Retirees on the move want to know: Is this the time to go big?

Q: We will retire in the coming year and expect to move from our current home in a high-cost metro area to something smaller and less expensive in an area with lower costs. That’s the plan. But would it make any sense to go larger, to get a bigger place?

A: There are substantial differences among local markets, and it may be that retirement will offer the opportunity to go big and at the same time wind up with lower monthly expenses.

The idea of a bigger home in retirement is relatively common. In the particular case of a move from a high-cost area to something less expensive, it might be attractive for several reasons.

First, your current home may have grown in value. Combine a mortgage balance that declines through monthly payments and a growing sale price, and the result can be a huge check at closing.

Second, a good portion of your profit from the sale of a prime residence might be exempt from federal and state income taxes. At the federal level, says the IRS, “If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.”

Third, given the proceeds from the sale of your current home, you may be able to buy a replacement property for cash, meaning you won’t have monthly mortgage payments.

Fourth, it may be that you will move to a state with no income tax. According to Kiplinger. com, such states include Florida, Texas, Nevada, Alaska and others. If you buy a less expensive home in a lower-cost area, you may also have additional property tax savings.

The result is that you might move from a smaller home or condo in one area to a very much larger home, which has a significantly lower cost. Here’s how:

After 20 years, the home with 1,800 square feet that you bought for $250,000 is now worth $799,000. Your original $225,000 mortgage has a $135,000 balance. After the mortgage payoff ($135,000) and closing costs, you walk away from settlement with a check for roughly $600,000 — an amount that for many owners is largely tax-free. Speak with a tax professional for details.

Next, you move to a less expensive area with no state income tax. You buy a 2,400-square-foot replacement property for $300,000. You now have a bigger home, no mortgage, no state income tax and somewhere near $300,000 in the bank remaining from your home sale.

So yes, depending on your circumstances and preferences, retiring to a larger home and lower costs may be entirely possible.