We Live on Social Security and Pensions—Should We Borrow $50,000 for Home Repairs or Sell Stocks?

Many retirees reach a point where the home they love needs real work—new roofing, safer steps, plumbing fixes, or renovations that make daily life easier. But when you’re living mainly on Social Security and pensions, a big question pops up fast: do you take on debt, or use your investments?

This rewritten report explores a real-life retirement dilemma shared by a couple in their early 70s: they have a paid-off home, an emergency fund, and close to $1 million invested across retirement accounts and taxable accounts. Now they want to fund about $50,000–$60,000 in home improvements. The core decision is simple to say but tricky to solve: take a loan against the house (like a HELOC or mortgage) or sell investments (such as stocks) to pay cash.

What the Retired Couple’s Situation Looks Like

Here’s the financial snapshot that shapes the decision:

• Age: Early 70s (retired)
• Income: Primarily Social Security and pension payments
• Home: Fully paid off (no mortgage balance)
• Investments: Around $1 million total (split between IRAs and regular taxable accounts)
• Emergency fund: About $30,000 in cash reserves
• Goal: Home improvements totaling about $50,000–$60,000

Even without knowing every line item of their budget, this profile is common: solid assets, stable retirement income, and a desire to maintain a safe, comfortable home—without causing long-term financial stress.

Why This Isn’t Just a “Math Problem”

At first glance, people try to solve this with a single comparison:

“If my investments earn more than the loan interest rate, I should borrow.”

That sounds neat, but retirement decisions rarely work that cleanly. In your 70s, the most important factors often include:

• Risk: Markets can drop right after you borrow or right after you sell.
• Cash-flow comfort: A loan adds a required monthly payment.
• Taxes: Selling investments or withdrawing from retirement accounts can change your tax bill.
• Flexibility: Debt reduces your options if expenses rise later.
• Peace of mind: In retirement, “less stress” can be worth more than a tiny theoretical gain.

So yes—math matters. But in retirement, lifestyle stability matters just as much.

The Borrowing Option: HELOC or Mortgage Loan

What Borrowing Might Look Like

With a paid-off home, the couple can usually borrow in a few common ways:

• Home Equity Line of Credit (HELOC): Often a variable interest rate; flexible draw period; payment changes can occur.
• Home equity loan: Often fixed rate; fixed payment schedule; lump sum upfront.
• Cash-out refinance / new mortgage: Larger structure and longer repayment term (not always ideal in your 70s).

Interest Rates Are the “Price Tag” on Borrowing

In the scenario discussed, typical borrowing costs were described around 5.5% for a 10-year mortgage and about 7.4% for a HELOC.

When rates are high, borrowing becomes less attractive—especially if the money you keep invested is not expected to earn dramatically more than the loan rate.

The Biggest Hidden Cost: Monthly Payments

Even if a loan looks “reasonable,” retirees should ask a blunt question:

“Do we want to add a required payment every month for the next 5–10 years?”

Because the house is already paid off, adding a new loan flips the household from “debt-free” to “debt again.” That shift can reduce comfort, especially if other costs rise—like healthcare premiums, property taxes, or surprise repairs.

When Borrowing Can Make Sense Anyway

Borrowing isn’t automatically wrong. It can be helpful if:

• Selling investments would trigger a large tax hit in one year (more on that below).
• You need the work done immediately and you want to spread out withdrawals.
• You want to preserve a larger cash buffer for safety.
• You can repay quickly (short-term borrowing, not long-term debt).

The key is to treat borrowing as a tool, not a default.

The “Sell Stocks” Option: Using Investments to Pay Cash

Why Paying Cash Often Fits Retirement Better

For retirees with sufficient assets, the advice in the original scenario leaned strongly toward avoiding new long-term debt in the 70s and instead funding the renovations through taxable investment accounts when possible.

Why? Because debt adds pressure, while cash payment preserves flexibility. If you pay for the improvements upfront, you’re not locked into payments that could squeeze your budget later.

But Wait—Doesn’t the Stock Market Average 7%?

You’ll often hear: “The market returns about 7% long-term, so don’t sell stocks—borrow instead.”

That idea can be misleading in retirement. Here’s why:

• Many retirees are not fully invested in stocks. Their portfolio may include bonds, cash, and conservative assets.
• A more conservative retirement allocation may have expected returns closer to 4%–5% rather than the stock market’s long-run average.

• Market returns are uncertain year to year—especially over a short period like 1–3 years.

So if you’re borrowing at 6%–7% but your realistic expected return is 4%–5%, the “borrow to invest” edge may shrink or vanish.

The Tax Angle: Where You Sell From Matters

This couple has money in both:

• Traditional IRAs (taxed as ordinary income when withdrawn)
• Taxable brokerage accounts (where long-term capital gains can be taxed at different rates)

A critical point: pulling a big chunk from a traditional IRA can raise taxable income and potentially push someone into a higher bracket—especially as Required Minimum Distributions (RMDs) begin at age 73 under current rules.

So rather than starting with the IRA, many planners prefer using taxable investments first—especially if those sales create long-term capital gains instead of ordinary income.

A Practical 7-Step Decision Framework for Retirees

Step 1: Define the Renovation “Why” (Safety vs. Nice-to-Have)

Not all repairs are equal. Break the project into categories:

• Safety/health: electrical hazards, roof leaks, mold risk, unstable stairs, accessibility upgrades
• Home protection: plumbing issues, foundation concerns, water damage prevention
• Comfort upgrades: cosmetic remodeling, kitchen refresh, landscaping

If it’s safety or home protection, delaying can cost more later. If it’s mostly cosmetic, you have more flexibility.

Step 2: Confirm Your Real Monthly Budget

Before choosing “loan vs. sell,” you want clarity on cash flow. List essentials:

• Property taxes and homeowners insurance
• Utilities and maintenance
• Food, transportation, and medical costs
• Medicare premiums and out-of-pocket healthcare
• Discretionary spending (travel, hobbies, gifts)

If a loan payment would force uncomfortable cuts, borrowing may not be worth it—even if the interest rate looks “okay.”

Step 3: Preserve a Cash Cushion (Don’t Drain the Emergency Fund)

The couple has about $30,000 in emergency savings.

Emergency cash is not just a number—it’s a safety net. A balanced approach many retirees use is:

• Use some cash (not all) if needed
• Keep enough for true emergencies: medical bills, urgent repairs, travel for family needs

If the renovation costs $55,000, draining the entire $30,000 fund could leave the household exposed. Better to keep a cushion and pull the rest from investments or a small short-term loan.

Step 4: If Selling Investments, Sell the “Right” Assets

A thoughtful sell strategy matters. Many retirees do this:

• Prioritize selling holdings that have been owned over a year (potentially creating long-term gains).
• Avoid selling in a panic during a steep market dip if you can schedule withdrawals.
• Rebalance your portfolio as you sell, rather than selling randomly.

The key is to avoid turning a home project into an unmanaged tax and investment mistake.

Step 5: Spread Withdrawals Over Two Tax Years

One specific tactic suggested is to spread sales over two tax years, which can reduce the chance of spiking taxable income in a single year.

Example: If repairs cost $60,000, you might pay $30,000 late in one year and $30,000 early in the next—depending on contractor timing and billing.

Important: This isn’t about playing games. It’s about smoothing income and avoiding accidental bracket jumps.

Step 6: Consider a Small, Short-Term Loan Only if Taxes Would Be Painful

The advice allows for a middle ground: use a small HELOC or short-term loan only if a large, one-time investment sale would trigger unusually heavy taxes in one year.

This approach can work like a bridge:

• Borrow a smaller amount temporarily
• Repay it after selling investments gradually
• Avoid locking into a long repayment schedule

Think of it as borrowing for flexibility—not borrowing because you “hate selling.”

Step 7: Choose the Option That Reduces Stress, Not Just the One That Looks Best on Paper

Retirement planning is not a contest to squeeze out the last 0.5% advantage. The guidance in this scenario emphasizes that even if the math is close, the lifestyle effects aren’t. Debt creates fixed obligations; paying cash keeps life simpler.

In plain terms: if you can pay for necessary repairs without endangering your long-term security, it’s often worth keeping things simple.

Common Mistakes Retirees Should Avoid in This Situation

Mistake 1: Borrowing Long-Term When You Don’t Need To

If you have sufficient assets, adding a 10-year obligation can reduce comfort and flexibility. You may feel “fine” today, but retirement expenses can shift quickly.

Mistake 2: Pulling the Whole Amount from a Traditional IRA Without Planning

Large withdrawals from traditional retirement accounts can raise taxable income and possibly affect other items tied to income. That’s why using taxable accounts first is often recommended in cases like this.

Mistake 3: Emptying Emergency Savings

A house project can uncover surprises. Keeping a buffer is wise—especially for retirees on fixed income streams.

Mistake 4: Thinking “Average Market Return” Is Guaranteed

Even if the long-run market average is strong, your personal return depends on your allocation, timing, and risk level. Retirees often hold more conservative portfolios, making the “borrow to keep investing” argument less powerful.

So… Loan or Sell Stocks? The Most Retirement-Friendly Answer

Based on the scenario described and the expert guidance summarized, the most retirement-friendly approach is usually:

Fund most of the renovation from taxable investment accounts (selling assets strategically), keep a healthy cash cushion, and avoid long-term debt—unless a short-term loan helps prevent a major one-year tax hit.

In other words: if you have the assets, paying cash is often the calmer, cleaner solution. Borrow only if there’s a specific reason—like taxes or timing—that makes borrowing temporarily useful.

Frequently Asked Questions (FAQs)

1) Should retirees in their 70s take on new home debt?

Generally, if you have enough assets to pay cash, many advisors discourage taking on new long-term debt in your 70s because it reduces flexibility and adds fixed payments.

2) Is a HELOC a good idea for home repairs in retirement?

A HELOC can be useful as a short-term bridge, but it often has variable rates and can become expensive if rates rise. It may make sense only if you plan to repay it quickly or need flexibility to manage taxes.

3) Should I sell stocks or withdraw from my IRA for repairs?

Many retirees prefer selling from taxable accounts first (when possible), because IRA withdrawals are taxed as ordinary income and could raise your tax bracket.

4) How do I reduce taxes when selling investments to pay for repairs?

Common strategies include selling holdings owned longer than a year (potentially long-term gains) and spreading sales across two tax years if timing allows.

5) Should I use my emergency fund for renovations?

You can use a portion if needed, but many retirees keep a meaningful cash cushion for health costs and unexpected emergencies. Draining your emergency fund fully can increase financial risk.

6) What if the market is down—should I still sell stocks?

If the repairs are urgent, you may have to sell some investments regardless of timing. If the repairs can be staged, you may be able to sell gradually, rebalance thoughtfully, or use a small short-term loan as a bridge instead of selling a large amount at once.

Conclusion: The Best Repair Plan Is the One You Can Live With

For retirees living on Social Security and pensions, home repairs are not just a financial decision—they’re a quality-of-life decision. If the home is paid off and you have substantial investments, taking on long-term debt often creates more pressure than it’s worth. Selling investments carefully (especially from taxable accounts), protecting your emergency cushion, and smoothing withdrawals across time can offer a balanced, lower-stress path.

If you want a deeper dive into retirement withdrawal planning concepts, you can explore general education resources from the IRS guide on Required Minimum Distributions (RMDs).

Bottom line: A safe, comfortable home is a meaningful part of retirement. The goal isn’t to “win” the math—it’s to protect flexibility, reduce risk, and enjoy the years ahead.

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