Totally agree about possibly being flexible. That’s a huge reason why we’ve rented near our kids for the past 3-4 years. Kids now appear to be staying, BUT during that time, home prices have soared. Now a 1200 SF condo cost about 2x the value of our 2400SF home. Rentals have also significantly increased. “shoulda-woulda-coulda” tends to be our theme song
Ideally, we want to have a presence in both areas. To do that now, will take a huge chunk of our retirement savings. Can we live on the remainder? Yes… for awhile. That’s why I’m debating on just how much, and for how long.
We do have a financial advisor, but while a fiduciary, there is still a conflict of interest. They don’t make any percentage of your home value. So it will be an interesting next discussion with them!
Agree Colorado_mom - health care is the variable. Some of my (slightly older) friends are researching options on the marketplace and I’m curious what they find (will share in case it helps). Would be - healthcare for late 50s/early 60s age, higher-ish income, 2 spouses…
I can commiserate. H and I went back and forth about when to buy or build our retirement home, and he came around only after getting news of our grandchild. By then, prices in the new area had risen dramatically, while sales of too large houses like ours had slowed considerably in our area. H has dragged his feet on listing our house and has resisted cleaning out his stuff in the basement and garages. He wants to wait until our new house is completed, likely next spring, before we list. I hope for a lightning strike while we’re not there.
We have a small temporary home in the new area so we can babysit and I can be on hand for the building project. I hate going back and forth, and have mainly done so only to see my doctors. Once we’re back to owning just one house, it will likely be 15% - 20% of our net worth. That’s more than we planned on, but building during a pandemic with prices of all materials soaring has blown the budget out of the water. I try to view it as contributing to the economy and keeping people employed. We’ll be fine, there just won’t be as much to leave to our kids and they’re okay with that.
Another thing to think about in a newer area or newer state is how is the water situation and how to keep from those kind of risks (the wild fires, or water shortages).
Just came up in the news today with CA and Oregon, water rights and needs.
Some years ago it was an issue between GA and AL - GA (specifically Atlanta area) wanted more water as their primary water source - a lake was getting low because of huge growth needs. They wanted the corps of engineers to redirect water that was coming into AL and AL successfully kept the water rights under strong AL Gov Bob Riley and his administration/state legislature.
Then you have to think about water extremes and coastal issues - yes the beach is wonderful but are you prepared for adverse weather and water/storm damage?
It has to be a ‘meeting of the minds’ - and DH and I are working on it. Hope the condo works out because we need to do some ‘baby steps’.
I hope that we can afford to stay in our current home for a long time, the biggest factor will be property taxes as they are not low and there is no limit to increases. Our home, as a share of total NW varies based on how market investments do and how the market is here. I would say it is 20-33% of our NW depending on the ups & downs. But that is only critical if we began to need full time in home care, otherwise, it’s the property taxes that will be the issue. Oh, and when DH & I can do longer do cleaning/maintenance/yard work, that would add a regular new set of bills.
Seems that the main thing about home equity is that if you have a paid-for house that you like by the time you retire, you are no longer renting the place (rental housing) or renting the money (mortgage), so your base housing costs are just property taxes, house insurance, maintenance, and utilities. That may make your cost of living considerably lower, even in an “expensive area” if the high costs there are mostly housing price related.
An opinion page says that the 4% rule (of how much you can spend from your retirement money each year) is based on US financial history, but that may be too optimistic compared to world norms (that the opinion writer implicitly believes that the US will regress to in the future):
Maybe about 20% but I own my house without a mortgage and while I would love to downsize every time we’ve gone looking it would cost us basically the same to downsize as we could get for our house. Actually that was pre-covid and now houses by us are getting snapped up in days so who knows. On Zillow my house has gone up by 6 figures in less than 30 days after taking a huge hit in 2008 and never fully rebounding. If I sold now I would look to rent temporarily and then wait for the bubble to burst again. Or just not rush to buy anything. We also have a couple investment properties that we’ve seen the prices go up insanely and seriously considering selling but don’t need the cash right now and with the ROI there’s no reason to sell so it’s an odd position to be in.
I’m one of those that will always feel like I never have enough to retire. Maintenance and ongoing repairs or updating worry me but I do love my house so not sure what we’ll do.
Glad to see the strategy in the US holds up 19/20 cases, 5%.
Honestly it is how things go at the end years - if you spend through assets with health care needs, if you work things out with children assisting with managing elder care/needs (as my siblings and H’s siblings did). My mom had non-combative Alzheimer (they call it w/o behavioral disturbances) - so she was happy in her home with the care there (her body just started to fail shortly before she died). DH helped with his mom’s care the last few months of her life, and she entered skilled care (nursing home) just 16 days before her death and she died a day before turning 92 - out of the 13 siblings, the oldest lived to 91 (two), 92, 93, 94, 95 and 96.
One does need to be smart on how one will continue if in an area with high property taxes and other taxes. If you have it worked out in your budget, or you decide different priorities. However if moving, do so when you are healthy enough to manage it well.
I foresee DH and I having some transitioning with permanent dwellings. DH is already being very good on eating healthy and getting exercise - and he is already retired. I am looking to have a full cardiac work up with him as I suspect he may have Paroxysmal A Fib. He had a rough day after his 2nd Pfizer Covid Vaccine - after the shivers/hot/cold, it triggered a full Migraine (which he has successfully avoided for a long time). I have to drastically be very rigorous on ‘rapid results’ weight loss and exercise plan; also making the biological change from late 2nd shift hours to daytime hours. I have done weight loss before over 26 months - but now I just have to continue to do the weight loss and continue lifetime exercise…and DH and I will have the time. Scoped out activities in new city and our current city.
A coworker expected her dad to use up his assets when he went into assisted living and he died less than a month after the move of natural causes. His health had been declining and they had to have him move to be safe. So her one sibling and she inherited what he had in the bank and his paid off home.
For estimate of per-Medicare health care costs (assuming not covered by employer), we used ballpark of $1000/month per person… and that may only get you a high deductible plan. That kept me working until hubby, 7 years older, was on Medicare. (I Cobra and an employer fund that will get me most of the way there).
Per retirement housing, we are fortunate to have mortgage paid off. But… we do recognize that the tied up equity means less investment earnings (which could be put toward rent someday). It becomes a bigger factor where home costs are much higher than average. For now, we are happy where we are and are glad property taxes are reasonable (about $3k).
The research I’ve done on ACA policies puts premium+ deductible costs at $22-30k for the two of us. We will not qualify for subsidies, and I don’t see any way of manipulating our income to qualify.
Haven’t investigated if anything is available off of the exchange.
One possibility is to put as much of your income into deferred compensation if possible so that you lower your AGI and use Roth IRAs or other non taxable retirement mechanisms so that you would have less taxable income and qualify for the subsidies. I know people who have a lot
of income but because their tax planning when they were younger was savy they have very little taxable income now so they qualify for the subsidies.
You might check out Bogleheads, there are a lot of early retirees who make every effort to structure their income to qualify for subsidies during the weird time between retired and Medicare. Sometimes it’s something like bunching income to one year and expenses to another year so they at least qualify every other year. Or delaying taking pre-tax funds out and using a HELOC to make it that last year or two to Medicare.
We get enough income annually from our rental properties to make it impossible to get a subsidy without doing something crazy like selling our entire portfolio (huge tax hit) and buying a whole new group of properties inside an IRA, or just getting out of the rental business entirely. Idk, maybe there’s another way I don’t know about.
The bottom line is that health insurance via ACA or otherwise w/o employer participation is going to cost more than waiting for Medicare. I certainly understand if one spouse is younger than another and need to pay for one spouse’s health care.
It is one thing if you are close to subsidy line. But trying to change things very close to retirement when the overall picture under a different/better plan is another.
For Medicare - I believe if taking Medicare B, there is a higher charge if a couple’s household income is over $147K. It is a 2 year looking period. Once the 2 year period out of the $147K/year can get it adjusted down.
I’ll have to look back on last year, but I know this year we are under that limit on earnings, unless we take out $$ from retirement funds to purchase the condo I have my eye on. All these things to keep an eye on when one is close to various limitations.
