Have you noticed how many “experts” keep telling retirees to sell this or liquidate that? It feels like everyone has an opinion about what you should do with your hard-earned assets in retirement. The truth is, while some sales might make sense, there are certain things you really should think twice about selling. With baby boomers holding over $78 trillion in wealth (more than 50% of total U.S. household wealth), making smart decisions about what to keep is just as important as knowing what to let go.
Appreciated stocks with large capital gains
Picture this: You’ve held onto some stocks for years, maybe even decades, and they’ve grown nicely. Now you’re thinking about selling them to fund your retirement. But wait! Selling those appreciated stocks might not be the smartest move. When you sell stocks that have gone up in value, you’ll likely face capital gains taxes that can take a big bite out of your profits. These taxes can significantly reduce the money you’d have available to spend in retirement. Many financial advisors suggest holding onto these assets instead of rushing to sell them.
There’s actually a tax benefit to keeping those appreciated stocks until you pass away. Your heirs can receive what’s called a “step-up in basis,” which means they inherit the stocks at their current market value without having to pay taxes on all the gains that happened during your lifetime. Another option is to donate appreciated stocks to charity, which allows you to avoid capital gains taxes completely while supporting causes you care about. This strategy can be particularly helpful if you’re already planning to give to charity and have other sources of retirement income.
Life insurance policies
When money gets tight in retirement, you might think about selling your life insurance policy for quick cash. Some companies will buy your policy for more than its cash surrender value but less than the death benefit. While this might seem like a good deal in the moment, there are serious downsides to consider. Selling your life insurance means your beneficiaries won’t receive the financial support you originally intended for them. Think about why you bought the policy in the first place – was it to help your spouse maintain their lifestyle, pay for grandkids’ education, or cover final expenses?
There’s another important consideration: selling your life insurance policy might make you ineligible for need-based programs like Medicaid. This could be a big problem if you need long-term care later on. Instead of selling, look into other options. You might be able to borrow against your policy’s cash value if it’s a permanent life insurance policy. Or you could consider temporarily stopping premium payments if your policy has enough cash value to keep it in force. Some policies even allow you to access part of the death benefit early if you become terminally ill, which could help with medical expenses.
Your family home
Many retirees think about downsizing to get some extra cash and reduce maintenance headaches. It sounds perfect, right? Sell the big family home, buy something smaller, and pocket the difference. But before you put up that “For Sale” sign, consider what’s happening in today’s housing market. With the average home selling for over $501,000 as of the third quarter of 2024, finding an affordable smaller home isn’t as easy as it used to be. Nearly 30% of all large homes belong to empty-nest boomers, partly because there’s a shortage of smaller, more accessible homes to move into.
Instead of selling, you might want to look at other options for tapping into your home equity. A home equity line of credit (HELOC) can give you access to funds without giving up your home. Unlike a reverse mortgage, a HELOC won’t leave your heirs with a large debt that might force them to sell the house. Plus, staying in your home lets you age in place in a familiar neighborhood with established connections to friends, services, and healthcare providers. If you’re worried about maintenance, consider hiring help for the tasks that have become difficult, which might still be cheaper than moving and dealing with today’s high housing costs.
Sentimental items and family heirlooms
When you’re cleaning out closets and drawers during retirement, you might come across valuable items with special meaning – maybe your grandmother’s china set, your father’s watch, or artwork you’ve collected over the years. It can be tempting to sell these items, especially if they’re worth money and you’re trying to simplify your life or boost your retirement income. But once these treasures leave your family, they’re usually gone for good. Many retirees who sell family heirlooms for quick cash end up regretting it later when they realize the sentimental value far outweighed the money they received.
Rather than selling these treasured items, consider gifting them to family members who will appreciate their history and meaning. This allows you to enjoy seeing your loved ones benefit from these special pieces while you’re still around. It also gives you the chance to share the stories behind these items, ensuring that family history isn’t lost. If you’re concerned about fairness, work with an estate planning attorney to incorporate these gifts into your overall plan. For items that truly no one wants, consider donating to a museum or historical society where they might be preserved and appreciated by others.
When balancing short-term needs with long-term goals
Retirement can last 20-30 years for many people, which makes it crucial to think beyond immediate financial needs. With average life expectancy putting retirement at 17-20 years for most boomers, making hasty decisions to sell important assets could lead to regrets down the road. The challenge is finding the right balance between enjoying your retirement and preserving your financial security throughout those years. Many retirees face the temptation to cash out investments during market downturns or sell assets to fund unplanned expenses, but these moves can permanently damage your long-term financial health.
Financial experts suggest creating a detailed spending plan before making any major decisions about selling assets. This helps you understand exactly how much income you need and which assets are truly essential for your long-term security. Look for other sources of cash before selling important assets – this might include reducing discretionary spending, taking on part-time work, or tapping into cash reserves. Remember that once certain assets are sold, the tax advantages and growth potential are gone forever. Taking a moment to consult with a financial advisor before making big decisions can help ensure you’re not sacrificing long-term security for short-term convenience.
Why retirement income planning matters more than ever
Did you know that over half of the “peak boomers” (those born between 1959 and 1964) have less than $250,000 in retirement assets? This means many will rely heavily on Social Security, which typically replaces only about 40% of working income. The decline of traditional pensions has shifted the burden of retirement planning squarely onto individuals’ shoulders. Unlike previous generations who could count on monthly pension checks, most boomers need to create their own retirement paycheck from their savings and investments. This makes smart decisions about what to keep versus what to sell even more critical.
Studies show stark differences in retirement readiness based on education and income levels. College graduates have a median of $591,000 in retirement assets, compared to just $75,000 for high school graduates and a mere $7,000 for those without high school diplomas. This disparity highlights how important it is to make the most of whatever assets you have. Creating reliable income streams from your existing assets rather than selling them can provide more security throughout retirement. Options like dividend-paying stocks, bonds, annuities, and rental properties can generate ongoing income while preserving your principal. About 20% of peak boomers don’t plan to retire even by 2034, reflecting the challenges of creating sustainable retirement income.
Protecting your retirement from inflation and market swings
With inflation eating away at fixed incomes, holding onto certain assets becomes even more important. When prices go up but your income stays the same, your purchasing power shrinks over time. This is why selling assets that have the potential to grow with or ahead of inflation can be a risky move for retirees. The assets we’ve discussed – appreciated stocks, life insurance with cash value, your home, and even some collectibles – can serve as important hedges against inflation. They may increase in value over time or provide tax advantages that help stretch your retirement dollars further.
Market volatility presents another challenge. When the market takes a downturn, selling investments means locking in losses that might have recovered given enough time. Instead of selling during market dips, having a diversified portfolio with some growth-oriented investments alongside more conservative ones can help weather market storms. Some financial advisors recommend keeping 1-2 years of expenses in cash or cash equivalents, allowing you to avoid selling other investments during market downturns. This strategy lets you ride out market fluctuations without panic-selling assets that should be kept for the long term. Remember that retirement planning isn’t about maximizing returns in any single year but ensuring your money lasts throughout your lifetime.
How to pass on wealth with minimal tax impact
Many retirees want to leave something behind for their children, grandchildren, or favorite charities. The way you handle your assets during retirement can significantly impact how much actually reaches your intended beneficiaries. Selling certain assets prematurely might generate taxes that reduce the overall value of your estate. There’s a reason financial advisors often recommend holding appreciated assets until death – the tax benefits for your heirs can be substantial. The “step-up in basis” we mentioned earlier means your heirs won’t have to pay capital gains taxes on the growth that occurred during your lifetime.
Estate planning isn’t just for the ultra-wealthy. Everyone can benefit from making thoughtful decisions about how to structure their assets and pass them on efficiently. Working with an estate planning attorney can help you navigate options like trusts, gifting strategies, and charitable giving plans that minimize taxes while maximizing the impact of your legacy. Only about 33% of Americans have any estate planning documents in place, even though proper planning can prevent family conflicts and ensure your wishes are carried out. By carefully preserving key assets rather than selling them, you can provide meaningful financial support to the next generation while potentially reducing their tax burden.
Making smart decisions about what to keep versus what to sell can make the difference between a retirement filled with financial stress and one where you can focus on enjoying life. When in doubt, take your time and seek professional advice before selling any major assets. Remember that the goal isn’t to die with the most money possible, but to use your resources wisely throughout retirement while preserving what matters most to you and your family.
