If you had $4M, would you spend $2M of it building a house?

Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
Why do you need a $2 Million dollar home? Believe you could accomplish same for a fraction and sleep at night a lot better w $3+ million in other places.
 
M....BEEN THERE DONE THAT. Market looks good right now but who knows what will happen..?
I sank 1M in the house, was to be a gift for the wife. Having lived in a condo while waiting ..now thinking is who the heck will live there except the two of us? We have done 6 corporate moves, every time I bought a house, the first criteria was " who the *&$% will buy this from me in three years?
Have you answered that? The 30 acres can be divided by a developer? Who will be a buyer if & when you want to sell.....? What are the taxes? What size of market ( number of buyers )will be ready to buy this? Feel free to Dm if you need to....
 
I was just going to type "you will definitely have the nicest house in Eastern Tennessee".
I could leave my Dad's farm in rural East Tennessee ("Eastern Tennessee" is only for people who... are from elsewhere :) ), and be knocking on the doors of three or four homes worth more than that within ten minutes, off the top of my head. Stereotypes help keep out the riffraff, though!
 
I would imagine the upkeep on a $2M house would run north of $30,000 a year. Coupled with ordinary living expenses and typical retirement expenses, seems you could be stretching financially.
 
No, I wouldn't, and posed that question to my SO. He says No as well. We are close behind that number and have considered building but really don't want the hassle at age 65 (or older). We are looking for a retirement place and have decided to keep it under $1M.
 
Well, considering we DOWNSIZED when we retired, my obvious answer is no.
Why?
--NO interest in the upkeep of a huge house anymore, inside or out
Now, I have friends for whom a big house for when the kids/grandkids come is very important.
We figure we can rent an Airbnb if that ever happens! (no grandkids...none of our 3 kids even in a relationship!)
 
This sounds very reckless to me....there is no way I would spend 50% of my net worth on a house. I would greatly scale back the scope of the project, to something on the scale of 500K to 1.0M.
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
 
I would imagine the upkeep on a $2M house would run north of $30,000 a year. Coupled with ordinary living expenses and typical retirement expenses, seems you could be stretching financially.
A brand new house should cost almost nothing in upkeep for at least the first decade other than basic yard work.
 
4% wr of 2million $80k so guess it’s Lifestyle?
High rent here - track homes go for 1-2million aka cookie cutter homes. Tennessee I imagine it’s still a mansion - hey it’s your Dream make it come True! Medical covered - Spend it…
I’m Retired on my moniker Live Large😆
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
Hell no. I retired at 59 by reducing overhead. Not adding to it. You’re in a great position considering your assets. I’d say go deeper and wider brainstorming what you’d really like to do or accomplish. Also, any plan that includes the word hopefully still needs work. 😉
 
How big a place does $2M buy you in LCOL East TN?
We are in East/Central TN in a smaller area. Our house is projected in Zillow and other sites to be upwards of $1M. Ours is a 5K sqft one story all brick home situated on four acres in a development of about 50 homes. Let's just say $2M will get you a big house. Perhaps the OP is looking at lakefront; there is a lot of building on them towards the Knoxville area, and that would drive the price up a lot.
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
First time I have heard a person spending 2M to build a house as frugal.
This is a totally personal choice and nobody can tell you right or wrong.
You obviously are placing a great deal of importance on wanting this”dream” house.
It is hard to say when talking about a strangers wants and needs.
If it was me I would be able to build or buy a very, very nice house in lcol E Tennessee and feel more secure with 3M leftover.
I found it interesting that you said it hit you that you were spending half your money. That should have been very obvious from the beginning or even thinking about it.
Good luck.
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
I think you’ll regret it if you don’t! You’ve planned this for a long time from purchasing the land, to retirement. You could rent or buy a luxury condo with a pool and keep most of the $4M but you won’t be happier. Btw many of us retired with a lot less than $2M. I’m in California and retired in 56, at the time I was very worried as all the numbers were doable but tight. Although I passed the FIRE calculator. Today our net worth is about $3.5M with our house at $1.4M so not much difference than your situation. We would not be able to build the same house we are living in due to high property tax. We are currently at $7k due to Prop 13. But a new build of $1.5M would be close to $20k property tax. Your property tax is low or appears even lower in 10 years. That alone is really good news! It’s nice to have extra elbows room. Our 4 bedrooms house is on 1/3 acre lot with a pool and spa, so quite large for So Cal. As we getting older and traveling less. We found that we would not be happy in a condo or smaller house. We remodeled our kitchen, pool, roof, landscape as we spend a lot of time in our house. My wife spend a lot of time in the garden and we are quite happy with the large property even with more expenses and maintenance, I still clean the pool myself and my small collection of cars keep me busy. The pool being used almost weekly now as our grandkids still little, in the winter they swim in the heated spa. Surprisingly I’m using the pool and spa more than ever to release shoulder pain that wasn’t there before. Appears your dream house is already well thought out ie solar not on the roof etc My only advice is to plan into your seventies and eighties. Would you need an extra room for nursing care if you need long term care, is the walkway wide enough for wheel chairs, what would you do in ten or twenty years that you may not consider today? I’m so happy for you because you’ve worked hard for this and you know you wanted this dream house. Well deserved and send lots of pics.
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
No, I wouldn’t. It seems extravagant especially in TN. I would rather have the money in the bank!
Why do you need to feed your ego that much? But it is your call. Why do you care what we think?
 
FWIW- DW & I have been thinking of getting a different place for our retired years. Most FA's I've talked to advise investing no more than 1/6th of a full retiree's nest egg in a new home. Half would make me uncomfortable, especially considering ongoing expenses of an expensive place (taxes, utilities, insurances, upkeep, etc.).
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.
We just moved into our custom home in Jasper Highlands - 40 minutes west of Chattanooga. EXPECT 10-15 percent on overages. 2mm buys a lot of house but if there’s only two of you; 2200 square ft is plenty. Our next door neighbor who is about 79 yrs old is building a 4700 sq ft contemporary home and spending over 2mm but taking close to 2.5 yrs build. If you want a “show” house go for it. Otherwise, build a home that is comfortable, spacious, beautiful, yet practical.
 
$2M is not a lot to live off of. Using a conservative 4% return, that’s $80K a year. Depends on your lifestyle.
 
Debt free, fairly frugal, and FIRED. We are close to building our dream home and it suddenly hit me that we may be spending half our money on it. I have $1M in cash, $1M in 401K fixed fund, and $2M in S&P based equities (mix of Roth, 401K, and brokerage). We are 57YO with no source of income other than a small pension that only pays for our healthcare. The plan is to spend the $1M in cash to get the house started (dried in) and hopefully sell some stocks or fixed next year to pay for the rest of it. I find it hard to believe that we can't get by on $2M but I figured I would ask around. The house will be extremely energy efficient and on solar power. We are in LCOL east TN.

No way. Buying a house with at least half your net worth at age 57 is reckless and dangerous.

First off, have you calculated the taxes you will pay on the 401K portion of your assets that you are counting towards your $4 million? If you haven't, you are in grave danger. If $1 million is in your 401K, you don't actually have $1 million. You have $1 million minus the taxes you will pay on this money, so if you just use the dollar value on your account statement you are overcounting.

Secondly, this monstrous home is going to have a super sized property tax bill. Do you even know how much that will be? And, sure, you have solar power, but there are going to be many expenses for such a large house. Taxes and insurance top the list, but there will be many more. Your remaining $2 million, if it is even that, might not be enough to support your lifestyle with this house. As another posted pointed out, that's about $80k a year. The average property tax rate in Tennessee, per Google, is .56%. That means just your property tax bill is going to be nearly $12,000 a year or 15% of your safe draw rate from your investments, if as I pointed out your 401K value is calculated correctly at it's after tax value. Homeowner's insurance will probably be at least $750 a month. (I used MoneyGeek website for estimates but they only went up to $1 million and the $1million amount given by Statefarm was $588 a month.)

Third, do you even know how much, in the end, this money pit will cost to build? Is it actually $2 million? Will there be costs overruns? And when it is done, will it even hold it's value, let alone grow in value.

I could go on with more reasons. But I won't. Suffice it to say, you need to get out of this situation now, while you can. Buy a smaller place. Let your investments grow and compound.

Buying a house for half your net worth at this stage of your life is a terrible idea.
 
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Me? At age 57?
Yes.
If I had $4m and it's always been our dream.
My parents died young. Anyone who lives to 65, rich or poor, is blessed.
$1m for that house is right on par for cost of construction. Another $1m for land improvements is a bit high.
Be prepared to sell it if you live to a ripe old age and need money for medical care.
 
4% wr of 2million $80k so guess it’s Lifestyle?
High rent here - track homes go for 1-2million aka cookie cutter homes. Tennessee I imagine it’s still a mansion - hey it’s your Dream make it come True! Medical covered - Spend it…
I’m Retired on my moniker Live Large😆
That is where I went, $80k income and a $2M house seems out of whack. If you bought a $400k house 20 years ago and it is now $2M, that's different then taking half your nest egg to build a house.
 
No way. Buying a house with at least half your net worth at age 57 is reckless and dangerous.

First off, have you calculated the taxes you will pay on the 401K portion of your assets that you are counting towards your $4 million? If you haven't, you are in grave danger. If $1 million is in your 401K, you don't actually have $1 million. You have $1 million minus the taxes you will pay on this money, so if you just use the dollar value on your account statement you are overcounting.

Secondly, this monstrous home is going to have a super sized property tax bill. Do you even know how much that will be? And, sure, you have solar power, but there are going to be many expenses for such a large house. Taxes and insurance top the list, but there will be many more. Your remaining $2 million, if it is even that, might not be enough to support your lifestyle with this house. As another posted pointed out, that's about $80k a year. The average property tax rate in Tennessee, per Google, is .56%. That means just your property tax bill is going to be nearly $12,000 a year or 15% of your safe draw rate from your investments, if as I pointed out your 401K value is calculated correctly at it's after tax value. Homeowner's insurance will probably be at least $750 a month. (I used MoneyGeek website for estimates but they only went up to $1 million and the $1million amount given by Statefarm was $588 a month.)

Third, do you even know how much, in the end, this money pit will cost to build? Is it actually $2 million? Will there be costs overruns? And when it is done, will it even hold it's value, let alone grow in value.

I could go on with more reasons. But I won't. Suffice it to say, you need to get out of this situation now, while you can. Buy a smaller place. Let your investments grow and compound.

Buying a house for half your net worth at this stage of your life is a terrible idea.
So to be clear are you telling him not to do it then?😀
 
All you nay sayers, relax.... OP clarified that it will likely come up to only $1.4M. I don't think $1.4M out of $4M is bad at all.
 
All you nay sayers, relax.... OP clarified that it will likely come up to only $1.4M. I don't think $1.4M out of $4M is bad at all.
I agree obviously the OP has given this some serious thought. He has smartly added $600K to his preliminary figure. I am sure he has given thought to other less costly construction methods to lower cost if needed. I say build it.
 
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