Anybody upsizing their house in retirement without a mortgage?

[explanade]

Currently we are looking in Riverside/North San Diego Co., where we lived 30 years ago, as our Prop 13 tax base will also transfer to those counties. (Property taxes will still about double, if we move, due to all the special assessments that have been added to meet local needs.)

Are you referring to Prop 90, about transferring your property tax base?

So if your old home is assessed at $400k by the county you live in, you can buy say a $800k home in another county and that new county would use $400k as your property tax base?

Seems like it would be a good idea to get that confirmed before buying the new home.

My understanding is that for a one-time exemption, within the same county, the new home can't be worth (maybe market value, which could be more than the assessed value for property taxes) more than the old home.

 

[Midpack]

Yeah... that was not quite my house... no middle bedroom, so the master BR has double sized bath with big shower, and much bigger master BR, and a very large walkin closet.

Very discerning of you to apply the architectural knowledge.

Looks like an Epcon, we looked at them.

 

[Accidental Retiree]

Yes, I am referring to Prop 90. The houses we are looking at are listed at a lower price than what our house would sell for, according to our potential listing agent, so it seems we fall into the right slot. I will definitely check with the county assessors' offices of both counties before doing anything.

Here's a link to the site:

Exclusions from Reappraisal - Frequently Asked Questions- Board of Equalization

Prop 90 applies to inter-country transfers; Prop 60 to intra-county transfers.

So if your old home is assessed at $400k by the county you live in, you can buy say a $800k home in another county and that new county would use $400k as your property tax base?

Seems like it would be a good idea to get that confirmed before buying the new home.

My understanding is that for a one-time exemption, within the same county, the new home can't be worth (maybe market value, which could be more than the assessed value for property taxes) more than the old home.

 

[daylatedollarshort]

I think you just have to pick a house size that fits your lifestyle. The house we have now has been good when the kids were at home and they'd have friends over. It was like that again some days over the holidays this past year.

But for just the two of us going forward once the kids are launched we want a lock and go place next. Maybe I'll feel differently some day, but I am not much of a housekeeper, decorator or a gardener so a big place just seems like a lot of work these days.

My dream is to have a relatively small space with modular furniture and a small patio, which is about all the gardening skills I am qualified to handle. I would like to get furniture like this:

Space-saving furniture that transforms 1 room into 2 or 3 - videos - *faircompanies

I could see living some place bigger if we planned to be home more to enjoy it.

 

[W2R]

My dream is to have a relatively small space with modular furniture and a small patio, which is about all the gardening skills I am qualified to handle. I would like to get furniture like this:

Space-saving furniture that transforms 1 room into 2 or 3 - videos - *faircompanies

I could see living some place bigger if we planned to be home more to enjoy it.

That does sound nice! I am all in favor of a low maintenance home. I enjoyed the video at your link, thanks.

 

[keegs]

We've lived in this house for almost 30 years. It was about 1000sq ft originally and after a few years I (DW was ok with it) started getting cabin fever. We were going to upsize to a newer house but we liked the neighbors and eventually decided to add a level and finish the walk out basement. The house is about 2000 sq ft now and much more comfortable for me.

We bought a second home some time back primarily with proceeds from shares my wife had purchased over time through her employer. As I recall it, the share price at purchase had fluctuated and there was a split in there at one time, so there were cap gains costs to deal with but overall nothing like what we would have paid had we taken a mortgage.

There's equity in both properties now.

 

[W2R]

To conclude this thread and "wrap it up with a bow", here's what I decided was the right thing to do based on my own inclinations that were consistent with many of the great comments above. I decided to go with an approach nicely described by Midpack's suggestion, back in post #2, and withdrew $50K from my portfolio to establish my "house fund". Since I have a few years to accumulate what I need, hopefully if I do this each year my tax situation will remain manageable.

Thanks so much to everyone for your very helpful comments and contributions to this thread, which were even more expert and illuminating than I had hoped.

Carry on if you wish, or not....

 

[oldphd]

Edited to add: Looks like I cross posted with you…

W2R, a thought back along the lines of the financial side of things…

If you're unsure about the timing, you could go ahead and execute a trade that would realize LTCG and then repurchase, which would reset the basis. The federal tax rate would be 0% up to the 15% bracket, or 15% after, depending on your situation. Obviously it depends on what your other income desires are, for example if you are doing Roth Conversions. This would allow the money to continue working in the same investment, and then a year or two down the road if you decide to make a purchase, you could get your hands on more cash without incurring all the taxes in one year due to the increased basis. But if you don't end up buying the house, you still have the money invested in the same way as you did originally.

Personally, I am also thinking about upsizing in retirement, at least $$$ wise. Very similar thoughts, we would like amenities that we don't have now, likely in a different location. I don't know when this will be, perhaps a few more years, but not sure. I've been doing a combination of sales and Roth conversions up to the 15% bracket. The LTCG sales are done for this reason, keep more readily available cash in the event that I decide to make a purchase, and wouldn't want to incur LOTS of gains in one year. I also want to balance between Roth conversions and LTCG in case tax law changes would make one or the other more beneficial. Just like diversifying investments, I want to be balanced between the two instead of putting all my eggs in one basket. And with current projections, I may be unable to stay in the 15% bracket once I get to RMDs, so the LTCG owe money to the IRS. Good problem to have, though!

 

[W2R]

Edited to add: Looks like I cross posted with you…

No problem! Your post is very helpful and provides much food for thought, so thanks.

 

[Lsbcal]

To conclude this thread and "wrap it up with a bow", here's what I decided was the right thing to do based on my own inclinations that were consistent with many of the great comments above. I decided to go with an approach nicely described by Midpack's suggestion, back in post #2, and withdrew $50K from my portfolio to establish my "house fund". Since I have a few years to accumulate what I need, hopefully if I do this each year my tax situation will remain manageable.

Thanks so much to everyone for your very helpful comments and contributions to this thread, which were even more expert and illuminating than I had hoped.

Carry on if you wish, or not....

Wait W2R, I didn't get my 2 cents in yet! Just kidding.

But I am wondering why you decided not to move to that nice town you and Frank were thinking about before you retired (somewhere a bit north if my memory is right)?

If you are unhappy with how your neighborhood is going, why just make an incremental change when you could move to an ideal location?

 

[W2R]

Well, we haven't ruled that out either. We plan to make that decision for once and for all in the next few years, so that another move will not be needed.

 

[Mulligan]

Well, we haven't ruled that out either. We plan to make that decision for once and for all in the next few years, so that another move will not be needed.

Well the good thing is if you move to the ozarks instead, W2R, you will not have to withdraw more money on that decision. Unless you change your mind and want to buy a mansion, I imagine your price point will be the same or less up there.


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[Lsbcal]

Well, we haven't ruled that out either. We plan to make that decision for once and for all in the next few years, so that another move will not be needed.

Sounds like you are looking at all the angles. Moves are tough (I think) so one wants to be excited about the goal. We moved only once in the last 4 decades and it was nice a way to clear out the old stuff.

 

[haha]

Well, we haven't ruled that out either. We plan to make that decision for once and for all in the next few years, so that another move will not be needed.

Moves are very expensive, in every way, especially when multiple house buys and sells are contemplated.

IMO once someone hits age 60, there ideally will be at most one unforced move in their future.

Again, to simplify, hurricanes and flooding are the telling reasons to leave New Orleans. Crime can be avoided by living in a high security high rise, and not going into dicey areas when out. Even if you do not wish to live together you and Frank could very comfortably live in the same building.

You said you had a recent break-in. These are very unsettling, I hope you are feeling secure again.

There are many burglaries in low crime Seattle, in neighborhoods of 3-$5 million dollar homes. There are break-ins everywhere, except where it is almost impossible, and there they still happen but just not often.

Ha

 

[W2R]

Well the good thing is if you move to the ozarks instead, W2R, you will not have to withdraw more money on that decision. Unless you change your mind and want to buy a mansion, I imagine your price point will be the same or less up there.

So true! In that case, I can just buy the house outright before my house even sells. Then, if I need to do renovations before moving in, I will have plenty to cover that as well.

Sounds like you are looking at all the angles. Moves are tough (I think) so one wants to be excited about the goal. We moved only once in the last 4 decades and it was nice a way to clear out the old stuff.

The older I get, the tougher the idea of moving seems to get, too. I want to be settled into my new house before I am 70, for sure.

So (you guys will understand), I kind of laid down the law about the fact that I would be moving to another house in the next 1-3 years no matter what. I am tired of waiting on this. Gettin' tough and pushy in the way that we women can sometimes be. Frank and I need to make up our minds on this and if we don't, I'll move into another house here and stay here for the duration.

He is working on his end of this decision, and we are definitely planning a road trip up north later on this spring or summer to see if we are still excited about Springfield MO. Might brave the tarantulas, snakes, and blistering heat to drive through Texas on the way back.

 

[W2R]

Moves are very expensive, in every way, especially when multiple house buys and sells are contemplated.

There's the truck rental and gas, the strong backs to hire to load and unload it, renovations on the house and landscaping, closing costs, all the new furniture since we aren't taking much or any, and so much more. But then, what's money for, party like it's 1929 I suppose. Well, once I manage to extract more from my portfolio.

IMO once someone hits age 60, there ideally will be at most one unforced move in their future.

This will be that one unforced move. The last time I moved was in 2002, and I was only a young lass of 54.

Again, to simplify, hurricanes and flooding are the telling reasons to leave New Orleans. Crime can be avoided by living in a high security high rise, and not going into dicey areas when out.

That will be something I will be checking out if I end up buying here. If I had a million and a half to spend, I could find a really nice one but I am looking at much lower priced accomodations. I'll have to see what if anything I can find at my price point. BTW, you have figured out the two main reasons why we want to leave New Orleans. I am impressed, especially considering that you are probably on pain killers from the surgery still.

Even if you do not wish to live together you and Frank could very comfortably live in the same building.

We'll have to see what is available that each of us can afford.

You said you had a recent break-in. There are many burglaries in low crime Seattle, in neighborhoods of 3-$5 million dollar homes. There are break-ins everywhere, except where it is almost impossible, and there they still happen but just not often.

I know.... Look at what happened to John Lennon. He wasn't even inside his condo and he was shot dead, which of course something to be avoided as well.

 

[Live And Learn]

We decided to buy the new house before selling the old one, so we sold enough stock to buy the house out right. This worked out well because we ended up with cash from the sale of the old house and dumped it into Vanguard's Wellesley fund to use as part of our early retirement money.

Just for perspective - we did the "buy before selling" thing and I'd never do it again. It was great because we were able to clear all the junk out of the original house first, so it showed well. We moved 1 month after buying (the new house needed all new flooring, a new roof, and a fresh coat of interior paint). In total it was 10 weeks between buying the new house and selling the old house but I was a basket case worrying about the roof on the old house, the 2 HVAC units and all the other things that could break / need repair / need replacement during that time. It is one of the most influential causes in my OMY (x2) syndrome ! (Thankfully that can't happen to W2R !).

W2R - I'm with you on the "no mortgage ever again" thing. You've gotten a lot of good suggestions on slow and steady withdrawals, treating this as just a larger WR than you're used to. That's the way I'd go. Since you're in no rush you could manage it in a way that keeps your tax rate relatively low but clears up enough cash for your new place.

I look forward to reading about the house hunt. How about calling the Property Brothers ! (I love those guys)

 

[W2R]

[...] I look forward to reading about the house hunt. How about calling the Property Brothers ! (I love those guys)

I love the Property Brothers too, and probably would even if they were ugly

I just hope I don't back out of this move, whose planning is still in its infancy. Otherwise, instead of talking about the move-that-never-happened (back in 2010), I'd have to specify: the move-that-never-happened-Part-One or the move-that-never-happened-Part-Two.... Even if all goes well, I am sure it will not be fast. Houses still are not selling in my neighborhood and who knows what the market will be like here in a few years when I am trying to sell.

Thanks for the additional perspective about buying before selling.

 

[Marita40]

I've been living in a condo for the last six years; I was in a single family home for 30 years before that. I'm still conflicted about condo living. The location is great, the space is lovely, it is all fixed up the way I like--but I have moments when I long for the independence of the single family home. If I do decide to move I would no doubt have to move "up" in terms of house cost. It would also kill me to assume a mortgage again.

 

[RockyMtn]

Currently have two homes. Colorado home is about 4500 sq ft over 3 levels. Arizona home is 2400 sq ft with a 500sq ft casita. Would like to sell Colorado home and move to Arizona year round. Probably buy something a bit bigger in Az...maybe 3500 sq ft. We have lots of guests, grown kids, grandkids, etc so need a few extra beds.

The money we save dumping the one house will be used to pay for extended vacations when it gets too hot in the desert during July, August. At the end of the day I expect that we'll still come out significantly ahead over owning the two places plus we'll be putting a big check into savings and no longer have any type of mortgage.

Now, if I could just get my act together and get the Colorado house ready for sale!

 

[Lsbcal]

I love the Property Brothers too, and probably would even if they were ugly

I just hope I don't back out of this move, whose planning is still in its infancy. Otherwise, instead of talking about the move-that-never-happened (back in 2010), I'd have to specify: the move-that-never-happened-Part-One or the move-that-never-happened-Part-Two....

If you are motivated this could happen fairly quickly.

Even if all goes well, I am sure it will not be fast. Houses still are not selling in my neighborhood and who knows what the market will be like here in a few years when I am trying to sell.

At the right price houses can be sold quickly. One could put this at the top of the priority list and launch full time into making it happen.

Right now the economy seems to be making progress, rates have not gone up a lot ... maybe it's a good time to make a change?

 

[Helen]

The money we save dumping the one house will be used to pay for extended vacations when it gets too hot in the desert during July, August.

This is a nice setup. There are many places to go in July and August. Those are great months to visit the Pacific Northwest, the Northern Midwest states and places like Vermont, New Hampshire and Maine. July may be a bad mosquito month, but August is prime.

Actually, you could rent a place in Colorado for those two months too.

 

[keegs]

If it's within your means to enjoy a balance of living for today as well as for tomorrow then you've been good and ....lucky

 

[Moemg]

If your neighborhood is going down I would suggest moving before you lose a lot of value in the house . I saw this happen way to often in New Jersey.

 

[Culture]

Currently building our retirement home (have purchased lot, currently working with architect and builder on design), with an expected cost 3.5x the value of our current home. I expect to retire about the time it is finished in one year. The size will be about 12% bigger, but finishes will be much, much nicer, and floor plan configured for retirement rather than raising kids. The purchase of he house has delayed my retirement by one year, as it is going to be double what I expected to spend.

I am paying cash out of my taxable investment accounts. We are saving about 70% of our income right now, and all of that is currently going to VG Prime MM to defray as much as possible. The balance will come from selling bond funds, as I was already tilting towards bonds over the past three years in anticipation of purchasing a house with cash. I plan to leave equities alone to avoid capital gains.

Why the high cost? It was the only way we could build a house that would make me and my wife both happy. I wanted a large lot in the county with a 2000 SF shop building. She wanted to be in a nice neighborhood in the city. It turns out that large acreage lots in nice neighborhoods in the city where you can build 2000 SF shop buildings are $$$$$$$$$$$$$$.