Prioritizing: Dream Home vs. Retirement Savings
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Prioritizing: Dream Home vs. Retirement Savings
I want to preface this post by saying that I am all-in Boglehead and not only drink the Kool-Aid, but bathe in it. I have used what I've learned here over the years to pay off tens of thousands of dollars in debt and to establish a pretty decent retirement portfolio that we're on track to completely max out within the next year or so. We recently had a baby and are in the process of bumping up our emergency fund, but after that, we'll be in a pretty good financial spot. Things will still be tight, but we'll be fine.
That being said, my wife and I have a shared goal of living within walking distance to the beach. And not just any beach, but a nice one. Preferably on the Florida gulf coast. We're not sure if we should be thinking about buying a second home (assuming we could ever afford it) or just waiting until we retire to do so, and that's where I could really use some opinions and different perspectives.
I know I'm not offering much help in terms of specifics, but I'm just thinking conceptually at this point - what exactly should we be doing with our money to support this goal? Is maxing out two 401Ks (and eventually two Roths) really what we should be doing? That would leave us with no savings for a beach house, BUT it would allow us to retire comfortably and likely rent a beach house whenever we wanted (assuming we can keep our savings rate that high through our careers). Certainly an option, but just how much enjoyment can you get out of a beach house when you're 65?
Conversely, we're suckers for the shows on HGTV that show couples purchasing the most amazing beach houses (not necessarily big and expensive) and the common theme seems to be that they have significant savings set aside for the downpayment. It makes a compelling case for NOT maxing out retirement accounts and setting some aside for such a purchase one day, but I feel that flies in the face of Boglehead principles...and that gives me an uneasy feeling.
Have any of you wrestled with similar circumstances? How did you approach them and what is your plan of action? I sort of feel that this is the very last piece of the puzzle we need to figure out, but honestly don't know which way to turn at this point.
Thank you so much for your time and responses!
That being said, my wife and I have a shared goal of living within walking distance to the beach. And not just any beach, but a nice one. Preferably on the Florida gulf coast. We're not sure if we should be thinking about buying a second home (assuming we could ever afford it) or just waiting until we retire to do so, and that's where I could really use some opinions and different perspectives.
I know I'm not offering much help in terms of specifics, but I'm just thinking conceptually at this point - what exactly should we be doing with our money to support this goal? Is maxing out two 401Ks (and eventually two Roths) really what we should be doing? That would leave us with no savings for a beach house, BUT it would allow us to retire comfortably and likely rent a beach house whenever we wanted (assuming we can keep our savings rate that high through our careers). Certainly an option, but just how much enjoyment can you get out of a beach house when you're 65?
Conversely, we're suckers for the shows on HGTV that show couples purchasing the most amazing beach houses (not necessarily big and expensive) and the common theme seems to be that they have significant savings set aside for the downpayment. It makes a compelling case for NOT maxing out retirement accounts and setting some aside for such a purchase one day, but I feel that flies in the face of Boglehead principles...and that gives me an uneasy feeling.
Have any of you wrestled with similar circumstances? How did you approach them and what is your plan of action? I sort of feel that this is the very last piece of the puzzle we need to figure out, but honestly don't know which way to turn at this point.
Thank you so much for your time and responses!
- bertie wooster
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Re: Prioritizing: Dream Home vs. Retirement Savings
It depends on how much you have saved for retirement. It sounds like you guy started late so I would direct midst savings to retirement accounts. But if I'm wrong and you feel your retirement accounts are sufficiently large, then put money aside for a down payment.
I wouldn't do this as a second house though.
I wouldn't do this as a second house though.
Re: Prioritizing: Dream Home vs. Retirement Savings
You should max retirement accounts before even considering saving for a second home. And let me warn you about beach houses on the Florida Gulf Coast, which is very near where I live: The insurance will kill you, not just financially but also emotionally as you have to scramble to find insurance and fight with the insurance company every time a storm blows through. Just rent.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Good thoughts so far, thank you.
As for our retirement savings, we're where we should be actually. My wife did start a little late (at 29) and I started a little early, so I think it balanced out. As it stands now, we're on track to be able to retire by ~60 though.
Regarding insurance - an excellent point that I had not considered. Definitely don't need to add to our list of headaches, so I appreciate that input.
As for our retirement savings, we're where we should be actually. My wife did start a little late (at 29) and I started a little early, so I think it balanced out. As it stands now, we're on track to be able to retire by ~60 though.
Regarding insurance - an excellent point that I had not considered. Definitely don't need to add to our list of headaches, so I appreciate that input.
Re: Prioritizing: Dream Home vs. Retirement Savings
I call HGTV "The Consumption Channel"Conversely, we're suckers for the shows on HGTV that show couples purchasing the most amazing beach houses
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Re: Prioritizing: Dream Home vs. Retirement Savings
I agree with the previous poster that you should max out the retirement accounts first. When you have sufficient amount of money, you can do whatever you want. After maxing out the retirement accounts, you can consider the taxable accounts which may be for your beach front home.
We like beaches very much, but we do not want a beach house. We plan to go to Dominic Republic all-inclusive beach front hotel for Thanksgiving week.
We like beaches very much, but we do not want a beach house. We plan to go to Dominic Republic all-inclusive beach front hotel for Thanksgiving week.
- InvestorNewb
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Re: Prioritizing: Dream Home vs. Retirement Savings
Personally I would rather use that money to travel. I don't have any desire to own a beach house, or even a cottage. It seems like they are a lot of work to maintain.
Renting sounds like a better idea.
Renting sounds like a better idea.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: Prioritizing: Dream Home vs. Retirement Savings
Rent your fantasies.
What looks great now will not meet your needs / wishes later. I've watched the market at a nearby resort beach for more than 40 years. The perpetual upgrades in what are considered necessities in a cottage on / near the beach have been remarkable. I'm sure your tastes / requirements will change over time, too.
What looks great now will not meet your needs / wishes later. I've watched the market at a nearby resort beach for more than 40 years. The perpetual upgrades in what are considered necessities in a cottage on / near the beach have been remarkable. I'm sure your tastes / requirements will change over time, too.
Last edited by RadAudit on Tue Sep 09, 2014 9:26 am, edited 1 time in total.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Last edited by Pizzasteve510 on Tue Sep 09, 2014 9:33 am, edited 1 time in total.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Interesting quote and point well taken, however I wouldn't consider our goal of living near the beach a fantasy. In fact, both of our parents own(ed) houses either directly on or within three blocks of a beach, so it was very much a reality for both of us growing up.RadAudit wrote:Rent your fantasies.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Not having any luck with that link - it's returning a page not found error.Pizzasteve510 wrote:https://screen.yahoo.com/dont-buy-stuff-000000884.htm
- Aptenodytes
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Re: Prioritizing: Dream Home vs. Retirement Savings
Don't rely on HGTV for realistic information about second homes.
You are mixing up different things here. How to spend vacations during your working years, and where to retire. If there is a Boglehead view on this matter, it is probably to separate those things. Your brain has all kinds of powers to trick you into thinking that all the benefits of buying a vacation home will pay off and all the risks will never show up, so you need to work hard to resist. Another likely Boglehead mantra is almost assuredly to wait to buy a vacation home, if you must buy one, until after all your other needs are met.
It isn't hard to imagine conditions that make buying a vacation home justifiable; but it is also easy to imagine falling prey to temptations that are not justified. Be very careful.
Finally, please don't drink Kook Aid after you've bathed in it; it may sound virtuous but it isn't.
You are mixing up different things here. How to spend vacations during your working years, and where to retire. If there is a Boglehead view on this matter, it is probably to separate those things. Your brain has all kinds of powers to trick you into thinking that all the benefits of buying a vacation home will pay off and all the risks will never show up, so you need to work hard to resist. Another likely Boglehead mantra is almost assuredly to wait to buy a vacation home, if you must buy one, until after all your other needs are met.
It isn't hard to imagine conditions that make buying a vacation home justifiable; but it is also easy to imagine falling prey to temptations that are not justified. Be very careful.
Finally, please don't drink Kook Aid after you've bathed in it; it may sound virtuous but it isn't.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Hi Jim,
Have you read The Millionaire Next Door? A good quick read and provocative.
My take (and I'm repeating myself from another thread today because I'm in a similar situation as yours and that poster) is that despite being tempted to keep this money "at the ready" (in my case to eventually purchase home #1 not 2), do what you can to keep and grow as much as you can. Tax-advantaged savings will boost your savings rate, increase amount compounding, etc. Never mind that it is sheltered from spending in tax-advantaged. Remember that it only costs you $.70 to save $1.00 in your tax-advantaged account (or whatever the math is in your case).
Ok so the flip side is you need to figure out how much you can save based on your lifestyle, but don't we all.... And if you max out 2 retirement plans and IRAs it leaves little left for taxable investing. Not a horrible problem to have, actually.
I'd look at what realistic short and mid-term goals you have in order to decide what not to save for retirement. A beach house might be that? But I think a vacation home should be bought with cash, and there should be a whole bunch more behind it as well. But I've never bought one so I don't know.
And I'm not 65, but if I were I think I could enjoy beach houses just as much as I do now (which as it turns out is not all that much. Cabin on a lake, maybe, and I dream too).
Have fun,
JL
Have you read The Millionaire Next Door? A good quick read and provocative.
My take (and I'm repeating myself from another thread today because I'm in a similar situation as yours and that poster) is that despite being tempted to keep this money "at the ready" (in my case to eventually purchase home #1 not 2), do what you can to keep and grow as much as you can. Tax-advantaged savings will boost your savings rate, increase amount compounding, etc. Never mind that it is sheltered from spending in tax-advantaged. Remember that it only costs you $.70 to save $1.00 in your tax-advantaged account (or whatever the math is in your case).
Ok so the flip side is you need to figure out how much you can save based on your lifestyle, but don't we all.... And if you max out 2 retirement plans and IRAs it leaves little left for taxable investing. Not a horrible problem to have, actually.
I'd look at what realistic short and mid-term goals you have in order to decide what not to save for retirement. A beach house might be that? But I think a vacation home should be bought with cash, and there should be a whole bunch more behind it as well. But I've never bought one so I don't know.
And I'm not 65, but if I were I think I could enjoy beach houses just as much as I do now (which as it turns out is not all that much. Cabin on a lake, maybe, and I dream too).
Have fun,
JL
Last edited by JLJL on Mon Apr 20, 2015 3:53 am, edited 1 time in total.
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Re: Prioritizing: Dream Home vs. Retirement Savings
If you retire at 60, can't you take money out of your 401k and roth to buy then? I think the age where you can make withdrawals is 59.5. As for a down payment, if you plan to move to the beach and only own one house, then your current home that you will live in for the next 28 years should provide a nice chunk of cash when you sell it. Owning a second home sounds like a horrible money pit, but retiring to the beach sounds like a wonderful plan.
Re: Prioritizing: Dream Home vs. Retirement Savings
Jim - We stay for at least a week every year on the California coast in a vacation home. It's someone's dream home, but not ours - except for the week we rent it.
It sounds like we are in a similar financial place - we max 401ks and Roths and are trying to build a 529. Like you, we could buy a coastal home or fully fund retirement, but not both. And we have no desire to deal with the maintenance and utilities of a second home, plus the HOA fees that exist in the community we visit. Not to mention the insurance; I imagine Florida coastal homes come with insanely steep insurance costs after the battering that region has taken in the past.
In my view, this is consumption on par with a luxury sports car. Nice to have, and fine for truly affluent people to own, but if you're having to ask whether you should divert retirement savings to fund it, you already know the answer.
So why not just go to VRBO or a rental agency every year and rent for the weeks you want to visit? I don't know what it costs there, but we pay about $1200-$1500 a week. A cheap price for being able to enjoy the coast whenever we want and not having to deal with any of the headaches.
It sounds like we are in a similar financial place - we max 401ks and Roths and are trying to build a 529. Like you, we could buy a coastal home or fully fund retirement, but not both. And we have no desire to deal with the maintenance and utilities of a second home, plus the HOA fees that exist in the community we visit. Not to mention the insurance; I imagine Florida coastal homes come with insanely steep insurance costs after the battering that region has taken in the past.
In my view, this is consumption on par with a luxury sports car. Nice to have, and fine for truly affluent people to own, but if you're having to ask whether you should divert retirement savings to fund it, you already know the answer.
So why not just go to VRBO or a rental agency every year and rent for the weeks you want to visit? I don't know what it costs there, but we pay about $1200-$1500 a week. A cheap price for being able to enjoy the coast whenever we want and not having to deal with any of the headaches.
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Re: Prioritizing: Dream Home vs. Retirement Savings
I have two "second homes". One in SE Florida that I inherited, and another in the Caribbean (Venezuelan island) that I bought. I love the Caribbean home and winter there. The FL one, which I rent, has been an albatross around my neck. It is worth less than 50% of what it was worth when I inherited it. I love the one in the Caribbean. I spend my winters there, which, on top of providing me with endless enjoyment, saves me a lot of money.
Lots going on here to think about.
A second home, like a dream, can be a nightmare...you never know when you go to sleep. If you are only spending a small amount of time there due to a busy work/family life elsewhere, you may have to contend with major upkeep issues (especially true in Florida in the hurricane zone, and where the climate seems to rot everything), renting hassles, tenants from hell, annoying neighbors, draconian homeowner association regulations, unpredictable real estate market...it can be a full-time job with little reward. The bigger and more expensive the home, the more you have to lose when things don't go your way. Don't get me wrong- it's great to have your own space. But the flexibility of renting places without worry is also great. It sounds like you want this place for your use more than as an income generator. I think if your time there is limited to weeks per year for the foreseeable future, unless you are deriving enough income from it to balance your hassles (which will likely be greater than you imagine), you should seriously reconsider.
If you can somehow manage to declare FL your residency, you may profit from the lack of state income tax. I am not in that position.
To address your concern about 65 year olds, I have no idea if a 65 year old can enjoy living at the beach, since I am still a 62 year old child who windsurfs every day when I am there. If I ever get old I will report back on that.
Lots going on here to think about.
A second home, like a dream, can be a nightmare...you never know when you go to sleep. If you are only spending a small amount of time there due to a busy work/family life elsewhere, you may have to contend with major upkeep issues (especially true in Florida in the hurricane zone, and where the climate seems to rot everything), renting hassles, tenants from hell, annoying neighbors, draconian homeowner association regulations, unpredictable real estate market...it can be a full-time job with little reward. The bigger and more expensive the home, the more you have to lose when things don't go your way. Don't get me wrong- it's great to have your own space. But the flexibility of renting places without worry is also great. It sounds like you want this place for your use more than as an income generator. I think if your time there is limited to weeks per year for the foreseeable future, unless you are deriving enough income from it to balance your hassles (which will likely be greater than you imagine), you should seriously reconsider.
If you can somehow manage to declare FL your residency, you may profit from the lack of state income tax. I am not in that position.
To address your concern about 65 year olds, I have no idea if a 65 year old can enjoy living at the beach, since I am still a 62 year old child who windsurfs every day when I am there. If I ever get old I will report back on that.
Re: Prioritizing: Dream Home vs. Retirement Savings
Just to give you an idea of the insurance costs: I live in a mid-size city about 40 miles north of the Gulf of Mexico. I know people in my town who live in average homes ($200,000-300,000 in value) and who paid upwards of $4000-5000 a year just for wind coverage following hurricanes Ivan and Katrina in 2004 and 2005. They had to pay an additional $1000-2000 a year for other perils coverage. Prices have come down since then, but they'll shoot right back up after the next storm. Many real estate closings fall through in this area because after negotiating a manageable sales price for the home, buyers realize they can't afford the monthly payments when insurance is factored in. It's truly a nightmare and I would never move to this area if I could start over again.
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Re: Prioritizing: Dream Home vs. Retirement Savings
I've well over 65 and enjoy my beach house very much. I would probably even buy it again if I time traveled back there.Rupert wrote:You should max retirement accounts before even considering saving for a second home. And let me warn you about beach houses on the Florida Gulf Coast, which is very near where I live: The insurance will kill you, not just financially but also emotionally as you have to scramble to find insurance and fight with the insurance company every time a storm blows through. Just rent.
However:
Even homeowner's insurance is hard to get. I don't know why, since it's not flood insurance. I have never even had a claim.
Liability insurance - this seems easy to get, however you can't get it without having homeowner's insurance, which makes the homeowner's insurance mess even more angst-producing.
Flood insurance - I don't know what has actually happened via the Boggert-Waters flood insurance bill. Gigantic increases in premiums were expected. At least this year, I seen to have dodged the bullet, despite being in a terrible flood zone, much worse than when I bought the house. They may have passed some subsequent bill protecting homeowners vs. renters or second house owners from some premium increases.
Workmen will assume you are rich and jack up their prices accordingly. It takes some effort and name passing around among neighbors to find honest people.
The house will be a total loss at some point. Do not expect it to retain value, let alone be livable eventually. At some point these houses will become unsellable.
Property taxes are high, but in my area are dropping as the previous sentence sinks in.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Pizzasteve510 wrote:https://screen.yahoo.com/dont-buy-stuff-000000884.html
Love it! Hope you don't mind me sharing.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Me too!Workinghard wrote:Pizzasteve510 wrote:https://screen.yahoo.com/dont-buy-stuff-000000884.html
Love it! Hope you don't mind me sharing.
Re: Prioritizing: Dream Home vs. Retirement Savings
@jimday1982 - sounds like you're already getting plenty of replies in the "don't do it" camp, and I agree.
When my wife & I first moved to Texas & the kids were very young, we would take long weekend vacations to a rented condo just south of Port Aransas, TX on the Gulf Coast. We considered buying a beach-front condo in one of the buildings we liked, but realized even with optimistic assumptions about income from rentals and outflow to expenses, we'd still feel compelled to take all of our vacations at that condo simply to get "our money's worth". No matter how much we like the beach (I grew up on the coast north of Boston and like it a lot), we would have cheated ourselves out of a lot of fun family vacations to different parts of the country and the world over the years if we were constantly pulled to that condo for every free week or long weekend of vacation. I've seen that happen with co-workers who buy a condo, vacation home, or small ranch out of town - it's great for a few years and is the source of griping around the lunch table at work. Often the property is sold with a heavy sigh of relief.
The notion that somehow a unit in a depreciating condo building would appreciate faster than the overall stock market seems like a speculative fantasy, regardless how well the building is managed. Perhaps a standalone house rather than a condo might increase in value nicely over the years, but other than speculation is there any reason to believe that you wouldn't be able to buy the beach property when you're at retirement after experiencing 25+ years of stock market appreciation? The fear that real estate appreciation would be much higher than the appreciation of your stock investments might be a strong "buy it now" argument, but the carrying costs of taxes, insurance, and maintenance would really be a drag between now and your eventual retirement.
Those are just thoughts on the effort that goes into managing a rental property, the cost of ownership, and worries about runaway real estate appreciation. What if you simply decide that you'd rather live on a nice lake in retirement rather than on the beach? Or in the mountains? You'll experience a lot of changes over 20 or 25 years and might feel differently about beachfront later. I can't see any reason to tie yourself down with a property in a fixed & remote location that will dominate your investment portfolio and demand so much of your time to maintain when you already have your career and raising children to occupy your time.
When my wife & I first moved to Texas & the kids were very young, we would take long weekend vacations to a rented condo just south of Port Aransas, TX on the Gulf Coast. We considered buying a beach-front condo in one of the buildings we liked, but realized even with optimistic assumptions about income from rentals and outflow to expenses, we'd still feel compelled to take all of our vacations at that condo simply to get "our money's worth". No matter how much we like the beach (I grew up on the coast north of Boston and like it a lot), we would have cheated ourselves out of a lot of fun family vacations to different parts of the country and the world over the years if we were constantly pulled to that condo for every free week or long weekend of vacation. I've seen that happen with co-workers who buy a condo, vacation home, or small ranch out of town - it's great for a few years and is the source of griping around the lunch table at work. Often the property is sold with a heavy sigh of relief.
The notion that somehow a unit in a depreciating condo building would appreciate faster than the overall stock market seems like a speculative fantasy, regardless how well the building is managed. Perhaps a standalone house rather than a condo might increase in value nicely over the years, but other than speculation is there any reason to believe that you wouldn't be able to buy the beach property when you're at retirement after experiencing 25+ years of stock market appreciation? The fear that real estate appreciation would be much higher than the appreciation of your stock investments might be a strong "buy it now" argument, but the carrying costs of taxes, insurance, and maintenance would really be a drag between now and your eventual retirement.
Those are just thoughts on the effort that goes into managing a rental property, the cost of ownership, and worries about runaway real estate appreciation. What if you simply decide that you'd rather live on a nice lake in retirement rather than on the beach? Or in the mountains? You'll experience a lot of changes over 20 or 25 years and might feel differently about beachfront later. I can't see any reason to tie yourself down with a property in a fixed & remote location that will dominate your investment portfolio and demand so much of your time to maintain when you already have your career and raising children to occupy your time.
- Jim in Austin, TX
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Re: Prioritizing: Dream Home vs. Retirement Savings
So another view.
My husband and I followed pretty much all the "rules". No large consumer debt, no spending, yada yada yada save save because you'll need it when you 70, 80, 90.
We also had a very concrete dream that we kept putting off as not to spend.
Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
What was the sacrificing for? Was it worth it? when I think of all the things we could have done but didn't because we lived with some "fear" of being 85 and running out of money.
So I'm no longer on the "max" every thing out band wagon. I put in the minimum in my 401K to get the company match (6%) and I have an emergency fund.
Now I still don't do consumer debt mainly because I was raised during an era that no one really used credit cards so that hasn't changed.
What has changed is I am no longer putting off my dreams for some unknown time in the future that I may or may not live to.
Next year my sons and I are doing England and Scotland for 3 weeks and I recently purchased a time share even though all the financial "gurus" say how it's a waste of money. You know what, what the hell am I working for if not to actually enjoy life.
Is the entire object of this to simply leave some one a gabillion dollars when I'm dead. I'm considering retiring in 2 years and no I'm not going to stress that I "may" need long term health insurance.
I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
So if you have done all the math, all the research, I'm not saying "go for it" I am saying that I am no longer delaying my true dreams on some 20 year in the future possibility.
My husband and I followed pretty much all the "rules". No large consumer debt, no spending, yada yada yada save save because you'll need it when you 70, 80, 90.
We also had a very concrete dream that we kept putting off as not to spend.
Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
What was the sacrificing for? Was it worth it? when I think of all the things we could have done but didn't because we lived with some "fear" of being 85 and running out of money.
So I'm no longer on the "max" every thing out band wagon. I put in the minimum in my 401K to get the company match (6%) and I have an emergency fund.
Now I still don't do consumer debt mainly because I was raised during an era that no one really used credit cards so that hasn't changed.
What has changed is I am no longer putting off my dreams for some unknown time in the future that I may or may not live to.
Next year my sons and I are doing England and Scotland for 3 weeks and I recently purchased a time share even though all the financial "gurus" say how it's a waste of money. You know what, what the hell am I working for if not to actually enjoy life.
Is the entire object of this to simply leave some one a gabillion dollars when I'm dead. I'm considering retiring in 2 years and no I'm not going to stress that I "may" need long term health insurance.
I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
So if you have done all the math, all the research, I'm not saying "go for it" I am saying that I am no longer delaying my true dreams on some 20 year in the future possibility.
"He who dies with the most toys is still, nonetheless dead"
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Re: Prioritizing: Dream Home vs. Retirement Savings
My wife and I never planned to own a second home, but ended up with one in the North Carolina mountains, a few hours from where we live.
My Dad loves that area and found a foreclosure home available there last year. He's just retired and wanted a place to go to several times a year, where we could join him (or go independently if we wanted.)
He offered that if we would put in half the purchase price and split the expenses, we could inherit the house directly (other assets will be split between myself, my stepmother and her children.) To us, this was a good deal: a house that had previously been valued at a half-million dollars, for about $150k for us counting the furnishings and repairs needed.
We've gotten a lot of joy out of the house and are there 1-3 times a month. That said, we are fortunate it is in an area where insurance and taxes are low (totaling about $250 a month), utilities are cheap (low to no A/C in summers, winterized in the winter), and there are year-round neighbors who are friendly and keep an eye out for oddities. The last point is very important, as without it you will spend lots of time driving/flying to take care of issues.
In total, our share of the "cost to own," ignoring any opportunity cost on our money, is about $500 a month. It's a great home and we love having it, but we wouldn't have done it on our own. And, when Dad does pass, it'll be an open question whether we keep it or sell and invest the proceeds.
Do you have a relative or close friend who might be able to go in 50/50 on such a venture with you (being mindful of the risks THAT kind of entanglement can bring....?)
My Dad loves that area and found a foreclosure home available there last year. He's just retired and wanted a place to go to several times a year, where we could join him (or go independently if we wanted.)
He offered that if we would put in half the purchase price and split the expenses, we could inherit the house directly (other assets will be split between myself, my stepmother and her children.) To us, this was a good deal: a house that had previously been valued at a half-million dollars, for about $150k for us counting the furnishings and repairs needed.
We've gotten a lot of joy out of the house and are there 1-3 times a month. That said, we are fortunate it is in an area where insurance and taxes are low (totaling about $250 a month), utilities are cheap (low to no A/C in summers, winterized in the winter), and there are year-round neighbors who are friendly and keep an eye out for oddities. The last point is very important, as without it you will spend lots of time driving/flying to take care of issues.
In total, our share of the "cost to own," ignoring any opportunity cost on our money, is about $500 a month. It's a great home and we love having it, but we wouldn't have done it on our own. And, when Dad does pass, it'll be an open question whether we keep it or sell and invest the proceeds.
Do you have a relative or close friend who might be able to go in 50/50 on such a venture with you (being mindful of the risks THAT kind of entanglement can bring....?)
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Re: Prioritizing: Dream Home vs. Retirement Savings
Your dreams are on hold temporarily. It's only been two years. In time you will find your independent identity and create new dreams if you are open to them.camptalcott wrote: Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
There is more to life than making money. The boglehead thing is only a part of the equation, and, IMHO, a wise man/woman avoids gurus. Other than those who have hurt others, nobody needs to live with regrets.camptalcott wrote:I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
Re: Prioritizing: Dream Home vs. Retirement Savings
So sorry to hear that, it's quite unfortunate.camptalcott wrote:So another view.
My husband and I followed pretty much all the "rules". No large consumer debt, no spending, yada yada yada save save because you'll need it when you 70, 80, 90.
We also had a very concrete dream that we kept putting off as not to spend.
Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
Unfortunately we can't see the future yet still have to make decisions based on it. You can't ask yourself now whether it was the right decision at the time based on what you know now, you can only ask based on what you knew then.What was the sacrificing for? Was it worth it? when I think of all the things we could have done but didn't because we lived with some "fear" of being 85 and running out of money.
Everything in moderation is a generally good rule of thumb to follow. You shouldn't overreact to one bad risk event by assuming it will happen again - I'm not saying you are overreacting but I wouldn't want to ignore the risk of being destitute at 80 just because you husband unfortunately died at 54.So I'm no longer on the "max" every thing out band wagon. I put in the minimum in my 401K to get the company match (6%) and I have an emergency fund.
Now I still don't do consumer debt mainly because I was raised during an era that no one really used credit cards so that hasn't changed.
What has changed is I am no longer putting off my dreams for some unknown time in the future that I may or may not live to.
Timeshares are generally a waste of money for the level of enjoyment you will get from them - it isn't simply that you shouldn't spend money it is that your travel dollar can go farther (and to more varied places on a more flexible schedule) when not used that way. I spend plenty of money on travel and have seen a good percentage of the world and am a big advocate of spending money on those experience - for almost everyone I too would say that a timeshare is a waste of money and a much better value for the salesman than the buyer.Next year my sons and I are doing England and Scotland for 3 weeks and I recently purchased a time share even though all the financial "gurus" say how it's a waste of money. You know what, what the hell am I working for if not to actually enjoy life.
Just make sure you aren't letting your regretsIs the entire object of this to simply leave some one a gabillion dollars when I'm dead. I'm considering retiring in 2 years and no I'm not going to stress that I "may" need long term health insurance.
I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
So if you have done all the math, all the research, I'm not saying "go for it" I am saying that I am no longer delaying my true dreams on some 20 year in the future possibility.
Re: Prioritizing: Dream Home vs. Retirement Savings
I think life is a balance, and you just have to decide which goals are more important. You can save up for a beach house and plan to retire later in life; or you can wait until to retire to buy a beach house, and use the proceeds from your current house to buy it (or at least pay for most of it); or you can buy a more affordable retirement house and rent beach houses whenever you want.
Just to share my perspective - we bought a cabin in the mountains 4 years ago after deciding that we could cut the amount we were saving and still feel comfortable with what we would be able to save. So, we are saving less than we used to, but we don't feel that we are imperiling our retirement goals. I don't regret the decision for a minute. We use it all the time and love it. But, again, we are also on target for our retirement. I can't tell from your post if saving for the beach house would mean you are just saving less, or it means you are derailing whatever retirement plans you currently have. You can change/alter your retirement plans to adjust for saving less (i.e. cut your expenses in retirement so that you can live on less, work longer, etc).
The question of prioritizing is very personal. To us, retiring early (in our mid-50s) is our number one goal, so we won't do anything that will take us off that track. For you, maybe the dream home is more important than having a specific retirement date.
Just to share my perspective - we bought a cabin in the mountains 4 years ago after deciding that we could cut the amount we were saving and still feel comfortable with what we would be able to save. So, we are saving less than we used to, but we don't feel that we are imperiling our retirement goals. I don't regret the decision for a minute. We use it all the time and love it. But, again, we are also on target for our retirement. I can't tell from your post if saving for the beach house would mean you are just saving less, or it means you are derailing whatever retirement plans you currently have. You can change/alter your retirement plans to adjust for saving less (i.e. cut your expenses in retirement so that you can live on less, work longer, etc).
The question of prioritizing is very personal. To us, retiring early (in our mid-50s) is our number one goal, so we won't do anything that will take us off that track. For you, maybe the dream home is more important than having a specific retirement date.
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Re: Prioritizing: Dream Home vs. Retirement Savings
avalpert wrote:So sorry to hear that, it's quite unfortunate.camptalcott wrote:So another view.
My husband and I followed pretty much all the "rules". No large consumer debt, no spending, yada yada yada save save because you'll need it when you 70, 80, 90.
We also had a very concrete dream that we kept putting off as not to spend.
Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
Unfortunately we can't see the future yet still have to make decisions based on it. You can't ask yourself now whether it was the right decision at the time based on what you know now, you can only ask based on what you knew then.What was the sacrificing for? Was it worth it? when I think of all the things we could have done but didn't because we lived with some "fear" of being 85 and running out of money.
Everything in moderation is a generally good rule of thumb to follow. You shouldn't overreact to one bad risk event by assuming it will happen again - I'm not saying you are overreacting but I wouldn't want to ignore the risk of being destitute at 80 just because you husband unfortunately died at 54.So I'm no longer on the "max" every thing out band wagon. I put in the minimum in my 401K to get the company match (6%) and I have an emergency fund.
Now I still don't do consumer debt mainly because I was raised during an era that no one really used credit cards so that hasn't changed.
What has changed is I am no longer putting off my dreams for some unknown time in the future that I may or may not live to.
Timeshares are generally a waste of money for the level of enjoyment you will get from them - it isn't simply that you shouldn't spend money it is that your travel dollar can go farther (and to more varied places on a more flexible schedule) when not used that way. I spend plenty of money on travel and have seen a good percentage of the world and am a big advocate of spending money on those experience - for almost everyone I too would say that a timeshare is a waste of money and a much better value for the salesman than the buyer.Next year my sons and I are doing England and Scotland for 3 weeks and I recently purchased a time share even though all the financial "gurus" say how it's a waste of money. You know what, what the hell am I working for if not to actually enjoy life.
Just make sure you aren't letting your regretsIs the entire object of this to simply leave some one a gabillion dollars when I'm dead. I'm considering retiring in 2 years and no I'm not going to stress that I "may" need long term health insurance.
I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
So if you have done all the math, all the research, I'm not saying "go for it" I am saying that I am no longer delaying my true dreams on some 20 year in the future possibility.
I think what I've learned in the last year though is that "value" some times is measure in more than just commission.
A waste of money? not sure I'd agree with that, my parents had one in Aruba and the summers spent there with family and cousins is some thing that has great value and I wish we had done with our kids.
My husband and I were bikers, our dream was to travel up and down the country on Harleys. why didn't we? to put an extra 3% in our 401K? After he died I got a severance check from his job for 8 weeks of vacation that he didn't take. Why didn't he? Why didn't I demand we enjoy TODAY.
just the routine, if "I" would coulda questions
"He who dies with the most toys is still, nonetheless dead"
Re: Prioritizing: Dream Home vs. Retirement Savings
There are a couple issues. The first is efficient spending (100k on a timeshare versus a 100k on other vacations) while the other is an inability to spend. The inability to spend seems like a stupid problem but it is a real one. After doing things for 30+ years it is hard to switch gears. Figuring out a balance point is hard and depends too much on luck (i.e. market timing and life expectancy timing). There is a strong tendency to be conservative because of the risks of being wrong are high but it is really easy to get way to conservative and lose out on life.camptalcott wrote:
I think what I've learned in the last year though is that "value" some times is measure in more than just commission.
A waste of money? not sure I'd agree with that, my parents had one in Aruba and the summers spent there with family and cousins is some thing that has great value and I wish we had done with our kids.
My husband and I were bikers, our dream was to travel up and down the country on Harleys. why didn't we? to put an extra 3% in our 401K? After he died I got a severance check from his job for 8 weeks of vacation that he didn't take. Why didn't he? Why didn't I demand we enjoy TODAY.
just the routine, if "I" would coulda questions
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Re: Prioritizing: Dream Home vs. Retirement Savings
Just wanted to chime back in to thank each of you, again, for your comments and perspectives. They were incredibly helpful and have helped me tremendously in realizing where we should be placing our savings.
Based on your comments, it's looking like the best course of action is to move forward with maximizing our retirement accounts. The trouble and expense of owning a second home probably isn't something we're cut out for, so we'll likely have to defer the beach house until retirement, after selling our primary residence. If we're able to max those accounts out for the next28 or so years, we should be in a pretty good position to either purchase one or rent any time we're inclined to.
I definitely received the food for thought I was after. I greatly appreciate it.
Based on your comments, it's looking like the best course of action is to move forward with maximizing our retirement accounts. The trouble and expense of owning a second home probably isn't something we're cut out for, so we'll likely have to defer the beach house until retirement, after selling our primary residence. If we're able to max those accounts out for the next28 or so years, we should be in a pretty good position to either purchase one or rent any time we're inclined to.
I definitely received the food for thought I was after. I greatly appreciate it.
Re: Prioritizing: Dream Home vs. Retirement Savings
I'd pick a coast that had less likelihood of the occasional hurricane going through.
Leonard |
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Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? |
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If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
Re: Prioritizing: Dream Home vs. Retirement Savings
I think it is time you took the kid(s) to go visit the grandparents. My in-laws have a house a few blocks from the beach and some of their further-away kids and grandkids "visit" for a week at a time several times a year. The parents-in-law love it.jimday1982 wrote: . . . We recently had a baby . . .
. . . Interesting quote and point well taken, however I wouldn't consider our goal of living near the beach a fantasy. In fact, both of our parents own(ed) houses either directly on or within three blocks of a beach, so it was very much a reality for both of us growing up.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Re: Prioritizing: Dream Home vs. Retirement Savings
We take the kids to Bonaire every year for Thanksgiving week - it is cheaper and more flexible for us not having a timeshare. It also means the year we decide to change it up and go to Cozumel or Grand Cayman we don't lose any opportunity costs.camptalcott wrote:avalpert wrote:So sorry to hear that, it's quite unfortunate.camptalcott wrote:So another view.
My husband and I followed pretty much all the "rules". No large consumer debt, no spending, yada yada yada save save because you'll need it when you 70, 80, 90.
We also had a very concrete dream that we kept putting off as not to spend.
Then my husband dropped dead two years ago at age 54.
so now I've got a boat load of money, no husband, no dream NOTHING!! My dreams are over and I'm only 53!! IT SUCKS.
Unfortunately we can't see the future yet still have to make decisions based on it. You can't ask yourself now whether it was the right decision at the time based on what you know now, you can only ask based on what you knew then.What was the sacrificing for? Was it worth it? when I think of all the things we could have done but didn't because we lived with some "fear" of being 85 and running out of money.
Everything in moderation is a generally good rule of thumb to follow. You shouldn't overreact to one bad risk event by assuming it will happen again - I'm not saying you are overreacting but I wouldn't want to ignore the risk of being destitute at 80 just because you husband unfortunately died at 54.So I'm no longer on the "max" every thing out band wagon. I put in the minimum in my 401K to get the company match (6%) and I have an emergency fund.
Now I still don't do consumer debt mainly because I was raised during an era that no one really used credit cards so that hasn't changed.
What has changed is I am no longer putting off my dreams for some unknown time in the future that I may or may not live to.
Timeshares are generally a waste of money for the level of enjoyment you will get from them - it isn't simply that you shouldn't spend money it is that your travel dollar can go farther (and to more varied places on a more flexible schedule) when not used that way. I spend plenty of money on travel and have seen a good percentage of the world and am a big advocate of spending money on those experience - for almost everyone I too would say that a timeshare is a waste of money and a much better value for the salesman than the buyer.Next year my sons and I are doing England and Scotland for 3 weeks and I recently purchased a time share even though all the financial "gurus" say how it's a waste of money. You know what, what the hell am I working for if not to actually enjoy life.
Just make sure you aren't letting your regretsIs the entire object of this to simply leave some one a gabillion dollars when I'm dead. I'm considering retiring in 2 years and no I'm not going to stress that I "may" need long term health insurance.
I know it's not very boglehead like or Dave Ramsey like or suzy ormanish but they don't have to live with the regrets, I do.
So if you have done all the math, all the research, I'm not saying "go for it" I am saying that I am no longer delaying my true dreams on some 20 year in the future possibility.
I think what I've learned in the last year though is that "value" some times is measure in more than just commission.
A waste of money? not sure I'd agree with that, my parents had one in Aruba and the summers spent there with family and cousins is some thing that has great value and I wish we had done with our kids.
Hindsight is always 20/20. You didn't demand it because you couldn't' see the future and made the decision that based on what you knew at the time seemed best.My husband and I were bikers, our dream was to travel up and down the country on Harleys. why didn't we? to put an extra 3% in our 401K? After he died I got a severance check from his job for 8 weeks of vacation that he didn't take. Why didn't he? Why didn't I demand we enjoy TODAY.
just the routine, if "I" would coulda questions
I tried learning to ride a motorcycle on Bali - not my smartest move but enjoyable nonetheless.
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Re: Prioritizing: Dream Home vs. Retirement Savings
Don't forget to have fun on the way.jimday1982 wrote:Just wanted to chime back in to thank each of you, again, for your comments and perspectives. They were incredibly helpful and have helped me tremendously in realizing where we should be placing our savings.
Based on your comments, it's looking like the best course of action is to move forward with maximizing our retirement accounts. The trouble and expense of owning a second home probably isn't something we're cut out for, so we'll likely have to defer the beach house until retirement, after selling our primary residence. If we're able to max those accounts out for the next28 or so years, we should be in a pretty good position to either purchase one or rent any time we're inclined to.
I definitely received the food for thought I was after. I greatly appreciate it.