I'm Still Nervous ...

[2017wasthe year]

I recently introduced myself in the Hi I am ... forum. I recently pulled the plug on full-time employment and have a part-time remote arrangement that will last until Sept. at the latest. Once that ends, my healthcare will be covered through COBRA (the company's rate wasn't as bad as i thought it would be) because I won't possibly be eligible for any subsidy until 2020 due to some deferred comp hitting in 2019.

My investable assets are $3 million (age 57 1/2, AA 60/35/5). My rental expenses are currently ultra low but I am moving to another state to be near my parents and I will be building a 1,800 square foot house on a lot I own. The ballpark price for the build is $250k (not including landscaping (~ $3-4k), furniture, window coverings. The builder is currently working on a detailed price. The lot was $42k.

After living so cheaply for so many years and saving the majority of my income, it is eating away at me to spend this much on a house. I plan on getting a mortgage and eventually paying it off. I just can't take the money out of my bond fund reserves. It's too painful to do, although I will put the 20% down to avoid any PMI.

Part of me thinks I should buy a cheap house (~$130-150k total) and be happy in it. Another part of me says I can afford this and I should build it and enjoy it because I can afford it.

What I know is that my stomach churns at the thought of the outlay. Totaling up the mortgage and my other expenses, I get a padded total of $66k for my annual living expenses. Am I crazy to hesitate?

 

[njhowie]

Yes, you are crazy to hesitate.

We should all be so unlucky to have such problems.

 

[braumeister]

What do FIRECalc and other calculators say your max safe spending rate might be?

 

[2017wasthe year]

Around $110,000...

 

[braumeister]

And you wonder if you're crazy to wait to spend 66?

Let it go, man.

 

[2017wasthe year]

Yes, because the future of healthcare really scares me. I have 7 1/2 years until Medicare. I know I am being ultra conservative and I need to loosen up but after years of living lean it is really hard for me.. especially now that there is no regular paycheck coming in. I don't want to die with money but i do want this to last if I live into my 90s...

 

[njhowie]

You can have the entire $3 million in no-risk investments, like CDs and it will throw off $75k per year. By the sounds of it, that's more than you need to live on. So you can live solely on the interest thrown off and not have to touch the principal.

You are worrying for no reason. Healthcare is not going to be an issue for you either. Just buy the cheapest Bronze plan - your maximum annual out of pocket will be capped at around $10k-$12k worst case, and unless you're in poor health or require a major operation, chances are you won't come close to that amount.

 

[street]

I see no problem for you to be worried about your money lasting. You are so in sync with your spending etc. that you will be fine.

I understand the part about having a hard time spending the money you worked so hard for now you have to spend it. LOL I understand that.

In a few years down the road you will have more money then when you retired. Of course you need good investments but even very average return you will have more.

Have fun would be my 2 cents.

 

[mystang52]

Without discussing the specifics of your financial question, I suggest you keep one thing in mind. Money is not the be-all/end-all. It is a means to an end - i.e., to support your chosen lifestyle. If the money you have fulfills that purpose, then you should look to enjoy the fruits of your many years of wise savings.

 

[copyright1997reloaded]

Maybe this will help you relax a bit. Get a quote on an ACA plan. Assume it goes up by 25% per year. Determine what you need to set-aside (worse case) to cover your medical premiums until medicare. If your fixed covers it, go live your life. If it doesn't, consider reallocating a bit to ensure it is covered an go live your life.

Each year, the number of years until covered by medicare goes down, so the amount you will have to have set aside will be reduced.

In the scope of things, the $66K is meaningless. Ask yourself this question. Would your life be any different if instead of $3,000,000 you had $2,999,934?

Like you, I moved away from home for a career. Along the way, I wanted to come back home to be closer to my parents, but various things got in the way. Now my parents are both gone and while I have a good life and a child I do regret not being to spend more time with them as an adult. Move back and be with your parents before it is too late. [

 

[joeea]

Part of me thinks I should buy a cheap house (~$130-150k total) and be happy in it. Another part of me says I can afford this and I should build it and enjoy it because I can afford it.

What I know is that my stomach churns at the thought of the outlay. Totaling up the mortgage and my other expenses, I get a padded total of $66k. Am I crazy to hesitate?

You haven't indicated your age and your other goals, so it's hard to say if your portfolio is big enough or not (although I'm guessing it's fine).

But lots of folks do things for reasons that aren't strictly financial but help them sleep at night or avoid stomach churn.

If purchasing a less expensive home than you can afford makes you feel better, just do it. To hell with what anyone else thinks - it's your life, you can live it the way you prefer.

 

[Ready]

A $300K house for someone with $3M saved and only $66K in expenses sounds very reasonable to me. Are you confident the house will be worth at least $300K when you build it, so that if you need to sell it you won't lose money?

 

[redduck]

Part of me thinks I should buy a cheap house (~$130-150k total) and be happy in it. Another part of me says I can afford this and I should build it and enjoy it because I can afford it.

What I know is that my stomach churns at the thought of the outlay. Totaling up the mortgage and my other expenses, I get a padded total of $66k. Am I crazy to hesitate?

About the house. It's going to cost more than the number your builder is going to come up with. You make it sound like your only two options are to build a house or to buy a cheap house. Do you think you can afford to buy a not-cheap house and be happy and not be nervous?

 

[2017wasthe year]

Yes, Redduck, that is the question. Can I spend that much and be happy? And I'm sure you are correct... It will end up costing more than the price I am given with a few add ons ...

 

[MRG]

Yes, Redduck, that is the question. Can I spend that much and be happy? And I'm sure you are correct... It will end up costing more than the price I am given with a few add ons ...

Yes, you appear fine. Run the numbers another few times. If not now, when?

Enjoy your life......

 

[gayl]

You haven't indicated your age

1st sentence 2nd paragraph:

My investable assets are $3 million (age 57 1/2, AA 60/35/5).

OP, relax, you can afford it

 

[AS2019]

Just my experience......I'm 48. I make enough money that I can afford pretty much any house I want. So I bought a really nice, really big, expensive house. And I'm currently in the process of selling it and downsizing to a regular, $125k house because I hate the monthly expenses of this big, nice house. I can afford lots of stuff, but the stuff doesn't make me any happier. So I'm getting rid of the stuff.

Good luck with your decision.

 

[TNBigfoot]

The question I ask is will your quality of life be significantly different in the $250k house or the $130k house. If the answer is no and it gives you peace of mind.....why do it?

 

[Looking4Ward]

I'm the same age as you but with only half as much. I'm considering spending upwards of $400K on a home, paid in cash because I can't get a mortgage.

And I'm confident I'll be fine on the $1.1M remaining.

You'll be fine as well.

 

[redduck]

Just my experience......I'm 48. I make enough money that I can afford pretty much any house I want. So I bought a really nice, really big, expensive house. And I'm currently in the process of selling it and downsizing to a regular, $125k house because I hate the monthly expenses of this big, nice house. I can afford lots of stuff, but the stuff doesn't make me any happier. So I'm getting rid of the stuff.

Good luck with your decision.

OK, but I don't think the OP is talking about buying a really nice, really big expensive house. I was suggesting that the OP consider not buying a "cheap" house--just a "nice" house. Doesn't necessarily mean that the monthly expenses are going to be huge. But, it might mean that his surroundings will be more pleasant. I've lived in crummy places and I've lived in nice places. I prefer the nice places. Makes me happy.

What kind of stuff are you getting rid of?

 

[RobbieB]

I think the OP should live in cheap week to week residential hotels filled with cockroaches to save even more dough that he doesn't want to spend.

Amazing.

Get that custom house on the lot you want because you want it. You're gonna live there your whole retirement eh?

 

[38Chevy454]

I have less savings than you, and spent approximately double on new house. I sleep well and am happy in new house that is near family.

You are fine, so get the nice house near your parents. Enjoy the time of retirement, get used to letting your money work for you.

 

[mokan]

Cheap isn't always inexpensive

There have been a lot of good comments here. To make it easy for people to comment, you framed your question in black & white: "cheap house" or "build". Obviously you have many more options than that.

One thing to think about is the long term cost of owning a house. I've moved a number of times & I've had houses with low maintenance and others that were serious money pits. Building a house can be stressful. It requires a builder you trust and a fair bit of time to be comfortable with the results. However, if you build custom then you control the quality. Better insulation, better HVAC, etc... In the long run, that could be much cheaper to live in than an older house that could have hidden problems.

That said, it is usually more expensive to build than buy. You'll get less house for your money if you build, generally. It ends up being a tradeoff that only you can make since it depends on the local housing market.

I agree with the others - the difference between your "cheap" and "build" options are very reasonable given your savings. It doesn't make a material dent in your overall portfolio and if it makes you happy then go with the house you want.

 

[AS2019]

OK, but I don't think the OP is talking about buying a really nice, really big expensive house. I was suggesting that the OP consider not buying a "cheap" house--just a "nice" house. Doesn't necessarily mean that the monthly expenses are going to be huge. But, it might mean that his surroundings will be more pleasant. I've lived in crummy places and I've lived in nice places. I prefer the nice places. Makes me happy.

What kind of stuff are you getting rid of?

Fair enough! You're right - nice doesn't mean big.

What am I getting rid of? This is a little embarrassing to admit. As I'm getting ready to move to a smaller house, I'm also taking the time to organize everything. I'm going through and putting all of the tools in one place, all of the coffee cups in one place, all of the towels in one place etc. I found that I have 3 miter boxes, 22 coffee cups, 18 wine glasses (I don't even drink wine), 14 bottles of Visine eye drops, 2 sets of hair clippers, and the list goes on and on. I had no idea that I had so many of everything. The current house has 5 sofas. The new house has room for 1 sofa. The current house has 7 end tables. The new house has room for 1.

I have closets full of old clothes that I haven't worn in several years. I have 7 space heaters. 2 crock pots.

It's just ridiculous. Most of my life I've lived like everyone else - from paycheck to paycheck. So the past 10 years has been rather nice in the fact that I don't have to do that. If I want something, I get it. But after some serious reflection, I realize that I my life was just as happy when I lived paycheck to paycheck, and that all this stuff is just stuff. It isn't liberating at all. Quite the opposite. I'm a slave to my stuff.

 

[Midpack]

I agree with the others - the difference between your "cheap" and "build" options are very reasonable given your savings. It doesn't make a material dent in your overall portfolio and if it makes you happy then go with the house you want.

+1. You’ve been conservative with your spending so far, no reason to think you’ll change in retirement. You’re not talking about an extravagant house for your net worth, and since you’re building you should get a house you’re very happy with. Normal to worry, but you’ve planned well. You’re safety factor is prudent, $66K spending vs $110K, if that doesn’t work a lot of us are going to be scrambling - you can’t plan for Armageddon.