January Is the Best Month to Rethink Real Estate in Retirement

At the start of the year, the retired real estate investor is rarely thinking in terms of “big moves”.  Instead, they’re more likely to be thinking in terms of control, predictability, and optionality. With the prior year still fresh in their minds, questions surface such as:

·         What repairs came out of nowhere?

·         How much tax did I actually pay?

·         Which properties felt like assets – and which felt like obligations?

·         How much effort did the portfolio require relative to the income it produced?

Their core mindset is less about needing more risk and instead wanting fewer surprises. And with many retired real estate investors already feeling successful, the question is no longer “can this work?”, but:

·         How long do I want to keep doing this?

·         What happens if something goes wrong this year?

·         How do I make this easier without giving up income?

You can tell by these types of questions, they’re not chasing returns, they’re protecting lifestyle. The primary concerns largely focus on income reliability and tax uncertainty. Rental income matters – but consistency can matter more. Whether or not tenants will renew or whether rents will keep pace with rising costs come to mind.

And with real estate comes tax complexity. There are capital gains exposure, depreciation recapture, state taxes, and interaction with Social Security and portfolio withdrawals. Even as these types of questions linger at the start of the year, January still allows just enough of an opportunity for the noise to quiet to some degree and for an opportunity to gain clarity when looking ahead.

Time Itself is a Planning Lever

The timing of real estate decisions can affect outcomes. Selling property earlier in the year versus later, initiating depreciation strategies soon, or planning for installment sales, partial dispositions, or exchanges all require planning. Starting early allows time to model tax impact, coordinate with other income, and avoid rushed decisions later in the year.

For example, in some instances, it may be appropriate to accelerate the depreciation of a property by segregating the costs of the different portions of a building. And while a full year of deprecation is generally available regardless of when the property is purchased, starting early allows time to model the tax impact, coordinate with other income, and avoid rushed decisions later in the year.

And early planning in areas like accelerated depreciation has relevance to retirement. It can offset high rental income, create tax room for Roth conversions, and can contribute to future planning around depreciation recapture – not just deductions.

Earl-Year Clarity Can Improve Retirement Cash Flow

By January or early February, retirees who actively review their portfolio usually have a much clearer view of where rents are realistically headed, insurance, taxes, HOA fees, and maintenance contracts for the year. That early visibility allows investors to adjust rents sooner, pre-fund reserves instead of reacting mid-year, and avoid “surprise” capital calls that disrupt spending plans.  The result is a smoother, more predictable net cash flow across the year – not feast or famine months.

Here’s a brief case study involving two retirees with the same real estate and investment assets – but with very different outcomes.

Background:

• Ages: 64 and 66

• Status: Recently retired

• Assets:

  •   $1.6M invested portfolio

  •   Two long-held residential rental properties

  •   Combined rental income: Approximately $72,00

• Goal: Stable retirement income with minimal tax drag and few surprises

At the start of the year, both households look financially identical.

Retiree A takes the “we’ll look at it later” approach:

• Keeps rentals unchanged

• Delays planning until late summer

• Focuses primarily on investment accounts, not how rental income interacts with taxes.

What happens by November:

• Higher-than-expected taxable income due to rent increases and interest income

• Roth conversion opportunity largely gone

• One property needs a major repair, funded from taxable investments

• Capital gains exposure if selling becomes necessary

• Planning becomes defensive, not strategic

The result is that decisions are made under time pressure. Taxes are managed but not optimized.

Retiree B has a “January mindset”. He meets with his advisor early in the year and focuses on coordination.

January – March actions:

• Projects full-year rental income conservatively

• Models how real estate income affects marginal tax rates

• Identifies room for partial Roth conversions

• Sets aside reserves for known property maintenance

• Evaluates whether one property still serves the retirement plan

Mid-Year Flexibility

• Adjusts conversion amounts as income becomes clearer

• Chooses not to sell – because they planned liquidity early

• Uses portfolio withdrawals more efficiently

  
  

The result is that even with the same assets and the same markets, he had better control, fewer surprises, and better long-term tax positioning.

The Key Difference Wasn’t The Real Estate

While both retirees owned similar properties and earned similar incomes, the difference was the timing and intentionality. Early year planning creates options, preserves flexibility, and turns real estate from a reactive obligation into a coordinated retirement asset. 

There’s another element that is unique to the retired real estate investor. It’s the issue of effort versus reward. Wondering whether it’s still worth the hassle or whether he’d structure things differently were he starting today It’s not something that’s often spoken out loud – but it’s present.

January is the last calm window before the year starts to take off. It’s the time before taxes are finalized, before maintenance issues surface, before markets dictate emotions, and before decisions become irreversible.  The retired real estate investor doesn’t want predictions. They want positioning, not performance. Early in the year, the goal isn’t to act – it’s to make sure every option remains available.

Retirement planning decisions – especially around real estate and taxes – are rarely about a single move. They’re about how different choices fit together over time. If you’d like help thinking through how this topic applies to your situation, I’m always happy to have a conversation. And if you’d like future articles like this delivered by email, I share ongoing insights on retirement, taxes, and life in Alabama on Substack. You can subscribe there anytime.