Ready to make the leap!?!

[Dave_S]

Hi. I have visited this site a few times over the past year and decided to officially register today.
About me:
I'm 52, wife is 57. We have lived in the same house in the Colorado mountains for the last 17 years. My wife retired from a 33 year DoD career with a great pension when she turned 55. I've been blessed with a good paying job for most of my working career. I'm tired of working and want to retire at the end of June when I complete a project at work, but it is so hard to walk away from the monthly pay check. Looking for some validation that it will all be ok ;-)
Our status:
We spend about $50K per year most years, but I'd assume $60K average considering the occasional car purchase every 7 or 8 years.

$0 debt, just over $1M in after tax savings and $975k in pretax (401K IRA, etc.) House is paid for and worth about $750K
Wife's pension pays $75K per year with COLA and health insurance at current employee rate and survivor benefit of 50%. We have long term care insurance as well.
I will not have any type of pension or income beyond investments in retirement.
My wife and I are in good health and have no children.

I assume we'll actually spend more per year in retirement as we'll travel and vacation more frequently, and I'm starting to think about buying a home in Florida and splitting our time between the mountains of Colorado and the Florida gulf coast, but that would set us back around $400K initially plus additional expenses annually - and may be a reason to keep working.
So the decision is to continue working a few more years or get on with our lives in retirement? I think I'm ready to make the leap but wonder if it's really feasible to buy a second home if I punch out this summer.

 

[Moemg]

Welcome Dave ,
I would skip the second home in Florida in favor of renting when you want to visit . It so much easier to rent and walk away then be worried about the house . It is also cheaper to rent if you are interested in proximity to the beach then own .

 

[MooreBonds]

I assume we'll actually spend more per year in retirement as we'll travel and vacation more frequently, and I'm starting to think about buying a home in Florida and splitting our time between the mountains of Colorado and the Florida gulf coast, but that would set us back around $400K initially plus additional expenses annually - and may be a reason to keep working.
So the decision is to continue working a few more years or get on with our lives in retirement? I think I'm ready to make the leap but wonder if it's really feasible to buy a second home if I punch out this summer.

Welcome to the forum!

There can be some compelling factors to buy a 2nd home in FL....but many on the forum would advise you run all of the numbers and take a long hard look at your actual time spent there, and what it would cost to simply rent vs buying and dealing with putting out $400k AND factoring in insurance, real estate taxes, buying furnishings, the "worry factor" (when the next hurricane heads its way), utilities, etc.

And, if you aren't planning on going to FL during the peak seasons to avoid the crowds, it makes even more sense to rent when you get the cheaper rental rates.

Only you can say if it's worth working an extra x years just so you can call a place "your own", versus retiring yesterday and enjoying more time in a rental!

 

[seraphim]

A lot depends on your lifestyle, but I don't see why not. You're basically telling us you can live on your wife's pension, plus still have 1.5M in investments which you don't have to touch to survive, but could easily pull 45k a year out of, should you change your mind. Plus two paid for homes.

Your wife is my age, and I certainly don't want to wait around the house while my spouse works. Would she?

IMO you're ready to go IF your $60k budget is feasible.

 

[seraphim]

But +1 on renting. What if you decide in 5 years you like Maine better? We bought a motor home instead.

 

[MBAustin]

Welcome! I agree with the "rent first" sentiments - my parents did this for about 5 years before buying, and when they did, it was first into a manufactured home community in FL which would be much less than $400K. They tried several locations in different states over those 5 years, renting a condo for 2-3 months to get the feel for the area. Worked out great for them as when they did buy, they knew the area and knew where to look (and where not to). Probably even more important now than in the 90's when they bought.

Would downsizing your CO house be a possibility also - that would free up some capital for a 2nd home.

Working out a detailed budget along with actual expense tracking and plugging the numbers into FIRECALC are two standard recommendations from folks here, so you may want to do that before you turn in your retirement letter.

Lots of good info here so look around and ask questions - good luck!

 

[Dave_S]

Thanks for the comments. I'm sure that it is good advice to forgo the second home idea. I found it to be an interesting option because it seems that everything is on sale now, with direct (sailboat) gulf access homes going for less than 1/2 of what they sold for in 2007. I was thinking it could be a good investment particularly if at some point we'd want to live down there permanently, but high property tax rates, insurance and maintenace could easily consume much of the appreciation on the investment.

 

[sengsational]

If you want to save on income tax, you could move your domicile to Florida if you can manage more than 6 months there.

 

[heeyy_joe]

If you want to save on income tax, you could move your domicile to Florida if you can manage more than 6 months there.

+1
You are all set, treat yourself to retirement.

 

[ERhoosier]

If you want to save on income tax, you could move your domicile to Florida if you can manage more than 6 months there.

But consider ALL the expense implications. Income tax is only one. Many areas in FL tend to have high property taxes, and hurricane insurance (inc high deductibles) can be costly. Real estate prices in many FL locales are highly volatile. Starting to recover a bit, but who knows if this is just a 'dead cat bounce' (as old Wall Streeters might say). I almost took a j#b in FL ~2008 near top of the real estate bubble. As a buyer not a renter I would still be digging myself out of that financial hole.

 

[Dawg52]

But +1 on renting. What if you decide in 5 years you like Maine better? We bought a motor home instead.

I like the motor home idea, particularly if you are only going to be there for just a few weeks or months a year. If not that, just lease something. My nephew's wife owns a couple of condo's in Orange Beach, AL and she didn't have a snow bird renter this winter. She would have been glad to cut someone a deal. Great deals can be had if you are flexible in location.

 

[jclarksnakes]

400K will buy a nice big Mcmansion in many parts of Florida.

 

[obgyn65]

To the OP: I would not buy a second home in Florida. It's likely to absorb a significant part of your ER budget, including taxes, airfares, etc. Maybe possible if you continue working.

 

[pb4uski]

What you waiting for?

If you don't buy a second home you have a ~$2m nestegg that will provide ~$70k a year of cash flow @ a 3.5% WR plus your wife's pension of $75k and you only need $60k to live so you have plenty of play money.

If you do buy a $400k second home, you'll still have ~$1.6m in your nestegg that will provide $56k a year of cash flow @3.5% WR plus your wife's pension of $75k and you only need $60k to live so you have plenty of play money.

Plus you haven't mentioned SS so assuming you are eligible then SS would be gravy.

Either way you should be fine. I suggest that you plug you information into Quicken Lifetime Planner (included in Quicken Deluxe and higher) and look at the graphs and then play with what-ifs (second home, renting for the winter, lower investment returns, or whatever you have concerns about.

Having owned two homes in the past, I think that we will rent in a warm winter spot, at least for now. I know people who do each, it is just a matter of preference, but renting seems more worry-free to me. If we rent in an area we fall in love with then perhaps we'll buy.

 

[harley]

Looks like you're fine financially, as far as FIREing. I would tend to agree with the others that renting in FL is a better call, if you can do it.

I'm going the purchase route, and prices on the (non-Naples) Gulf Coast are pretty low right now. If you don't need waterfront you should be able to find a nice place well under that $400K range. We just bought a nice little single family house for less than half of that. But I'd still rather have the flexibility of renting, if only anyone would rent to us with 4 dogs.

 

[Dave_S]

Thanks again for the comments. I had a few reasons to consider buying something in Florida, but your comments have me reconsidering if that really makes sense. I have been on the wall about the entire second home idea, so I will most likely put that off and maybe just vacation and rent for a while - even though the market down around the Cape Coral area looks like a real bargain right now. Colorado would be our primary residence for a long time coming.

 

[Dave_S]

Looks like you're fine financially, as far as FIREing. I would tend to agree with the others that renting in FL is a better call, if you can do it.

I'm going the purchase route, and prices on the (non-Naples) Gulf Coast are pretty low right now. If you don't need waterfront you should be able to find a nice place well under that $400K range. We just bought a nice little single family house for less than half of that. But I'd still rather have the flexibility of renting, if only anyone would rent to us with 4 dogs.

That was a primary consideration of mine in possibly buying. I have two large dogs that are still pretty young and a cat and if we were to go away for months at a time, we would want to bring them along- and be able to drive to the house. The reason I've been looking at more expensive properties in that area is that I would want waterfront, with sailboat access if I were to ever move there permanently, and I think those properties are limited enough that they will appreciate in value in the future. I'm sure that buying a house and then later a sailboat would be a constant drain on our financial resources, so I thought if we did buy, we'd probably use the place as a weekly rental when we weren't down there - with a goal of just covering the property tax and insurance costs until we decided if we want to move there permanently at some point.