Many retirees rely on their homes for financial security.
Home equity accounts for a substantial share of net worth among households aged 65–74, according to the Federal Reserve’s Survey of Consumer Finances.
But when it comes time to tap that value, often through a sale, converting housing wealth into cash doesn’t always go as planned for older adults.
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A recent study finds that even when home prices are relatively strong, the proceeds older sellers receive can differ meaningfully from those of younger homeowners. Though timing and how the sale is managed play a role.
And while the research doesn’t point to a single cause for the disparity, it raises broader questions about how home-sale outcomes can affect retirement income and, yes, taxes. Here’s more to know.
Why older homeowners get less money for their homes
A study from the Center for Retirement Research at Boston College finds significant variation in sale outcomes for older homeowners. It analyzed roughly 10 million repeat home sales using CoreLogic deed records linked to demographic data to estimate sellers’ ages.
Researchers compared outcomes across age groups while controlling for home type, location, and broader market conditions and found a consistent gap.
A key takeaway? Older homeowners tend to realize lower proceeds when they sell compared with younger sellers with similar observable characteristics.
According to the study’s findings:
- “Older sellers get less starting at age 70,” with the gap “increasing with each additional year.”
- There is an estimated 5% gap in realized sale proceeds over the average 11-year holding period for some cohorts.
- For a typical home, the differences can amount to tens of thousands of dollars, depending on market conditions. Per the study, for a median $400,000 home, that is roughly a $20,000 reduction in proceeds.
There appear to be several explanations for the gap. But the study points to two primary factors.
- First, older homeowners are more likely to sell homes with fewer recent updates, which can affect pricing even in strong markets.
- Second, the researchers report that in some cases, older adults are more likely to use off-market or less competitive listing channels than the Multiple Listing Service (MLS), which can result in fewer bidders.
Also worth noting: Some home sales at older ages are driven by life transitions like downsizing, health changes, or moves into assisted living, where speed and certainty matter more than maximizing the price. In some cases, that can mean accepting an early offer rather than waiting through a longer listing process.
How a lower home sale price affects retirement income
The impact of lower home proceeds can show up in how retirees adjust their broader financial picture after the sale.
A retiree may expect a home sale to generate a certain amount of cash, enough, for example, to fund a year or two of spending without significantly tapping retirement accounts. But if the actual sale comes in lower than expected, that shortfall might be covered elsewhere, e.g., through additional withdrawals from traditional IRAs, 401(k)s, or taxable investment accounts.
- Those withdrawals are generally taxed as ordinary income. As a result, a larger-than-planned draw in a single year can push a retiree into a higher marginal tax bracket, even if only part of their income crosses the threshold.
- The same increase in reported income can also eventually affect Medicare premiums (IRMMA surcharges), since those costs are tied to income levels from two years prior.
As a result, a lower-than-expected home sale price can have retirement planning implications beyond the transaction itself.
Capital gains tax on home sales over age 65
Even though the tax impact here is primarily about how income replacement flows through the rest of the retirement portfolio, capital gains are an important consideration in retirement.
The tax treatment of a primary residence remains unchanged, including the capital gains home sale exclusion of up to $250,000 for single filers and $500,000 for married couples. That tax break can shield many homeowners entirely from tax on the sale.
Note: A 2026 analysis by the Tax Policy Center and Brookings Institution finds that about 90% of households age 65 and older will likely remain within the current home-sale capital gains exclusion, while roughly 10% would have gains large enough to exceed it.
Still, other recent data indicate that approximately 8% of home sales resulted in gains that exceeded the home exclusion threshold. That’s more than double the percentage over the last five years or so, according to a report from the consumer information and analytics company CoreLogic.
That rising share of taxable gains has prompted several proposals on Capitol Hill, including bills that would eliminate capital gains taxes on home sales and a recent legislative proposal to increase the capital gains exclusion to $1 million for homeowners age 65 and older.
Why is this happening? One issue is that the exclusion limit hasn’t been adjusted for inflation, so the value of the tax relief provided by the home sale exclusion has eroded over time.
As a result, homeowners across the U.S., but more often in states with high property values, like California, New York, New Jersey, Massachusetts, Florida, and Colorado, are likely to see gains exceed the exemption limit.
Selling a home in retirement: Bottom line
Every individual’s financial situation is different, and a trusted professional can help with a tailored strategy.
However, a few considerations:
- How the sale fits into your broader retirement income strategy
- Whether the proceeds could affect taxable income or Medicare premiums
- How the proceeds will be used, saved, or reinvested
It may also be worth considering whether the timing of the sale allows enough time to attract multiple buyers. As the study suggests, urgency can limit a seller’s options and make it harder to maximize the sale price.
