Retirement Planning, Elder Law, and Senior Finance Paying for Senior Living: Selling Securities 3/7/2025 | By Annie Tobey When older adults consider moving to a senior living community, whether for an easier lifestyle or extra care, they must decide how to pay for it. If they’ve made investments over the years, selling securities offers one means of funding the transition. However, it’s important to consider the potential ramifications. Seniors who have been able to set aside and invest money anticipate a retirement free from the commitments of a job and career. Their visions may include a living environment that minimizes home maintenance and maximizes opportunities for recreation and camaraderie – i.e., the promise of a lifestyle that can be found in a CCRC or life plan community. These communities provide specialized services, so living costs are higher. Most require entrance fees and monthly fees. If you have been able to invest money in the lead-up to retirement, congratulations! But before selling securities to fund your retirement, you need to consider the consequences. When you sell your securities – such as stocks, bonds, mutual funds, and ETFs (exchange-traded funds) – you typically pay taxes on the profit. These capital gains taxes vary depending upon factors such as your taxable income and how long you’ve held the investment. Considerations in selling securities to pay for senior living Before you sell, you’ll want to examine each investment as well as your overall financial situation. Knowing this important information can help you determine which securities to sell or how much to sell. How long have you held the investment? “If you have held your securities for less than a year, you will pay the short-term capital gains tax,” says Elias Papasavvas, founder and CEO of Second Act Financial Services. His business focuses on helping older adults meet their financial goals. As of 2024, “The short-term capital gains tax is equal to your income tax rate in the year of sale,” which generally ranges from 10% to 37%. On the other hand, he points out, “If you have held your securities for more than a year … you will pay the long-term capital gains tax rate, which ranges from 0% to 20% and is capped at 20%.” This information can help you determine which securities to sell and when. Remember, too, to consider state taxes as well as federal. What is your income tax rate? Will selling a security put you into a higher tax bracket? Large withdrawals are usually considered income by the IRS. Not only would a large withdrawal increase your tax bill, it could bump you into a higher tax bracket. “Any capital gains tax you pay could therefore be higher, especially in a short-term capital gain situation,” explains Papasavvas. To make the best decision, determine your adjusted gross income (AGI): gather all of your sources of annual income, including Social Security, interest income, and retirement accounts. This is the first step in deciding if a withdrawal will bump you into a higher tax bracket. At the same time, not all capital gains are equally taxable, and not all states treat capital gains the same. For example, Investopedia explains that interest payments on corporate bonds are subject to both federal and state taxes, while interest payments on federal bonds are subject to federal taxes but not state tax. However, qualifying municipal bonds are not subject to any federal, state, or local taxes. Consult a professional to ensure a wise decision “Selling securities to fund your senior living community expenses could make sense for you,” says Papasavvas, “but be sure to discuss it with a tax professional and/or financial advisor well versed in taxation before making any decisions to make sure there are no unintended consequences from your actions.” A knowledgeable financial advisor can recommend other ways to trim your tax bill, too. For example, you can offset gains by taking investment losses, says Joe Curtin, head of CIO Portfolio Management, Chief Investment Office, Merrill and Bank of America Private Bank. You can explore other options for funding senior living as well. In this series on paying for senior living, Seniors Guide has examined selling your home, taking bridge loans, and using retirement accounts. Another option involves borrowing against your securities instead of selling them, which we’ll explore in a future article. “You saved a lifetimes worth of stocks, bonds, and other securities to enjoy a productive and meaningful retirement,” says Papasavvas. “Don’t let paying taxes keep you from enjoying your retirement. Taxes are a part of our lives and it is almost impossible to avoid them. The key is making sure you speak with your accountant or tax advisor on what is the least amount of tax you can pay by selling wisely. Then take those net proceeds and enjoy your life in your retirement!” Read More Annie Tobey Seniors Guide editor Annie Tobey has been involved in publishing for more than three decades, editing magazines, creating hundreds of freelance articles for local and national publications, and publishing two books. Her first book, “For Any Young Mother Who Lives in a Shoe” (Judson Press, 1991), offered humor and guidance to parents of young children. More recently, “100 Things to Do in Richmond Before You Die” (Reedy Press, Sept. 1, 2023) gave Tobey the opportunity to share her love for her hometown of Richmond, Virginia.