion Ed, and, you know, certainly

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two sides to this coin, as there are
with, uh, most everything in life, but..

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Ed Slott: This is very practical.

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00:16:21,685 --> 00:16:24,745
This is a lot of people, uh,
are grappling with this now.

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00:16:24,865 --> 00:16:25,435
Jeffrey Levine: Yeah, yeah.

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But, but our listeners, you know,
their life and their retirement

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decisions are too important
to leave up to that coin flip.

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So, you know, that's why the one
thing Ed you and I always agree on

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is making sure that, uh, people are
talking with a knowledgeable financial

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00:16:39,585 --> 00:16:43,365
advisor or tax professional when it
comes to any sort of big decision.

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This way they can weigh the pros and the
cons of different options against their

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specific set of goals and objectives.

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As a reminder, if you'd like to
continue the discussion with Ed

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00:16:52,035 --> 00:16:54,105
and I, we love to hear from you.

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00:16:54,405 --> 00:16:57,135
Uh, we always look forward, uh,
to seeing what's coming through

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00:16:57,135 --> 00:16:58,635
in our inboxes or on Twitter.

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00:16:58,745 --> 00:17:01,964
You can reach out to Ed on Twitter
using the handle @TheSlottReport.

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That's with two ts, @TheSlottReport.

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Or you can reach out to me
using the handle @CPAPlanner.

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Once again, that's @CPAPlanner.

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Uh, and we would love to hear from you.

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Let us know what you thought.

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You think you're gonna downsize,
you're gonna stay in your current home.

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00:17:18,125 --> 00:17:18,695
Why?

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00:17:18,935 --> 00:17:22,505
And if you have a topic for us for
a future episode, we'd love to know.

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Ed Slott: Well, I think it's important
we hit good topics, uh, good points on

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this, but one of the big points, I just
wanna reiterate the point you made, you

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have to really have some good records.

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I mean, you have to know what you paid.

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You talked about the gain.

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You have to know what you paid,
and a lifetime's worth could be

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00:17:40,715 --> 00:17:42,485
decades worth of improvements.

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00:17:42,485 --> 00:17:44,585
You know, pe sometimes
people don't keep records.

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00:17:44,585 --> 00:17:47,345
This is one area where you've
had to keep these records

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00:17:47,345 --> 00:17:48,965
forever, as long as you own that.

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Because everything you can prove will
increase your basis and may get you to

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the point that you can sell with that
$500,000 exclusion and have no tax.

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Anyway, something to think about
and we'll see you next time on

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00:18:02,730 --> 00:18:04,170
the Great Retirement Debate.

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Outro: Jeffrey Levine is Chief Planning
Officer for Buckingham Wealth Partners.

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00:18:09,390 --> 00:18:12,600
This podcast is for informational and
educational purposes only, and should

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00:18:12,600 --> 00:18:15,870
not be construed as specific investment
accounting, legal or tax advice.

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00:18:15,900 --> 00:18:18,810
Certain information mentioned may
be based on third party information,

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00:18:18,810 --> 00:18:21,660
which may become outdated or
otherwise superseded without notice.

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00:18:21,720 --> 00:18:24,930
Third party information is deemed to
be reliable, but it's accuracy and

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00:18:24,930 --> 00:18:26,400
completeness cannot be guaranteed.

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00:18:26,520 --> 00:18:29,520
The topic discussed in corresponding
arguments are those of the speakers

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00:18:29,700 --> 00:18:32,490
and may not accurately reflect
those of Buckingham Wealth partners.