The Housing Market Is Red Hot, but Should You Sell Your House if You're on Social Security?

Could selling your home affect your Social Security?

Across the United States, home prices have been rising rapidly. Low mortgage rates, changing habits due to COVID-19, and a low supply of homes on the market have all pushed the price of properties to the stratosphere.

If you're a homeowner, this is great news because your house is probably worth a lot more now than it was a few years ago or even a few months ago. And if you're on Social Security benefits, you may be thinking this is an optimum time to cash out your equity by selling your home at a tidy profit.

But is it a good idea to sell your home while you are on Social Security?

Social Security can affect eligibility for certain benefits

If you sell your house while you're on Social Security, some types of benefits could be impacted. Specifically, if you are receiving Supplemental Security Income (SSI), you could lose eligibility for these benefits due to the sale of your home if you don't do the process correctly.

SSI benefits are available to older and disabled Americans with limited resources. If you have too many assets -- more than $2,000 in the bank or $3,000 for married couples -- you are going to lose benefits. Now, the home you are living in typically doesn't prevent you from being eligible for these benefits. But, if you sell it and suddenly have a lot of money in the bank, this could cause a problem.

This isn't an issue if you use the proceeds to purchase another house, but you must do so within three months of selling your old one. And in today's tight housing market, that could be a problem if you sell your house and can't find another one to buy within a three-month period.

If you fail to spend the proceeds of the sale on a new home and you end up with more money than allowed, you won't be eligible for SSI benefits anymore. You have 12 months to spend down your assets and get your benefits reinstated. But if you gift the money to loved ones, you won't be eligible for benefits.

Retirees also have things to consider

Now if you are just receiving Social Security retirement benefits, these aren't means tested, so the sale of your home shouldn't affect the amount of your checks. However, you do need to think about where you'll go after selling your home.

While you may make a nice profit on the home you currently own, that doesn't do you a lot of good if it's extremely expensive to find or rent a replacement place to live. And if you're relocating to a different state, you should confirm whether it is one of the 13 states that taxes Social Security. If so, you could find your move does affect the amount of your benefits you get to keep.

Ultimately, Social Security recipients are often on a fixed income and need to think about the impact a move could have on their monthly checks before getting ready to sell. And if you're on SSI, that's even more important than for those receiving retirement benefits alone.