# Selling Your Home to Fund Retirement: What You Need to Know
Many retirees rely on home equity as their primary retirement funding source, but this strategy carries real risks that deserve careful examination.
Your house is not a liquid asset. Selling takes time, costs money, and depends on market conditions beyond your control. Real estate commissions typically run 5-6% of the sale price. If you sell a $400,000 home, you'll pay $20,000-$24,000 in fees alone. Add closing costs, potential repairs, and transfer taxes, and your net proceeds shrink further.
Timing creates another problem. If a market downturn hits right when you need to sell, you lose leverage. A home worth $500,000 today might fetch only $425,000 in a recession. You cannot pause retirement while waiting for better conditions.
Tax implications matter too. If you've owned your primary residence for at least two of the past five years, the IRS excludes $250,000 in gains from taxation ($500,000 if married filing jointly). Gains above that threshold count as taxable income and can push you into a higher bracket, affecting Medicare premiums and Social Security taxation.
Location and condition determine sale speed. A home needing major repairs sells slower and for less. You might hold out longer than planned, draining other savings while waiting.
A smarter approach builds multiple income streams. Combine Social Security, retirement accounts like 401(k)s and IRAs, pensions if available, and investment accounts before considering a home sale. If your retirement plan centers on selling your house, create a backup timeline. What if your home sits on the market for six months? What if it sells for 10% less than expected?
Consider alternatives before selling. A home equity line of credit (HELOC) lets you tap equity without