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More Expensive Home Purchase After FIRE
Old 02-22-2020, 08:32 PM   #1
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More Expensive Home Purchase After FIRE

We are considering purchasing a more expensive house in an area that would provide a significantly better quality of life, and much closer access to parks and walking/biking trails.

Presently the value of our primary residence is approximately 6% of our NW. We are thinking of purchasing a different primary residence that would be about 14% of our NW. I retired in June 2019 and was originally planning on upgrading to a house that would be about 10 or 11% of our NW. Property taxes will more than double. Having just retired, I'm still getting used to spending instead of saving. Either way, our annual spending averages less than half of what Firecalc considers safe.

Anyone else buy a substantially more expensive house after retiring?
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Old 02-22-2020, 08:36 PM   #2
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Yes. Went from about 10% to 14% of NW. Didn’t really change anything in our plan.
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Old 02-22-2020, 09:33 PM   #3
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I retired in 2009, and in 2015 I bought my Dream Home, moved, and immediately did a lot of re-landscaping at the Dream Home to make it what I wanted. In this post I am including that re-landscaping in the purchase price. If I am computing this correctly, then the percent of my net worth represented by my house went from 11% to 18%.

In my case, this move added a great deal of happiness to my life.

My property taxes went up from $956 to $1822, but overall the ongoing costs have not been a budget buster. However, it helps that the two homes were about the same square footage.
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Old 02-22-2020, 09:40 PM   #4
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Our current home is roughly 15% of NW. made an offer last year on a home that would have been 23% of NW, but the offer was not accepted. Still looking, but I really don’t want to be over 23%.
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Old 02-22-2020, 09:52 PM   #5
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I don't see how percentage of net worth is relevant. The purchase reduces your investments and increases your necessary spending (taxes, etc). To me, what is relevant is whether your withdrawal rate is still appropriate. If your current withdrawal rate is half the safe rate, you probably don't have anything to worry about.
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Old 02-22-2020, 10:10 PM   #6
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I don't see how percentage of net worth is relevant. The purchase reduces your investments and increases your necessary spending (taxes, etc). To me, what is relevant is whether your withdrawal rate is still appropriate. If your current withdrawal rate is half the safe rate, you probably don't have anything to worry about.
I think that's a very good point.
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Old 02-22-2020, 11:39 PM   #7
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Originally Posted by travelover View Post
I don't see how percentage of net worth is relevant. The purchase reduces your investments and increases your necessary spending (taxes, etc). To me, what is relevant is whether your withdrawal rate is still appropriate. If your current withdrawal rate is half the safe rate, you probably don't have anything to worry about.
I am guessing that the OP is trying to get a feel for what percentage the cost of the main residence vs total NW before the home price becomes excessive. For those of us living in HCOL area, home costing 30% or more of total NW is typical, so ~15% sounds reasonable to me.
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Old 02-23-2020, 12:27 AM   #8
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I am guessing that the OP is trying to get a feel for what percentage the cost of the main residence vs total NW before the home price becomes excessive. For those of us living in HCOL area, home costing 30% or more of total NW is typical, so ~15% sounds reasonable to me.
I guess I'm missing your point. The only "excessive" concern that matters is your withdrawal rate. If I need $100,000 a year to live on and I have $3M in investments, it doesn't matter if my home costs $50,000 or $2M, as long as all my expenses are covered by the $100,000 that I withdraw yearly.


If you were drawing down your investments to a dangerously low amount by purchasing an expensive house, that would be an issue. But that again is just a different side of the safe withdrawal rate equation.
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Old 02-23-2020, 02:58 AM   #9
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This is something I consider doing as well, going from a house that is about 8% of my net worth to 11% of my net worth as part of a relocation in the same general region of the same state, and possibly up to 14% of my net worth if I relocate to a state that doesn't have such high property taxes. That would still leave me with plenty of buffer/discretionary.

A similar thread came up in the last few weeks on another early retirement forum, and most people recommended buying the more expensive house if it would truly make the OP happier and if the OP could afford it.
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Old 02-23-2020, 03:55 AM   #10
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I live in a HCOL area. My home is 50% of my net worth. The mortgage will be paid off before retirement. As Travelover states % of NW doesn’t matter. What matters is if the income covers your costs/spend.
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Old 02-23-2020, 04:44 AM   #11
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I asked a similar question on here recently about buying a new more expensive house. No one ever raised the % of Net Worth as an issue. Simply if the additional cost would impact WR or my portfolios ability to generate income for expenses. And most importantly quality of life and longevity in the home.

Alas after a year on the market with an interested buyer finally, they took it off the market.
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Old 02-23-2020, 05:23 AM   #12
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We did not move but since RE have done several remodeling projects that took the house investment from 7% to 10% of NW. WR still below 3%.
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Old 02-23-2020, 07:09 AM   #13
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We have just doubled our home investment and are not done yet. Will probably end up another 10%. Will end up at 16.4% of NW but still below SWR at 2%.

With the consistent run up in the markets, we are spending the inheritance yet they will still get it eventually plus it forced us to take some profits into fixed assets.
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Old 02-23-2020, 07:43 AM   #14
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I don't understand why the cost of the house is being expressed as a percentage of net worth. How is that useful?

All that matters is your spending and your portfolio.
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Old 02-23-2020, 07:49 AM   #15
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I don't understand why the cost of the house is being expressed as a percentage of net worth. How is that useful?

All that matters is your spending and your portfolio.
I do not either, but it is an interesting metric. Ours is 20%, but we like a high standard of retirement and live in a MCOL area but in an up market development. We spend a lot of time in our home. Others who travel more than we do perhaps do not, and see no need for such an expense. Nothing wrong with that, different strokes. Same as some people do not mind living in ULCOL areas. Not for everyone, but works for some.

We want to enjoy our retirement, a nice home is part of that, good weather along with having all the things we need and the beach close by is another. Again, different strokes.
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Old 02-23-2020, 08:21 AM   #16
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We did this right before we retired, as I wanted to have a HELOC secured on the new place before we no longer had earned income.

Our old house was 7% of our net worth, and the new one is 13%. Money was cheap at the time, so we took a small mortgage on the new place, after putting down ~70%.

Quality of life in retirement is important. We're glad we did it. Good luck.
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Old 02-23-2020, 08:23 AM   #17
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Originally Posted by travelover View Post
I don't see how percentage of net worth is relevant. The purchase reduces your investments and increases your necessary spending (taxes, etc). To me, what is relevant is whether your withdrawal rate is still appropriate. If your current withdrawal rate is half the safe rate, you probably don't have anything to worry about.
I think the net worth guide is just piggy backing onto an older thread regarding what percentage your house is in your NW. I think the mean was around 10% ish, but donít quote me on that. Itís just another guidepost and yes cash flow is king in this equation.
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Old 02-23-2020, 10:23 AM   #18
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Originally Posted by W2R View Post
I retired in 2009, and in 2015 I bought my Dream Home...


My property taxes went up from $956 to $1822, but overall the ongoing costs have not been a budget buster. However, it helps that the two homes were about the same square footage.
Trying to understand, your property taxes are $1,822 per year?
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Old 02-23-2020, 01:06 PM   #19
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We live in a MCOL and spend a lot of time at home so it’s important that it’s nice. We also like to entertain. I also don’t think it matters what percentage of your net worth it is.
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Old 02-23-2020, 01:12 PM   #20
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Trying to understand, your property taxes are $1,822 per year?
We DREAM of our property taxes bein under $6k a year, but we do get a lot for it.
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