Hi Paul
I think the best way to think about this is as 2 separate but important questions -
1 - do I want to live in this house?
2 - what about the money?
If the answer to 1 is definitely no, then sell. If not, then see if it makes financial sense to keep it.
For 2, you don't need to wait until age 59.5 to access retirement funds -
- it's only 2 years, can you save enough cash to fund 2 years (combined with renting out primary home?)
- google "rule of 55" - you can possibly access your 401k funds at age 55 with no penalty
- google "SEPP" - you can setup a small separate IRA to withdraw funds from without penalty, it just requires a small bit of math and planning
- pay the 10% penalty for 2 years - costs $1k to get $10k out of the IRA, but maybe cheaper than the tax you avoid now