A Moving Experience For Some

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BERLIN – Retirement is a time to take a fresh look at life: changing careers, pursuing new adventures and, for a substantial number of people, changing where they live. Half of all Americans aged 50 to 59 plan to buy a new home during their retirement, according to a 2005 Harris Interactive survey. When it’s time for you to make a move, buffer the impact with a sound financial strategy developed in concert with your financial advisor.

For homeowners, the good news is the capital gain exemption for primary residence sales. Provided that certain tests are met, current law allows individual homeowners to realize up to a $250,000 profit from a home sale (that limit increases to $500,000 for married couples) without paying capital gains taxes.

“What you do with this profit factors into your overall income strategy,” said Stephen Mitchell, Director of Planning and Education for the Merrill Lynch Retirement Group. If, for example, you already have income-producing bonds in place for retirement, you might choose to invest a windfall in growth-oriented equities to bolster your long-term finances, he notes.

Of course, many long-term homeowners who have profited greatly from their home sales may be subject to capital gains taxes. If you’re facing such tax implications, you can work with your financial advisor on some possible alternatives.

For example, if you have losses on a given stock in your portfolio during the year of your sale, you may be able to offset a portion of such losses against such gains for tax purposes.

Another possibility to consider may be donating property or easements on a property to a recognized charity or to a qualified personal residence trust.

“When you donate property directly or create a trust,” said Mitchell, “you may be eligible for a tax deduction for the full value of the property without having to pay capital gains taxes.” This option also works best when you have sufficient means to take advantage of the potential tax benefits.

Whether you’re scaling up or downsizing, you always have financial options. Let your financial advisor work with you, starting early in the process, to help facilitate a smooth financial transition as you make one of the most important moves of your life.

(The writer is a Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-9084.)

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