Q. I am a 63-year-old woman living on my own. I retired in 2007 and am receiving a monthly $2,600 retirement pension. I have $100,000 in a 457 plan and CDs. I do not tap into those funds for regular living expenses. I consider this money as a fund for traveling. Recently, I started receiving Social Security of $1,600 a month. Except for $22,000 owed on a vehicle, I only have basic living expenses.

Early in my life I purchased a home on my own a home and I have already paid off the mortgage. Today the property has a market value of over $300,000. I have decided to downsize and sell it. My plan is to purchase an RV for about $30,000 and live in it for a while to keep my living expenses to a minimum. I occasionally teach part-time just to have a bit more income and keep active. My question: How should I invest the funds from the sale of my house to provide for the rest of my life? —E.O., San Antonio, TX

A. As a single person with $4,200 a month in guaranteed lifetime income from Social Security and a pension, you will probably be able to add the home proceeds cash to your “active retirement” fund. Since basic living costs are likely to be covered, you can withdraw from this fund in good years, and do less in bad years.

You can keep this very simple by investing in a low-cost balanced fund. That could be an index fund like Vanguard Balanced Index (Admiral shares since you’ll be making a large investment) or a managed balanced fund like Vanguard Wellington (also Admiral shares).

Another thing to do would be to explore the broader world of RV and manufactured home living. While many love “full-timing” in their RV, I’ve also learned that many RV-ers want to settle down after a while. If you do that, you can keep costs to a minimum by looking for a ROC. That’s a “resident-owned community”, a cooperative form of ownership that lets you have an ownership stake in your RV Park or manufactured home park.

Owning your lot will do two things. First, it will reduce the monthly land rent considerably, so it will be a good investment. Second, it will reduce the rate of increase in your monthly land costs. You can find “all-in” costs for used manufactured home units, with land, for $50,000 to $100,000. That’s more than the $30,000 of an RV but it would also represent a lot more living space.

Q. I am considering selling an income producing property that I bought in 1983. The capital gains tax will be huge because long-term capital gains are not adjusted for inflation. The President has proposed increasing the capital gains tax without adjusting for inflation. Does it make sense to sell my property since a large percentage of the sales price will go to the
Federal government? —L.W., by email

A. This is an “it is what it is” problem. Capital gains are currently taxed at a lower rate than labor income or interest income. So it’s hard to get too incensed about paying the tax, even though part of the gain (and much of the tax) is artificial. The tax bill will also be increased by the amount of depreciation you have claimed since 1983 and many investors forget that every dollar of that depreciation produced a lower tax bill in previous years.

What to do? First, unless someone has a gun to your head, you don’t have to sell the property. If it provides a good cash flow, keeping it may be a really good thing. It is unlikely that you will find an alternative that provides more income, particularly when you try to reinvest the after-tax money. Another alternative is to do a tax-free property exchange. This will defer (not eliminate) the tax bill, but making such deals isn’t easy.

If you hold the property until you die, all of the capital gain will be eliminated as the property is revalued to its value at the time of your death. Many people have joked that this wrinkle in the tax law is the last incentive we have to die.