Real Estate Investments You Should Sell Before Retirement To Save A Ton Of Money

While owning real estate prior to retirement can be an investment that can boost your retirement income, much of that benefit can also become an unnecessary financial burden. According to a June 2025 study by Bankrate, the obscure costs of homeownership — based on utilities, electricity, property taxes, home insurance, and cable and internet — have hit an average of $21,000 per year. By offloading your home onto the market, a retiree can knock off a considerable amount from their annual expenses. The survey also found that the average homeowner in the U.S. needs a household income of $116,986 in order to comfortably afford a home.

Another recent study by the Morningstar Center for Retirement & Policy Studies, via MoneyTalksNews, revealed that 45% of Americans retiring at 65 run a significant risk of running out of money during retirement. The Morningstar study also notes that baby boomers, in particular, have a 52% chance of running out of money if they retire at age 65, while Gen X faces a 47% chance of suffering a retirement savings shortfall. With this in mind, it might be fair to question how much sense it makes to hold onto real estate in retirement.

Whether purchasing a new home or maintaining one you already own, there are several advantages to selling your property that you should consider. While it's true that your home builds equity over time, there's always the possibility of a downturn in the market that could leave your home performing worse than a low risk investment portfolio. The 2008 financial crisis, in particular, is a good example of how placing all of your finances into property can ultimately be disastrous to your retirement planning. 

According to a 2011 Pew Research Center study, the Great Recession hit baby boomers particularly hard, with 66% of people aged 50 to 61 years old at the time postponing their retirement due to the impact of the crisis. Gen Xers were also among the hardest hit groups, with 25% of those surveyed saying that their homes lost considerable value. Even worse, 21% lost all their home value and were left owing more than the home they purchased was originally worth. Ultimately, there are many ways of making passive income that are better than real estate. Plus, selling your home can also free up cash for more diversified investments and free up much-needed capital in your retirement years.

By thinking ahead, as per the Internal Revenue Service, you may be able to take advantage of a home sales tax exclusion. This exclusion is for homeowners who have lived in the home they are selling, as their primary residence, for at least two years out of the prior five years. The owners must not have sold another property in the last five years. An individual homeowner can exclude up to $250,000 income from what they gain from the sale of a home, while couples can exclude up to $500,000. With that said, be sure to report the sale of your home to the IRS — whether you qualify for the exclusion or not.

Even if you don't qualify, another way to keep your tax obligation low is to leverage the amount you've spent on the maintenance of the home, including any major improvements, as well as what you paid for the home at the time of purchase. Basically, any expense incurred by major home improvement projects that raised the value of your home should be recorded, and later claimed, in order to offset the capital gains tax associated with the sale of your home. This is where planning ahead comes into play, since you'll need copies of contracts, receipts, and even before and after photos of the work done on your home to prove your case to the IRS.