How much should I spend on retirement house

[jgman]

How much to spend on retirement house

Retired last year and just sold my single family house and am looking to downsize into my retirement house. My question is how much is too much for my retirement house. I am 58, divorced, no kids and no debt. I have about $1.6 million in savings and retirement accounts. I also receive a 5k per month Federal government pension. Ideally I would like to pay all cash for the house but wonder if its wise to sink 700k in a house. Any thoughts or advice?
Thanks

 

[Ronstar]

I don't think I would take almost half of my investable assets and put them into a retirement house, even with a $5k per month govt pension. I would rent. And renting gives you more flexibility if you decide to move.

 

[pb4uski]

No right answer and it depends on how much you are into houses... is it simply a place to live or is it your pride and joy?

We have more $$$$ and I would never think of buying a $700k home, though I'll concede that our two homes are probably worth more than $700k combined.

Perhaps a good guideline for a maximum would be if you financed it that the PITI - principal, interest, taxes and insurance (and HOA fees where applicable)- is less than 30% of your income or spending budget and could be applied whether you finance or pay cash.

Using that 30% guideline, a 4% WR and your pension I'm guessing your maximum house would be $400k or so. That would leave you with $1.2m at 4% is $48k and $60k pension is $108k of income and 30% would be $2,700/mo PITI. A $400k house with 20% down and a 30-year mortgage at 6.7%, 2.5% of home value for property taxes and $1,000 annually for insurance would be about that.

But if it were me I probably wouldn't go that much.

 

[DrRoy]

I would try for more like $300K.

 

[Aerides]

It all depends on where you want to live, what kind of home you'd be happy in, and your expenses.

Our home was never a $700k house until these past two years. I would not be able to find a single family home in my county or nearby for $300k today that I'd feel comfortable to live in. Maybe a condo, or a very small townhouse.

 

[jgman]

I am looking in the Northern Virginia area in order to be close to family and friends. Unfortunately houses here are still pricey. I am going to look a little further out in order to afford something nicer. May have to consider condos as well. I am hoping that prices come down next year as many are predicting. Renting is an option but want to pay cash to avoid having a mortgage.

 

[pb4uski]

If you plan to do much traveling in retirement then consider a condo. We have a single family home and a condo and I prefer the condo. Turn off the water, lock it and leave. As long as you are prepared for condo living but it is really like renting an apartment but with more freedom to do what you want within reason inside.

 

[jgman]

If you plan to do much traveling in retirement then consider a condo. We have a single family home and a condo and I prefer the condo. Turn off the water, lock it and leave. As long as you are prepared for condo living but it is really like renting an apartment but with more freedom to do what you want within reason inside.

Not a big traveler but I have a dog so a condo isn't ideal. Maybe a smaller townhome with a small yard.

 

[Bigdawg]

I am looking in the Northern Virginia area in order to be close to family and friends. Unfortunately houses here are still pricey. I am going to look a little further out in order to afford something nicer. May have to consider condos as well. I am hoping that prices come down next year as many are predicting. Renting is an option but want to pay cash to avoid having a mortgage.

When you say "Northern Virginia area" are you thinking the whole DelMarVa? I live in Southern MD about 70 miles from downtown DC. Many decent houses in our area for the 3-4 hundred thousand range. I can get to Dulles (no or very light traffic) in 1:45. Maybe go out to southern PA and get a cheaper place. Also over the bay bridge to the eastern shore of Delaware. I would be honest with myself about being too close to family. Most/many people say that and in reality they rarely see of spend much time with family. We have DD and SIL about 25 minutes away and DS and DIL in San Diego. I vote for the rent option and then fully evaluate your family time, budget, etc...

Good luck and congrat's on retirement.

 

[DawgMan]

Retired last year and just sold my single family house and am looking to downsize into my retirement house. My question is how much is too much for my retirement house. I am 58, divorced, no kids and no debt. I have about $1.6 million in savings and retirement accounts. I also receive a 5k per month Federal government pension. Ideally I would like to pay all cash for the house but wonder if its wise to sink 700k in a house. Any thoughts or advice?
Thanks

As others have said, a personal decision relative to how you view/use it. Some may look at their home as a "shelter" to launch from a do life. Others may be more nesters/"home-bodies" and/or be integrated into their neighborhood activities/relationships (i.e. think the Villages).

In our case, we went through the downsize exercise, but in the end made the decision to keep the "big house". With 4 kids relatively close and a growing count of Gkids (about to have 5), the basement and pool are getting new life!

That said, you want to be careful not to sink to many $$ into your home if it starts to subtract from your desired retirement spend.

Good luck!

 

[jgman]

When you say "Northern Virginia area" are you thinking the whole DelMarVa? I live in Southern MD about 70 miles from downtown DC. Many decent houses in our area for the 3-4 hundred thousand range. I can get to Dulles (no or very light traffic) in 1:45. Maybe go out to southern PA and get a cheaper place. Also over the bay bridge to the eastern shore of Delaware. I would be honest with myself about being too close to family. Most/many people say that and in reality they rarely see of spend much time with family. We have DD and SIL about 25 minutes away and DS and DIL in San Diego. I vote for the rent option and then fully evaluate your family time, budget, etc...

Good luck and congrat's on retirement.

Im referring to London County/Leesburg area. I looked down at the Delaware beach area but decided against it because of traffic issues and lack of medical facilities. I have a heart issue that requires monitoring. Probably should have worked a few extra years but couldn't take it anymore (terrible boss). Good thing is I am staying with my elderly father rent free so I have some time to look for the right deal.

 

[jgman]

As others have said, a personal decision relative to how you view/use it. Some may look at their home as a "shelter" to launch from a do life. Others may be more nesters/"home-bodies" and/or be integrated into their neighborhood activities/relationships (i.e. think the Villages).

In our case, we went through the downsize exercise, but in the end made the decision to keep the "big house". With 4 kids relatively close and a growing count of Gkids (about to have 5), the basement and pool are getting new life!

That said, you want to be careful not to sink to many $$ into your home if it starts to subtract from your desired retirement spend.

Good luck!

Thanks for your perspective. I am definitely a homebody and just enjoy working out and going on long bike rides. That's why I am looking to stay near the nice bike trail here in Northern Virginia.

 

[Andre1969]

Whether to pay cash or have a mortgage is a personal decision, but if it were me, I wouldn't be me paying all cash for that $700K house. I'd put a fairly large down payment on it, take out a mortgage for the rest, and then if/when rates finally come down, refinance.

But, even if you did pay cash for the whole thing, you'd still have about $900K left over, plus your $5k/mo pension. That doesn't sound like a bad setup to me.

 

[jgman]

Whether to pay cash or have a mortgage is a personal decision, but if it were me, I wouldn't be me paying all cash for that $700K house. I'd put a fairly large down payment on it, take out a mortgage for the rest, and then if/when rates finally come down, refinance.

But, even if you did pay cash for the whole thing, you'd still have about $900K left over, plus your $5k/mo pension. That doesn't sound like a bad setup to me.

I'm going to try to get something around 500k or lower. Prices are coming down so I thinks it's doable as I am fine with a smallish townhouse/house and a small yard.

 

[copyright1997reloaded]

Im referring to London County/Leesburg area. I looked down at the Delaware beach area but decided against it because of traffic issues and lack of medical facilities. I have a heart issue that requires monitoring. Probably should have worked a few extra years but couldn't take it anymore (terrible boss). Good thing is I am staying with my elderly father rent free so I have some time to look for the right deal.

And how is that going (living with your father)? I'm not trying to pry, but perhaps that setup benefits both of you, and gives you more time together?

While I have different #'s, I'm also struggling with the same question as you, i.e. how much house to buy when I finally retire (again). I could certainly stay here (upstate NY) in a paid off house, but want to move (either closer to family or to a warmer location). I find myself looking at way-t0o-wide a range of house prices, types, closeness to city, etc. I could perhaps "afford" a house 2-3x the cost (value) of my current place, but to what end?

 

[jgman]

And how is that going (living with your father)? I'm not trying to pry, but perhaps that setup benefits both of you, and gives you more time together?

While I have different #'s, I'm also struggling with the same question as you, i.e. how much house to buy when I finally retire (again). I could certainly stay here (upstate NY) in a paid off house, but want to move (either closer to family or to a warmer location). I find myself looking at way-t0o-wide a range of house prices, types, closeness to city, etc. I could perhaps "afford" a house 2-3x the cost (value) of my current place, but to what end?

Been with him a week and its fine, but he has no yard, so it a bit of a challenge with the dog.

While a newer fancy big house is nice, It's just me, so I could go with something smaller and more affordable. After enjoying the retirement life for a year I definitely dont want to have to go back to work.

 

[ERD50]

No way to answer, not enough info.

For example, if your $60K pension covers all expenses (plus SS in the future?), then why not?

Run it in FIRECalc, with a good estimate of future expenses (including taxes). No one here can tell you.

-ERD50

 

[Delawaredave5]

No right answer and it depends on how much you are into houses... is it simply a place to live or is it your pride and joy?

Good point. I view house as place to sleep and get ready for next trip.

However MANY people are "house worshipers" spending majority of their waking hours beautifying.

So if you're a "house puppy" and you live in NOVA - maybe $700k, half your net worth, is worth it to you.

 

[W2R]

Retired last year and just sold my single family house and am looking to downsize into my retirement house. My question is how much is too much for my retirement house. I am 58, divorced, no kids and no debt. I have about $1.6 million in savings and retirement accounts. I also receive a 5k per month Federal government pension. Ideally I would like to pay all cash for the house but wonder if its wise to sink 700k in a house. Any thoughts or advice?
Thanks

I see you live in Falls Church, where housing is quite expensive, IIRC. So, I'm not surprised that you are thinking of spending so much on a house.

If it was me I'd be highly motivated to spend considerably less on my house, even if it meant moving someplace cheaper. I'd shoot for something about half that price, and pay all cash for it.

I'm going to try to get something around 500k or lower. Prices are coming down so I thinks it's doable as I am fine with a smallish townhouse/house and a small yard.

Now 500K, that's more reasonable! And often, the smaller the house and yard, the less maintenance required.

 

[38Chevy454]

I'll be the oddball suggestion, move south to nicer weather and then your relatives can come visit you, or you go visit them if you want. South will give you year-round better weather for being outside for long bike rides or walking your dog. However, I would probably wait until you are sure that your father doesn't need you closer. While staying at father's place isn't ideal, it is great for flexibility now while you decide what to do.

I couldn't stand being around the DC area myself, which may alter my feelings on staying there. Some work trips were enough for me. I declined a DC offsite assignment for work because I did not want to move there, even for a 2-3 year term with company paid housing benefits. So take my advice as what it is, my opinion.

 

[pacergal]

What is your standard monthly budget and Is is covered by your pension?
Does the 1.6 million include the money from your house sale?
Cash is probably wiser with the mortgage rate where it is, but you could consider an ARM and refinance when rates go lower.

Run firecalc and see how you fare.
Personally, spending almost half of my retirement savings to pay 700k for a house would make me nervous.
I would look for something less expensive, if I could.

Best wishes in your search, enjoy your time with your elderly Dad.

 

[pb4uski]

Not a big traveler but I have a dog so a condo isn't ideal. Maybe a smaller townhome with a small yard.

In my condo association there are lots of dog owners of both large and small dogs and they are constantly walking them around the neighborhood. In fact, the maintenance guy puts out a dish of water by the clubhouse for the dogs to drink and keeps a stash of dog treats in his office and in his golf cart.

 

[Teacher Terry]

Our condos have lots of dogs. We have a potty area with poop bags. Since my 2 dogs are only 5 and 6lbs they are pad trained. I love condo living. I would spend up to 500k and pay cash.

 

[jazz4cash]

I know the area. We are halfway between downtown DC and downtown B’more. There are some good values in less popular, less developed areas throughout the area and the far reaches. Charles Town and Harper’s Ferry are more convenient than DE and PA.

Downsizing around here usually means giving up all your equity and trading into a Townhouse or similar, 55+, etc. It’s like the developer’s have nailed the profile for many retirees looking to “downsize”. Smaller home, fewer chores, same money. We decided if we downsize we won’t dip into retirement savings so it depends on what we clear on sale of current home. Otherwise I’d try to go with a max of 30% of income w/ 20% down which I think is a traditional guideline. .

 

[HI Bill]

What percentage of your savings and retirement accounts can be withdrawn tax-free, or close to it? In the year before my ER, we decided to buy a $1M house with 50% down, before selling our condo (real estate market was very tight, and we didn't want to lose out on the house, or the interest rate). We put down the most we could without incurring a huge tax bill; we used the $ from the condo sale to later refill the cash bucket. Given today's higher interest rates, I'd tend to want to put down as large of a percentage as possible. This reminds me of the 'Should I pay off the mortgage?' threads! Comes down to priorities, spending, and desired lifestyle, as well as how important a home is to you versus other priorities (travel, boat, etc.).