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 — the house keeps appreciating — and the projection still shows spending going unfunded from age 79, because a house is wealth you cannot spend without moving out of it. Selling funds every year to the horizon, and prices what that costs: the gain runs far past the $500,000 exclusion, which has not 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's income raises the Medicare premium two years later. Consequences of two stated choices, not a recommendation to make either.
What the projection also found
Nothing here was left blank. These follow from the figures above, under the assumptions this example states.
- Spending is short $81,678 with the accounts at $0, while $2,183,522 of equity sits in a house worth $2,183,522. Net worth counts it; spending cannot.
The planner arrives with this household already filled in. Change anything — the balances, the ages, the assumptions — and run it as yourself.
A projection under stated assumptions, not financial or tax advice.