How Should Preretirees View Illiquid Assets?
Some people approach their retirement years owning illiquid assets worth more than their liquid ones. While long-held illiquid assets, such as a business or home, may become highly valued or appreciated over time, it can be wise to be frank and conservative when estimating their worth, especially if an owner wants to sell them to help fund their “second act.”
It may take months or years to sell an illiquid asset. Moreover, the process of selling that asset often involves expenses: payments to third parties facilitating the transaction, upgrades, or concessions to a new owner, moving costs, and legal fees.
A preretiree can view a future home or business sale with optimism, but that optimism may be tempered by these realities when the time comes. In addition, liabilities linked to illiquid assets may persist well into retirement; according to Federal Reserve data published in 2019, 68% of the debt of Americans is rooted in homeownership.
If you are considering what the sale of an illiquid asset might do for your financial future, think about how to position your more liquid investments. Liquidity is a financial plus at any stage of life and especially during retirement.
What Would We Like to Do When We Have the Chance Again?
As most of the nation contended with stay-at-home orders this spring, polling firm YouGov decided to survey 1,175 American adults to see what activities they might want to do once businesses fully reopen and social-distancing mandates end.
The big picture? Baby boomers, and to a lesser degree, Gen Xers, appeared to be more confident than millennials about resuming certain popular pursuits. As an example, 61% of boomers and 50% of Gen Xers who responded to the April 24-27 survey said that they would visit friends or family that they hadn’t seen since the beginning of social distancing, compared with 47% of millennials.
Sixty-four percent of boomers and 52% of Gen Xers said that they would be up for going to bars and cafes once lockdowns ended; only 42% of adults born 1982-99 put that activity on their list. While only 32% of millennials and 33% of Gen Xers said that they would visit a hairstylist or barber right after the end of a stay-at-home order, 50% of baby boomers indicated that they would do so. Forty-six percent of baby boomers longed to make in-person shopping trips to stores or malls, compared with 37% of Gen Xers and 35% of millennials.
On the Bright Side
Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you may deduct up to $300 in qualified charitable contributions made during 2020 on next year’s federal tax return. This applies even if you aren’t itemizing deductions for 2020. Remember, this tip is for informational purposes; it’s not a replacement for real-life advice. Make sure to consult your tax, legal, and accounting professionals before modifying your strategy.
Advisory services are offered through Lighthouse Financial, LLC, a SEC Registered Investment Advisor. Lighthouse Financial, LLC does not provide legal or tax advice. The information contained herein is obtained from sources deemed to be reliable. Lighthouse Financial, LLC cannot be responsible for the accuracy of the information being presented.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.
1 – Brookings.edu, June 25, 2019
2 – Benzinga, May 5, 2020
3 – Forbes.com, April 8, 2020