Considering moving from MCOL area to HCOL area for retirement

[Mountain skier]

Hello. We are considering moving from our MCOL area to a HCOL area for retirement. To do this we would probably have to give up the idea of living in a single family home and move into a condo/or townhome. This would still cost us an extra $250,000. If we did this our numbers would be:

$750,000 (AA 50/50, $400k of this is non-ira) after paying cash for residence
age: both 59
pensions = $27,550/yr
SS at 67 for both= $51,000/yr
estimated expenses (including HC and taxes) $60k/yr
no debts
firecalc says 100% success rate
retiring in May 2020

If we stay where we are our stash would remain $1M

What do you folks think of this plan in terms of success or practicality. Is it too risky moving to the HCOL area and reducing our stash to $750k?

Thank you for helping us

 

[braumeister]

Have you run it without one of the pensions and one of the SS checks (adjusting your expenses down appropriately?)

 

[Mountain skier]

Have not run Firecalc with only 1 SS. Our pensions are 100% joint survivor

 

[GreenEggs]

Moving to a condo and losing 25% of your nest egg doesn't sound appealing to me. What are the compelling benefits of moving to the HCOL city?

Will you be able to get by without a car? Are there other savings that the HCOL city would offer? There are obviously benefits. Hopefully, some are financial. What are the reasons that you are considering moving there? Everything a HCOL city offers costs more, theater, restaurants, etc.

It sound like you would feel a lot more financially secure in an MCOL city than in an HCOL city. I guess the answer depends on how tight you are comfortable living and if you feel comfortable with the numbers and the level of uncertainty that would put you in.

IMO $250K is 25% of $1M. That's a large percentage to be in question.

Personally, I'd look the opposite direction, towards a LOCL city or stay put.

 

[njhowie]

With your pension + SS being 30% greater than your annual expenses, of course Firecalc is going to show 100% success...and would even if you had a lot less saved.

Personally, I think moving to a HCOL area is a mistake for any retiree...unless they are swimming in so much savings they don't know what to do with it all. Having to pay $250,000 to downsize doesn't sit well with me. Is your current area terrible? Might you be able to visit the HCOL area for a few weeks once or twice a year for an extended trip and get the desired effect? Having an extra $250,000 will generate an additional $10,000 a year at 4% which can provide for some very nice vacations/travel ... every year.

 

[Midpack]

We moved to an area with a COL about 10% higher (mostly real estate, prop taxes, income taxes), and that took me a while to justify in my pea brain. But we would not move from a SFH to a condo, if we can’t afford a SFH home, that’s a show stopper for us. There’s no way I’d move to a documented HCOL area (e.g. San Francisco, Boston, NYC) - but comes down to the COL of the new city and what WR you’re comfortable with. A decision that’s unique for each of no “right answer.” And I’m happy to visit HCOL areas, not live there.

 

[Mountain skier]

Moving to a condo and losing 25% of your nest egg doesn't sound appealing to me. What are the compelling benefits of moving to the HCOL city?

Will you be able to get by without a car? Are there other savings that the HCOL city would offer? There are obviously benefits. Hopefully, some are financial. What are the reasons that you are considering moving there? Everything a HCOL city offers costs more, theater, restaurants, etc.

It sound like you would feel a lot more financially secure in an MCOL city than in an HCOL city. I guess the answer depends on how tight you are comfortable living and if you feel comfortable with the numbers and the level of uncertainty that would put you in.

IMO $250K is 25% of $1M. That's a large percentage to be in question.

Personally, I'd look the opposite direction, towards a LOCL city or stay put.

The HCOL area we'd like to move to is a beach town in So Cal. We are outdoors people and would greatly enjoy the weather, beach, and outdoor activities. Seems like that would be a lot of fun for an active retirement.
But yes, the costs are a bit unnerving.
Hence I am seeking advice from the learned folks of this site.

 

[njhowie]

Here are some you might check into that are more affordable...
https://www.55places.com/blog/affordable-places-to-retire-near-the-beach

Hunt around with google, I'm sure there are more. We live in a big country.

 

[GreenEggs]

Paying in full ties up a large portion of your investable capital that would most likely be earning a higher rate invested.

Renting instead of buying could be a better option, especially for the short term. From a personal viewpoint, it buys you the freedom to shop longer before buying. If you decide to rent long term it still gives you the freedom to easily move whenever the mood strikes. From a financial viewpoint, you'll be able to keep all of your capital invested and earning money. There aren't the substantial costs that are involved in buying a place, and again later when you sell it.

If you choose to buy a place getting a low-interest rate mortgage would allow you to keep most of your capital invested, most likely earning a much better rate than the mortgage rate.

Nobody knows the future, but the long-term market average return is about 7-8% and mortgage rates are about 3% now. So, that's about $30-40K per year difference.

Of course, there are many more affordable beach areas besides SoCal. Lakes are a nice option too, without the worry of rising tides & hurricanes.

 

[daylatedollarshort]

The HCOL area we'd like to move to is a beach town in So Cal. We are outdoors people and would greatly enjoy the weather, beach, and outdoor activities. Seems like that would be a lot of fun for an active retirement.
But yes, the costs are a bit unnerving.
Hence I am seeking advice from the learned folks of this site.

I've only seen this place from the outside and online pictures and videos, but in So Cal Laguna Woods seems like a good price point compared to the surrounding areas like Laguna Beach. Because it is over 55 only and they have financial requirements not all retirees can meet, I think it keeps the housing prices there pretty low compared to the non 55+ communities.

We live in the Bay Area, which is also expensive for housing. Some of the retirees we know who moved here post retirement made it more affordable by buying small condos and out in the suburbs, not SF proper. They are out and about a lot with outdoor activities and all sorts of things to do, They don't seem to miss having yards to take care of or snow to shovel. Sometimes I envy their free time and simpler lifestyle, though so far we haven't downsized yet ourselves.

 

[FIREd]

I moved from a MCOL area to a HCOL area last year. Real estate prices accounted for the largest difference in cost of living between the two locations (RE prices here are about 5x what they were in the MCOL area), so I knew that I would have to compromise on space to avoid dipping too much into my savings. I ended up trading a 4-bedroom house for a 1-bedroom condo and still had to pull about $50K out of my portfolio to remain mortgage-free. I felt OK with the move as the appreciation potential for the condo was far higher than for the house and recurring housing costs (like maintenance, utilities, insurance, and property taxes) were significantly reduced, hence putting less strain on my remaining portfolio.

I should note however that I lived most of my life in condos and that I hated maintaining my SFH so the move was actually a relief. YMMV.

 

[DrRoy]

We really like our house (have extensively remodeled) and area so killed plans to relocate. Now we just travel to places we want to visit.

 

[ckelly78z]

Could you keep your home base in the MCOL area and rent a beach side villa for a few weeks every year in a HCOL area. I think you would be about even on expenses (spend $10,000 every year for the next 25 years) with the $250K hit to re-locate, but spread out over so many years, wouldn't even notice it.

 

[gerntz]

If you're OK with your nest egg dropping to near $500K by the time you take SS, don't see the problem. Do what pleases you.

You don't say if pensions are inflation-protected or not. If not, gets tighter.

 

[Aiming_4_55]

If you will truly use and enjoy the new surroundings, and your new numbers work for you, I say go for it.

Do your research and visit the area for a few weeks before committing. I've lived in the Los Angeles area for about 7 years now (from Midwest), about 10 minute drive to the ocean. Condo living after 25 years of SFH and enjoying the freedom from some chores via paying HOA. As a family, we had beach picnics 3 - 4 times a week when we arrived since we had younger kids, now 2 - 3 times a month. Besides your residence, many things are about 10% more expensive, but it's only money and deals can be found. I'm glad we have/had the experience. Be careful when selecting the area, traffic can be tough and limit your desire to drive even 10 miles away, so pinpoint your new area.

We are seriously considering a relocation in 1 - 2 years, it was never our goal to stay beyond 5 - 7 years, we came for the experience. We are attracted to move closer to family as no family ties in the LA area.

Good luck.

 

[Mountain skier]

Could you keep your home base in the MCOL area and rent a beach side villa for a few weeks every year in a HCOL area. I think you would be about even on expenses (spend $10,000 every year for the next 25 years) with the $250K hit to re-locate, but spread out over so many years, wouldn't even notice it.

We have considered an extended stay there each summer, perhaps for two months. The yearly costs of doing that would equal the
$60K/yr living expenses moving there full time. If we moved there we would not travel much to keep our budget around $60k/yr.

By the way our pensions are non-cola 100% joint survivor.

Renting is an option, but doesn't that start getting more costly? Haven't run the numbers yet on that idea.

 

[Music Lover]

We have considered an extended stay there each summer, perhaps for two months. The yearly costs of doing that would equal the
$60K/yr living expenses moving there full time.

A 2 month stay costs $30k a month?

 

[HI Bill]

I've lived in HCOL ares for my entire life. I vote for the move, with your projected expenses, SS, and pension, along with your FIRE success rate of 100%. While you'd have a larger nest egg if you don't move, you wouldn't enjoy your LCOL existence as much, I'm inferring!

 

[Arizona1]

Get to move to your dream beach and downsize at the same time.
I would definitely do it.

 

[Mdlerth]

Don't let anyone steal your dream

Here is what I am doing. Time will tell if it is smart.

I always wanted to live on a waterfront, where I could walk out my back door and hop in the water, or into a boat, or toss out a fishing line, or just sit in a chair and watch the ripples. So two years ago, DW and I bought our retirement house on the lake. It's in a calm cove about a quarter mile long off the main channel, so you can swim there without fear of being run over by jet skis. It's a vacation house right now, but will become our permanent house once DW clocks out.

I retired (laid off) in December, and DW will exit some time later this year, so we don't yet know how well it will work out. One the one hand, the lake is incredibly quiet and peaceful between Labor Day and Memorial Day. OTOH, there is little in the way of the "urban" conveniences or attractions we've enjoyed during our career years.

One thing to consider about gearing your life around an outdoor lifestyle is that there will come a day when your body isn't up to it anymore. Dunno when that will happen: could be age 70, might not be till age 90. (At my regular house, one of my neighbors is pushing 80 and still scuba dives with sharks, but she's way tougher than I am or ever will be.) If ten or fifteen years from now I don't enjoy swimming and boating any more, or if DW's MS accelerates and she needs to be closer to specialty medical care, I accept that we'll sell out and move back to town. If we take a financial hit, then so be it. But at least I will have given my dream a shot.

 

[Mountain skier]

Here is what I am doing. Time will tell if it is smart.

I always wanted to live on a waterfront, where I could walk out my back door and hop in the water, or into a boat, or toss out a fishing line, or just sit in a chair and watch the ripples. So two years ago, DW and I bought our retirement house on the lake. It's in a calm cove about a quarter mile long off the main channel, so you can swim there without fear of being run over by jet skis. It's a vacation house right now, but will become our permanent house once DW clocks out.

I retired (laid off) in December, and DW will exit some time later this year, so we don't yet know how well it will work out. One the one hand, the lake is incredibly quiet and peaceful between Labor Day and Memorial Day. OTOH, there is little in the way of the "urban" conveniences or attractions we've enjoyed during our career years.

One thing to consider about gearing your life around an outdoor lifestyle is that there will come a day when your body isn't up to it anymore. Dunno when that will happen: could be age 70, might not be till age 90. (At my regular house, one of my neighbors is pushing 80 and still scuba dives with sharks, but she's way tougher than I am or ever will be.) If ten or fifteen years from now I don't enjoy swimming and boating any more, or if DW's MS accelerates and she needs to be closer to specialty medical care, I accept that we'll sell out and move back to town. If we take a financial hit, then so be it. But at least I will have given my dream a shot.

Thank you for sharing this. It is inspirational. "Giving the dream a shot" is a very motivating concept.

I hope more folks share there stories or plans about "Giving their dream a shot"

 

[njhowie]

Here's another with options that was posted late yesterday:
https://www.marketwatch.com/story/m...d-the-winter-where-should-i-retire-2020-01-27

 

[ncbill]

Here is what I am doing. Time will tell if it is smart.

I always wanted to live on a waterfront, where I could walk out my back door and hop in the water, or into a boat, or toss out a fishing line, or just sit in a chair and watch the ripples. So two years ago, DW and I bought our retirement house on the lake. It's in a calm cove about a quarter mile long off the main channel, so you can swim there without fear of being run over by jet skis. It's a vacation house right now, but will become our permanent house once DW clocks out.

I retired (laid off) in December, and DW will exit some time later this year, so we don't yet know how well it will work out. One the one hand, the lake is incredibly quiet and peaceful between Labor Day and Memorial Day. OTOH, there is little in the way of the "urban" conveniences or attractions we've enjoyed during our career years.

One thing to consider about gearing your life around an outdoor lifestyle is that there will come a day when your body isn't up to it anymore. Dunno when that will happen: could be age 70, might not be till age 90. (At my regular house, one of my neighbors is pushing 80 and still scuba dives with sharks, but she's way tougher than I am or ever will be.) If ten or fifteen years from now I don't enjoy swimming and boating any more, or if DW's MS accelerates and she needs to be closer to specialty medical care, I accept that we'll sell out and move back to town. If we take a financial hit, then so be it. But at least I will have given my dream a shot.

Just make sure that dream retirement home (or condo for the OP) is or can be modified for one-level living for when one can't handle stairs anymore (for my dad that was in his late 70s)

 

[Mdlerth]

When the view isn't worth the climb

Just make sure that dream retirement home (or condo for the OP) is or can be modified for one-level living for when one can't handle stairs anymore (for my dad that was in his late 70s)

Roger this. It was a must-have criterion when we were shopping for our lake house. It should buy us some extra years of living there, although one never knows how many.

My own parents' dream house wasn't on water, it was on a mountaintop surrounded by hundreds of acres of forest. They designed and built the house for single-floor living. Mom and Dad got about 15 years there before the woods and hills got to be more difficult than enjoyable. When your driveway is a mile long, finding a fallen tree across it eventually loses its charm.

 

[ckelly78z]

We will be keeping our 10 acre farm (paid off years ago) that we have been in for 25 years, and hope to be in for another 25 years. We are currently 55, and still have another 5-7 years of w#rk ahead of us. We plan on taking the camper south for the months of January/February with no plans of buying a dream house anywhere. The good thing about this plan is being able to move it when desired, and easily sell it/replace it.