Struggling with housing choice

[GBcycling]

DW is advocating hard to move from the multi-level, raise the kids home, to the last house we'll ever own ranch. Finding what we want has been difficult based on the suburban county we live in. Essentially, we would be moving from a home at 18% of our net worth to a home between 30 to 40% of our networth. This new home might be new construction or previously owned. But the goal is to be in a home she can stay in long after I am gone, and to reduce some of the maintenance costs.

If youve made that decision;
Did you spend that much? Our intent to to pass on significant assets to the 3 kids one of which is partialy disabled? I think 40% is to much and think that would constrain spending in other areas(like fun!)

What criteria did you consider?
We're you happy with the choice?

Open-ended questions, but am out gathering information from people who have been there.

gbcycling

 

[Steelpony]

Time to think long term as if you might have one. Anything shorter and you’re covered. An elder care attorney might help.

If you’re younger, and one ends up in LTC someday a house is the outside spouses along with one car and some cash (not half) if funds run out in my state. So an expensive house is protection for one spouse/kids anyway.

Being older we’ll be going to a apartment, condo or independent (CCRC) living facility hopefully soon.

Since our house is paid off I can live in an apartment for free probably (from increased cash flow) or head to independent living probably partially paid with cash flow or a condo the most expensive choice, but it’s protection again like a house.

That’s the practical side. Emotionally it’s something else. I convinced my parents to rent for free in their late 70’s and used the savings to prepare for the long term. Eventually I needed every dime, my mom lived to 99.

 

[aja8888]

DW is advocating hard to move from the multi-level, raise the kids home, to the last house we'll ever own ranch. Finding what we want has been difficult based on the suburban county we live in. Essentially, we would be moving from a home at 18% of our net worth to a home between 30 to 40% of our networth. This new home might be new construction or previously owned. But the goal is to be in a home she can stay in long after I am gone, and to reduce some of the maintenance costs.

If youve made that decision;
Did you spend that much? Our intent to to pass on significant assets to the 3 kids one of which is partialy disabled? I think 40% is to much and think that would constrain spending in other areas(like fun!)

What criteria did you consider?
We're you happy with the choice?

Open-ended questions, but am out gathering information from people who have been there.

gbcycling

How do you know you are going to die first? (asking as a widower that had a younger wife)

 

[Teacher Terry]

I think the age of you and your wife matters and should be taken into consideration. If you’re younger and beginning retirement, I would rather spend the money on travel and having fun versus a more expensive house but that’s my personal choice.

 

[RetiredHappy]

What are your monthly/annual expenses and income? How much of the investable assets are needed to support your expenses? If your income supports most of your expenses, you can have a larger percentage of your net worth in your home.

In our case, we have always lived in homes that are about 20% of our net worth, and we do move/change homes quite a bit. In our case 20% feels right for us. With the other 80%, we withdraw 2.75% currently and will drop to 2.5% in a couple of years' time. If your withdrawal rate is low, then 40% in a home is not a problem. If your withdrawal rate is high, then it can be problematic.

 

[pb4uski]

30% to 40% seems very high. We're slightly less than 30% but that is with two homes. The more expensive of our two homes is a little over 20%.

That said, that's us and it's a value judgement so no right answer.

 

[COcheesehead]

Since I retired in 2020 we’ve already had two “forever” homes and we are about to move into our third next Spring.

We’ve only ever had one criteria for moving and that is if we found something better. Better defined by current needs/desires.

So far it’s always worked out. Each house was better. The finances worked, largely because of a growing RE market. We are essentially selling our current home for what the new one will cost, but getting rid of a mortgage with the move. We also plan to sell another lot we own. The money was never an issue. With all that said our house value is 15% of our net worth.

I would judge your house decision based on do you have enough to live on, plus a buffer. Do you have enough for future care and do you have enough for whatever your legacy plans are. If yes, move and don’t look back.

 

[Koolau]

DW is advocating hard to move from the multi-level, raise the kids home, to the last house we'll ever own ranch. Finding what we want has been difficult based on the suburban county we live in. Essentially, we would be moving from a home at 18% of our net worth to a home between 30 to 40% of our networth. This new home might be new construction or previously owned. But the goal is to be in a home she can stay in long after I am gone, and to reduce some of the maintenance costs.

If youve made that decision;
Did you spend that much? Our intent to to pass on significant assets to the 3 kids one of which is partialy disabled? I think 40% is to much and think that would constrain spending in other areas(like fun!)

What criteria did you consider?
We're you happy with the choice?

Open-ended questions, but am out gathering information from people who have been there.

gbcycling

The % of NW wouldn't be too important to me as long as NW was large enough. IOW, AFTER you purchase a house at (let's say) 40% of NW, is the remaining 60% of NW more than enough to meet all your financial needs going forward?

Last move we made was from a moderate COL area to a HCOL area. So % NW in housing increased significantly. BUT we had enough left in our investments to more than cover expenses.

I think that's the issue. YMMV

 

[pjigar]

Since I retired in 2020 we’ve already had two “forever” homes and we are about to move into our third next Spring.

+1. We built a "forever" home about 10 years ago and we are already thinking of building another "forever" home in next 5-8 years. And I am not even retired! Idea of forever home is wishful thinking. I wouldn't mind an expensive home as long as it doesn't jeopardize my long term withdrawal rate (calculated with the additional expenses of an expensive home).

 

[GBcycling]

Thanks for the feedback. When I start pension(2026) and SS(2028) portfolio withdraws will be just over 2% per year. The numbers on the new home suggest spending 3% but in addition to purchase price my back ofthe napkin calculations suggest the new home would drive an adding 2k per month in tax, insur, utility costs. That is not worked into math yet, nor is DW SS when we decide to start hers. I know that it all comes down to wants and priorities. I'm not sure I have really adjusted to spending in retirement yet. Just finished spending severance a few months ago and am now burning a brokerage account until pension starts next summer.

 

[ShokWaveRider]

OP we are struggling with the same issues. We cannot find a home locally that we like. More of the area it is in rather than the home itself.

 

[pb4uski]

Thanks for the feedback. When I start pension(2026) and SS(2028) portfolio withdraws will be just over 2% per year. The numbers on the new home suggest spending 3% but in addition to purchase price my back ofthe napkin calculations suggest the new home would drive an adding 2k per month in tax, insur, utility costs. That is not worked into math yet, nor is DW SS when we decide to start hers. I know that it all comes down to wants and priorities. I'm not sure I have really adjusted to spending in retirement yet. Just finished spending severance a few months ago and am now burning a brokerage account until pension starts next summer.

How different are the results if you run FIRECalc with 1) status quo, 2) new house DW wants or 3) a more modest change? These days I tend to evaluate FIRECalc results using the Investigate tab and max safe spending to age 95 at 95% success rather than just success dates.

 

[brett]

We thought we knew what we wanted. We sold our home. Travelled for nine months. Rented a furnished apt for 3 months, then rented a condo overlooking a golf course for 4 years.

We thought we wanted a condo. Very thankful we did not buy because we changed our minds after living in one.

We kept on renting for four years because the market in our city was soft. We did much better putting our home equity in the market than we would have if it had been in real estate.

When we did buy we spent less that what we sold our home for. Not intentionally. We were prepared to spend more based on finding something that we both liked.

Our only consideration was finding a low mtce home that we liked in an area that we liked that could be as close to lock and leave as possible. Leaving money to our estate was never a consideration in our decision.

If you are certain would it be practical for you to rent for a year?

 

[rkser]

For us soft issues take precedence when we start talking about our next house.

I have had problems with an injured/replaced knee & now got my shoulder replaced, so I cannot do any house maintenance, nor that I wanted to do any before.

So when we downsized after my retirement 10 yrs back, we chose a single level 3/2 house with a small backyard & no pool in Florida. Kids had flown away so only guests/ kids visiting would use the other 2 bed rooms.

Although we can afford a larger (extra bed room) house, the present paid off house is 6% of the NW.

We have made good friends with our neighbors & got well adjusted to daily necessities needs like Grocery Stores, Doctor’s Offices… etc…

When I go to larger friends houses, I sometimes thinks about upsizing a bit, but DW drills sense in to me & the discussion is complete.

Home should match the necessary needs of the shelter we need & nothing more/less.

 

[Koolau]

For us soft issues take precedence when we start talking about our next house.

I have had problems with an injured/replaced knee & now got my shoulder replaced, so I cannot do any house maintenance, nor that I wanted to do any before.

So when we downsized after my retirement 10 yrs back, we chose a single level 3/2 house with a small backyard & no pool in Florida. Kids had flown away so only guests/ kids visiting would use the other 2 bed rooms.

Although we can afford a larger (extra bed room) house, the present paid off house is 6% of the NW.

We have made good friends with our neighbors & got well adjusted to daily necessities needs like Grocery Stores, Doctor’s Offices… etc…

When I go to larger friends houses, I sometimes thinks about upsizing a bit, but DW drills sense in to me & the discussion is complete.

Home should match the necessary needs of the shelter we need & nothing more/less.

Words to live by.

DW and I have two abodes due to our schizophrenic living arrangements - half in Paradise, half on the Frozen Tundra of the Midwest.

BOTH places are tiny by today's standards and both are (in effect) condos (one's actually a rental).

Very little maintenance - by design and not much room to store more stuff. Ideal for old folks like us who have no interest in w*rking - even if it's in our own home.

 

[rkser]

We are entering the Slow Go years, being a person who has the finances/money in mind & control, I at times feel we will be leaving a lot behind us.

I & DW both had frugal roots which we carried thru our earning years, saved & invested & the market rewarded the rest.

We are unable to spend more on ourselves now than we do (around 2%) apart from gifting to charities, kids & grand kids.

Most of us here on the Forum have the problem with spending our savings.

A question often comes to my mind - Was it worth it to save during our working years, could we have spent more when we were able bodied & before the kids left home.

Of course, past is past & we had no way of predicting the future during the accumulating phase.
The game is not over yet & I would rather have this problem rather than the other way around.

Thanks for this Forum

 

[38Chevy454]

I don't think 40% is too high, as long as you have sufficient investment assets that can produce what income you need with reasonable withdrawal rate. You mentioned it might be 3% with new house, that seems acceptable to me. Ultimately the house will be part of your estate, so it is just putting money in a different place than investment account.

I would not want a house where I had to use the stairs all the time such as BR upstairs. If your current home has a first floor main BR, then the stairs are not as critical factor. My house is ranch style, but with basement. So I use stairs but could get by with minimal stairs if a health issue caused concern for stairs.

 

[oldphd]

When I start pension(2026) and SS(2028) portfolio withdraws will be just over 2% per year.

I think the income flows from pension/SS are important to consider. We are in the higher % rate (maybe 35-40% house/NW), but currently have income flows that pay over half expenses, with more to come. Once all SS/pensions are in place in a few years, we will only need to withdraw from the stash for extras (new car, big vacation, ?). So having a higher % in the house along with spending 6-7% in the short term isn't necessarily irresponsible.