A worked example

House rich, and out of money at 77

Marisol and Dev, 63 and 62, own a California house worth $1,400,000 that they bought in 1994, $240,000 of purchase price and improvements between them. They have $900,000 in pre-tax accounts, $120,000 in Roth, $250,000 in a brokerage account, $180,000 left on the mortgage, and they spend $88,000 a year.

“We keep being told we're fine because of the house. Are we?”

What the projection shows

Two runs of the same household, one staying put and one selling at 65 and renting. Staying ends with more on paper because the house keeps appreciating, yet the projection shows spending going unfunded from age 79, because a house is wealth you can't spend without moving out of it. Selling funds every year to the horizon, and the projection prices what that costs. The gain runs well past the $500,000 exclusion, which hasn't been raised since 1997, so the excess is taxed as long-term capital gain, California taxes all of it as ordinary income, and the sale-year income raises the Medicare premium two years later. These are the consequences of two choices, not a recommendation to make either one.