Expensive Retirement Home

[Davis65]

It sounds to me like the real issue is that you have been frugal for so long that you don't know how to spend. You didn't say, "maybe i should save $500K on the house and spend it on drugs" or "... on a massive yacht" or "... on round-the-world cruises in the penthouse suite". You seem to be saying "maybe I should not spend the money".

Do you have beneficiaries for you're estate? (I'm available if you need one.) are you planning to leave a big legacy to a charity? If not, you should start getting ready to enjoy the fruits of your labour, thriftiness, and investment savvy.

I am trying to make this shift too: I'll retire early next year having accumulated significantly more than I expected to or than I think I'll need, in part, because I've been so frugal.

[Chasing Retirement]

I downsized a few years ago when I saw the real estate market showing weakness. I am now in a small condo that is very "lock and leave" but looking at larger homes for our "final home" in a lower cost market (i'm currently in SoCal). My goal is to travel while I'm still young (currently 57, planning to retire at 60), and still living in my paid for lock and leave condo. Once I make the investment into a larger home, i am guessing I will be all traveled out and not wanting to leave as often. In the mean time, and while traveling, make your money work for you so when you plunk down the $1mil, it won't hurt as bad! Of course, who knows what that $1mil home today will cost tomorrow.

[hesperus]

Quote:

Originally Posted by rb35 My wife and I are in what I hope to be our final couple of years before FIRE. We plan on moving to a different state and buying our "forever" home. This will probably cost about 700k to 1 million. I'm conflicted about a few things and would like to hear other members' thoughts. 1. An expensive home seems like such an inefficient use of resources. If I pay cash for the house, the opportunity cost of those funds is going to be about $50k / year. Add in 20k for maintenance, taxes and insurance and we're talking 70k / year to live in the type of home we're considering. I think this bothers me so much because I'm extremely investment oriented and virtually 100% of our net worth is currently working for us in some sort of investment. Do I just need to come to terms with the fact that we planned to splurge more during retirement and so it's time to quit being so frugal and just spend the 70k per year on our dream housing? 2. We plan on traveling a lot more during retirement. I could easily see us being away from our home 3 months a year (multiple trips). I'd be worried about having an expensive home vacant so much. It also compounds my feelings expressed in point 1 as paying that much for a house and not enjoying it for 3 months a year seems like a colossal waste. Financially, I don't think we'll have any problem affording the home. It's just such a dramatic change to my lifelong pattern of spending little while constantly saving and investing. Anyone been in a similar situation or given thought to these issues? Thanks! Sent from my iPhone using Early Retirement Forum

Yes, we also have been giving this some serious thought, trying to decide where we want to be in 10 years. I'm 56, FIRE'd about 2 years ago. DW is 47. We have two places, one a modest home in a somewhat expensive area in colorado that we purchased about 4 years ago, near a market bottom. The other is a ten acre mountain retreat, that we built a nice new cabin on. They are only about 30 minutes from one another. Right now our properties are only about 15% of our net worth, with the majority of our NW in investment accounts, right in the mid seven figures. I keep thinking eventually we'll rent out the current home we're in (the rental market is strong) and then buy a new home, that is more in our 20%-25% net worth range. But, the modest home we're in is so efficient for our uses currently, that I cannot justify it right now. I'm kind of a spendthrift, so I agree with the OP that going into a larger, $1M home just runs against my nature. But we could definitely use a larger home to comfortably have guests, give myself a wood shop, and also have ample storage and a privacy buffer. We like the idea of two homes, but right now they're so close to another that we don't get up to the mountain retreat as much. In ten years, I would like to see ourselves having a larger home in the neighborhood where we live now, with a second home somewhere very different, perhaps near the ocean. I just don't want to have too much tied up in our primary residence, because of the costs, and the fact that I'm investment oriented, liking the ability to keep growing the the income we get off of several good investment accounts. Need to find that balance somewhere.

[Bamaman]

We downsized to a medium size house in town, and are fortunate to have a lake house with a 6 mile sunset/water view. We live in a very inexpensive housing market where $1 million houses are not required. And our property taxes are ridiculously low.


My biggest problem is keeping up maintenance and insurance on two houses. The only help we ever get may HVAC--with me doing all other maintenance. The money I save by doing everything myself allows us to travel extensively.


If someone's wanting a second home of the magnitude you're talking about, you might consider getting the second home in a more inexpensive retail market.

[Options]

Quote:

Originally Posted by rb35 ...Now I guess the question is why not spend on some luxuries if you can comfortably afford it? What good will a larger bank account do?

Unless you've lost interest in spending on "luxuries", which I certainly have. Buying a luxury car last month and dropping way too much this month on remodeling (needed though it may be) have taught me I will not be doing either of these things again. The level of satisfaction is just not there anymore when buying "things", stuff, or luxury anything.

Nowadays, I'm much more interested in experience, and not the manufactured kind that has always been available to me. This newfound mentality probably comes from living almost half my life five minutes from the third most expensive zip code in the country (with everything that goes along with that).

[Danmar]

I guess it depends on how much enjoyment you would get from this "dream" house. Also, whether you would have enough "earning" assets left to support your desired retirement.

We have several homes and when we bought the last one 3.5 years ago , I was concerned that our remaining "earning" assets would be enough. No regrets at this point. Personal use real estate represents about 20% of our net worth. What percentage would it be for you?

[rb35]

Quote:

Originally Posted by Danmar I guess it depends on how much enjoyment you would get from this "dream" house. Also, whether you would have enough "earning" assets left to support your desired retirement. We have several homes and when we bought the last one 3.5 years ago , I was concerned that our remaining "earning" assets would be enough. No regrets at this point. Personal use real estate represents about 20% of our net worth. What percentage would it be for you?

It'd be 20% max. I think the remaining investment assets would support us fine. I just wouldn't have all my money working for me which is what I'm used to. But, I have to remember that the reason I've had my money working for me while we LBYM is so that we can enjoy a nicer lifestyle later.

Thanks to everyone for their thoughts / opinions!


Sent from my iPhone using Early Retirement Forum

[Delawaredave5]

The fact that you call it a "forever" home means it has a lot of attributes you really value. 15% of net worth is hardly excessive and wouldn't compromise other retirement objectives.

IMHO (which doesn't matter), it is the direct opposite direction I want to go. Older I get, the more I value smaller, simpler, more flexible, "lighter" assets and lifestyle.

My friend stayed in their "starter" home, never did "McMansion" and now has come full circle - this home is more than comfortable for two people.

Two times a year they rent a 3 month stints in different parts of the country. Then do about 4 individual weeks of "vacations". Rest of time, about 5 months, at historical home.

I think they find furnished 3 month short term rentals in "nice but not resort" locations for $2k/month or less. His historical house is worth about $300k - so has a annual cost of $21k (using your 7% metric). Add the short term rentals and he's still under $30k.

This has a lot more utility and desire to me than anchoring in a "forever" home (but again, only your opinions/desires count !)

[Danmar]

Quote:

Originally Posted by Options Unless you've lost interest in spending on "luxuries", which I certainly have. Buying a luxury car last month and dropping way too much this month on remodeling (needed though it may be) have taught me I will not be doing either of these things again. The level of satisfaction is just not there anymore when buying "things", stuff, or luxury anything. Nowadays, I'm much more interested in experience, and not the manufactured kind that has always been available to me. This newfound mentality probably comes from living almost half my life five minutes from the third most expensive zip code in the country (with everything that goes along with that).

So isn't the only alternative to give it away? Either during your life or after. Couldn't you also view this as a luxury? As far as I know you can only spend it or give it away?

[hesperus]

Quote:

Originally Posted by Options Unless you've lost interest in spending on "luxuries", which I certainly have. Buying a luxury car last month and dropping way too much this month on remodeling (needed though it may be) have taught me I will not be doing either of these things again. The level of satisfaction is just not there anymore when buying "things", stuff, or luxury anything. Nowadays, I'm much more interested in experience, and not the manufactured kind that has always been available to me. This newfound mentality probably comes from living almost half my life five minutes from the third most expensive zip code in the country (with everything that goes along with that).

+1
There's a lot to be said for choosing experiences over 'things'. I think that the emotional returns that we often expect in buying luxury items often aren't there or just don't last.

[ggbutcher]

Fundamentally, if the particular house you buy is in a market that will at least preserve your capital when sold and you don't need that money to be or generate income, go for it. Life's short.


Us, we bought small as a family and have shed kids to fit. Well, 'cept for being a long-term storage unit for some of their treasures... After thinking it through, we decided we already have the house we want, until we need the one-story job with the wide doorways for the wheelchairs...

[Bestwifeever]

Quote:

Originally Posted by rb35 My wife and I are in what I hope to be our final couple of years before FIRE. We plan on moving to a different state and buying our "forever" home. This will probably cost about 700k to 1 million. I'm conflicted about a few things and would like to hear other members' thoughts. 1. An expensive home seems like such an inefficient use of resources. If I pay cash for the house, the opportunity cost of those funds is going to be about $50k / year. Add in 20k for maintenance, taxes and insurance and we're talking 70k / year to live in the type of home we're considering. I think this bothers me so much because I'm extremely investment oriented and virtually 100% of our net worth is currently working for us in some sort of investment. Do I just need to come to terms with the fact that we planned to splurge more during retirement and so it's time to quit being so frugal and just spend the 70k per year on our dream housing?

The few people I know who bought homes like the one you describe also made a boatload of $$ when they sold them, so I don't know if the opportunity cost would really be that high. You could consider it shifting money into another investment.

Quote:

2. We plan on traveling a lot more during retirement. I could easily see us being away from our home 3 months a year (multiple trips). I'd be worried about having an expensive home vacant so much. It also compounds my feelings expressed in point 1 as paying that much for a house and not enjoying it for 3 months a year seems like a colossal waste.

May I suggest the Bestwifeever Housesitters for the three months your luxury home will be unoccupied ?

[W2R]

Personally I found that my wants and needs in a home changed a lot once I was retired. My suggestion would be to retire, and then spend at least a year or two decompressing and relaxing before burdening yourself with the maintenance requirements of such a big home.

You may find that you enjoy spending your remaining years doing home maintenance instead of traveling or having fun in other ways; some people do, some don't. I thought I would garden in retirement, and honestly I haven't spent 10 minutes gardening. I find that it no longer appeals to me as much as it did when I was working.

[Sunset]

When my mom "retired" she moved into a 2 bedroom condo highrise from a 4 bedroom house. For her it was perfect as she literally would lock the door and was free to travel.
She travelled to many countries and places over the years, never having to worry about the lawn/garden/break-ins/repairs.

Plus her apartment was 1 level and the building had elevators, so if her mobility had decreased that would be no issue.

[Koolau]

I'm with W2R. Give your retirement a little time to sort itself out. I too suggest you find out what you like most about retirement. Is it the freedom to travel? Is it the daily activities you never had time for? Is it visiting the grand kids? Is it having a very nice home to live in? Once you get your sea legs (retirement legs?) you might find that being tied down to a big house isn't what you want (or maybe it is!)

I wouldn't worry too much about such things as "opportunity cost". Your house will likely appreciate (for what that's worth). If you have the money and decide the expensive home is what you want, go for it.

We are actually in a somewhat similar situation. Our place (just a small condo) is very expensive (for us). It might sell now for $500K. We leave it for 2 to 4 months a year and travel. We have a very modest rental we keep full time as well, so you might guess that housing is our biggest expense in aggregate (especially when you count the condo fees and travel costs of a 10,000 mile round trip each year.) Still, it is what we want and find fulfilling. We "practiced" the lifestyle for several years (using vacations to see if we really wanted to move that far away, etc.) There are certainly issues with the life style, but no regrets.

As always, YMMV.

[daylatedollarshort]

rb35 - Maybe you could rent a home that interests you for a few months or more and test out the size and location before you buy. We're going to do the same with condos and see how we like living in a smaller space / different location before we consider selling the current house.

[Danmar]

Quote:

Originally Posted by hesperus +1 There's a lot to be said for choosing experiences over 'things'. I think that the emotional returns that we often expect in buying luxury items often aren't there or just don't last.

Agree but many great experiences can be expensive as well. Also, sometimes great experiences are the result of expensive items. Eg I love driving sporty cars. You can guess the rest.

[RobLJ]

We originally had planned to "downsize" in the move from Houston to Reno to retire, but housing was more expensive, so we "upgraded" although not nearly to the extent of the OP. We decided to also sell the small cabin in CO, since we have close access to skiing, hiking, and flyfishing and was near DS and his wife in CA.
So the Reno housing turned out to be the equivalent of both the Houston house and the cabin combined; we have a mortgage that is about 80% of the cabin at 15 years with a payment that is 60% of the original cabin payment. The payment is minimal.
After looking at smaller homes, DW settled on a Reno home that was very close to the Houston house in size, but much newer and in a great location.
Our youngest in Seattle is leasing downtown but has considered buying a vacation property in Southern Washington or Oregon, so down the road, we may consider going in with him for a family retreat similar to the Colorado cabin. We'll see.
My last day is this Friday; after that, I'm early semi-retired (just turned 57); will work on some special projects and teach online. Interesting post.

[Bamaman]

Rob: Congratulations on your pending "unemployment." I'm just too busy to work.


Houston and Atlanta are two places that spoil you to inexpensive real estate, temperate climate and a high quality of life. Too bad the traffic's so bad in both places. When you have to move from those cities, you get real sticker shock in housing.


I don't know about living in Reno, but I do know I could live within sight of Lake Tahoe. We love the place.

[NW-Bound]

If and when you no longer have to work, which limits your residence to cities with employment opportunities, there are so many places you can live.

In our travel, we have seen so many nice places that we could not make up our mind. So, in the end we just stay where we are.