“Upsizing” are we foolish?

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Topic Author
Turkishcoffee
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Joined: Sat May 25, 2019 5:16 pm

“Upsizing” are we foolish?

Post by Turkishcoffee » Sat May 25, 2019 5:48 pm

Long time lurker and enjoy this website.

Weve lived much the bogleheads lifestyle without knowing what a bogleheads was, but have certainly steered my investments to greater simplicity in the last few years I’ve read posts here.

My spouse and I have 1 child, age 11. We live in a strong school district in which we would like to stay for reasons most closely related to less interruption of our child’s life in school.

We live in a relatively HCOL area in a carriage house (connected twin). Spouse and I are both 51 and hope to retire in 5 - 6 years.

Basically, our home is small, very tight and to move the only construction we would be interested in is a town home giving us about 800 square feet more than what we have now. Everything else is old 60+ years in the area.

But so close to retirement we feel we are doing it wrong “upsizing” when we will be empty nesters in 7 years. We would need to spend the difference between our homes worth and about $325,000 to get a bigger place. Is this foolish?

Here is our situation:

Home paid off
Ages 51/51
Child 11
Debt- 0
Income combined :$135000
Annual spend is about $105000
Total tax deferred savings: $1700000
Total taxable savings $1500000
Asset allocation is 65/35 stocks to bonds in a three fund portfolio
Expected SS at 62/68 $10,000/$14000


Are we in a position to gain some more comfort? Are we being foolish? Is this going to derail our retirement plans?

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leeks
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Re: “Upsizing” are we foolish?

Post by leeks » Sat May 25, 2019 6:16 pm

What's wrong with a 60+ year old house? The older construction is often sturdier than the newer. Of course it can have issues but so can a 20-year-old house, or even a 2-year-old house. Would it be cheaper if you bought an older place and renovated to bring it to your preferences?

If you are currently spending $105K per year, there are clearly opportunities to cut costs if you prefer a larger house. You can surely make it work if you want to.

Edit: I missed the $1.5 million in taxable savings in my first read. I'm not sure why you are asking this question, I must be missing something. Why do you think you can't afford to spend $350K? Couldn't you spend that in cash and still have enough money to retire *now* if you wanted to?
Last edited by leeks on Sat May 25, 2019 6:26 pm, edited 2 times in total.

mortfree
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Re: “Upsizing” are we foolish?

Post by mortfree » Sat May 25, 2019 6:19 pm

Wow. No mortgage and you spend 105k out of 135k??

prairieman
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Re: “Upsizing” are we foolish?

Post by prairieman » Sat May 25, 2019 6:20 pm

At some point, we went from spartan saving mode to spending/enjoy life mode. I was mid fifties, and we upsized to the house of our dreams - where we could see ourselves living out our lives. If you can afford it, and want it, then do it.

runner540
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Re: “Upsizing” are we foolish?

Post by runner540 » Sat May 25, 2019 6:23 pm

You have $1.7MM + $1.5MM in investments, and make $135k? I think you are ok to get a $325k house, just run the numbers on your retirement budget, with SWR on $3-3.5MM and SS.

Topic Author
Turkishcoffee
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Re: “Upsizing” are we foolish?

Post by Turkishcoffee » Sat May 25, 2019 6:24 pm

mortfree wrote:
Sat May 25, 2019 6:19 pm
Wow. No mortgage and you spend 105k out of 135k??

Actually, we are experiencing a big pay cut going from $225k last year to what we anticipate around $130 k this year. But yes, I guess we spend a lot!

randomguy
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Re: “Upsizing” are we foolish?

Post by randomguy » Sat May 25, 2019 6:29 pm

The expense of this house is going to be minimal. In 10 years you can downsize and get most of that 325k back. You will lose some to transaction and carrying costs along the way. Living cheaper is always financially better. Don't let money run your life.

veindoc
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Re: “Upsizing” are we foolish?

Post by veindoc » Sat May 25, 2019 6:31 pm

How long do you plan to stay in new house? Will you stay in the area after the little one has flown the coop? You might find that you don’t want to move after your child has left. My parents expected to leave once they empty nested but they loved the area, their home, neighbors etc and stayed there. So be prepared for that.
How will you pay for new house?
Why is your income declining? And has it hit bottom yet?

dbr
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Re: “Upsizing” are we foolish?

Post by dbr » Sat May 25, 2019 6:33 pm

You can easily spend on a house of that price. When you become "empty-nesters" you will find that the nest is actually instantly full with something as soon as the kid moves out. Also kids come back if only to visit, along with a family in tow, eventually.

Note you can probably just pay cash given your assets in taxable.

And . . . what is the value of your current house?

crre
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Re: “Upsizing” are we foolish?

Post by crre » Sat May 25, 2019 6:39 pm

i too would not be so quick to dismiss a 60+ year old house. in fact, i would prefer it. also, define "small" and "very tight".

finally: when i was in your situation many years ago, the best advice i ever got was not to buy too much house. instead of moving, we added a bedroom for what it would have cost in taxes and fees to move. is that possible in your current house?

Topic Author
Turkishcoffee
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Re: “Upsizing” are we foolish?

Post by Turkishcoffee » Sat May 25, 2019 6:42 pm

dbr wrote:
Sat May 25, 2019 6:33 pm
You can easily spend on a house of that price. When you become "empty-nesters" you will find that the nest is actually instantly full with something as soon as the kid moves out. Also kids come back if only to visit, along with a family in tow, eventually.

Note you can probably just pay cash given your assets in taxable.

And . . . what is the value of your current house?
Current home value is $395,000, anticipate needing to spend $625000

delamer
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Re: “Upsizing” are we foolish?

Post by delamer » Sat May 25, 2019 6:45 pm

You’d only be spending 10% of your liquid assets to upgrade, and you’d still have $2 million left.

I don’t see a problem — given your current expenses — unless you expect to spend a huge chunk of money on your child’s education.

Topic Author
Turkishcoffee
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Re: “Upsizing” are we foolish?

Post by Turkishcoffee » Sat May 25, 2019 6:46 pm

Forgot to mention we have $100k in a 529 and plan to spend about half to 75%% of their college.

Topic Author
Turkishcoffee
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Re: “Upsizing” are we foolish?

Post by Turkishcoffee » Sat May 25, 2019 6:47 pm

crre wrote:
Sat May 25, 2019 6:39 pm
i too would not be so quick to dismiss a 60+ year old house. in fact, i would prefer it. also, define "small" and "very tight".

finally: when i was in your situation many years ago, the best advice i ever got was not to buy too much house. instead of moving, we added a bedroom for what it would have cost in taxes and fees to move. is that possible in your current house?
Hoa community won’t allow build outs. We have 1700sq feet of space.

dbr
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Re: “Upsizing” are we foolish?

Post by dbr » Sat May 25, 2019 6:50 pm

Don't forget that exchanging some of your stock and bond assets for a house asset is not a loss in net worth whether or not it is the highest net return you can manage. That asset is still there if/when you want to downsize to a smaller house, move to a lower cost of living area, or decide/are forced to rent.

runner3081
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Re: “Upsizing” are we foolish?

Post by runner3081 » Sat May 25, 2019 7:18 pm

leeks wrote:
Sat May 25, 2019 6:16 pm
What's wrong with a 60+ year old house? The older construction is often sturdier than the newer. Of course it can have issues but so can a 20-year-old house, or even a 2-year-old house. Would it be cheaper if you bought an older place and renovated to bring it to your preferences?
20 years is about when things start breaking for the first time, all at once, it seems!

crre
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Re: “Upsizing” are we foolish?

Post by crre » Sat May 25, 2019 7:28 pm

We have 1700sq feet of space.

ok, so i don't live in the states and therefore my perceptions are probably very different from yours, but 1700 square feet of space is huge to me. especially for three people. 1700 square feet is slightly more than our current 4 bedroom home, in which we brought up three children after adding above mentioned bedroom to the original house. i realize that in the states rooms are typically much larger.

so: how many rooms is your home and why is it not enough? do you have too much stuff? is it the kitchen or other specific area that is tight and cramped and could that be solved by a renovation?

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Watty
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Re: “Upsizing” are we foolish?

Post by Watty » Sat May 25, 2019 7:35 pm

Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
Total tax deferred savings: $1700000
Total taxable savings $1500000
....
Current home value is $395,000, anticipate needing to spend $625000
You can afford it but it will increase your yearly expenses with things like higher property taxes and utilities so be sure to include your budget.

I would pay cash.

If it is a smart move or not is another question.

If you have health insurance provided by your jobs your expenses could go up considerably so even without buying the larger house trying to retire in five or six years could be borderline unless you are saving a lot each year and you didn't mention that.

HomeStretch
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Re: “Upsizing” are we foolish?

Post by HomeStretch » Sat May 25, 2019 7:41 pm

Turkishcoffee wrote:
Sat May 25, 2019 6:24 pm
mortfree wrote:
Sat May 25, 2019 6:19 pm
Wow. No mortgage and you spend 105k out of 135k??
Actually, we are experiencing a big pay cut going from $225k last year to what we anticipate around $130 k this year. But yes, I guess we spend a lot!
You are spending $105k of a newly cut income of $130k. Not a lot left over to save much more before you retire at age 56-57.

Upsizing your house requires spending from savings and probably higher monthly house-related expenses.

Does the $105k include all expenses + taxes + healthcare? How much will your annual expenses increase with an upsized house?
How much will your expenses increase after retirement for healthcare pre-Medicare?

randomguy
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Re: “Upsizing” are we foolish?

Post by randomguy » Sat May 25, 2019 11:31 pm

crre wrote:
Sat May 25, 2019 7:28 pm
We have 1700sq feet of space.

ok, so i don't live in the states and therefore my perceptions are probably very different from yours, but 1700 square feet of space is huge to me. especially for three people. 1700 square feet is slightly more than our current 4 bedroom home, in which we brought up three children after adding above mentioned bedroom to the original house. i realize that in the states rooms are typically much larger.

so: how many rooms is your home and why is it not enough? do you have too much stuff? is it the kitchen or other specific area that is tight and cramped and could that be solved by a renovation?
Why did you expand your house? A 1100 sq ft house (guessing on size before adding 1 bedroom) is plenty to raise a family of 5. I have parents on both sides that can attest to that. Ok one was a family of 6:) People size preference differs and to some extent it is also driven by ability to buy more. OP can afford more if they want to.

crre
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Re: “Upsizing” are we foolish?

Post by crre » Sun May 26, 2019 12:22 am

randomguy wrote:
Sat May 25, 2019 11:31 pm
crre wrote:
Sat May 25, 2019 7:28 pm
We have 1700sq feet of space.

ok, so i don't live in the states and therefore my perceptions are probably very different from yours, but 1700 square feet of space is huge to me. especially for three people. 1700 square feet is slightly more than our current 4 bedroom home, in which we brought up three children after adding above mentioned bedroom to the original house. i realize that in the states rooms are typically much larger.

so: how many rooms is your home and why is it not enough? do you have too much stuff? is it the kitchen or other specific area that is tight and cramped and could that be solved by a renovation?
Why did you expand your house? A 1100 sq ft house (guessing on size before adding 1 bedroom) is plenty to raise a family of 5. I have parents on both sides that can attest to that. Ok one was a family of 6:) People size preference differs and to some extent it is also driven by ability to buy more. OP can afford more if they want to.
sure. it was a want and not a need, and we could afford it. i was not trying to judge the op, only raise questions since op seems ambivalent.

Olemiss540
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Re: “Upsizing” are we foolish?

Post by Olemiss540 » Sun May 26, 2019 6:30 am

mortfree wrote:
Sat May 25, 2019 6:19 pm
Wow. No mortgage and you spend 105k out of 135k??
Wow. Save 3.2 MILLION DOLLARS and get chastised on your spending habits. I vote to upgrade your house and enjoy the next handful of years. You are basically transferring 10% of your assets into a localized real estate investment. If it derails your retirement plans than they were on shaky footing to begin with so a tweak may be necessary. Worry about that in 5 years IMO.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

jharkin
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Re: “Upsizing” are we foolish?

Post by jharkin » Sun May 26, 2019 6:38 am

leeks wrote:
Sat May 25, 2019 6:16 pm
What's wrong with a 60+ year old house? The older construction is often sturdier than the newer. Of course it can have issues but so can a 20-year-old house, or even a 2-year-old house. Would it be cheaper if you bought an older place and renovated to bring it to your preferences?

If you are currently spending $105K per year, there are clearly opportunities to cut costs if you prefer a larger house. You can surely make it work if you want to.

Edit: I missed the $1.5 million in taxable savings in my first read. I'm not sure why you are asking this question, I must be missing something. Why do you think you can't afford to spend $350K? Couldn't you spend that in cash and still have enough money to retire *now* if you wanted to?

+100

I am selling a 1790 house to move into a larger 1990s house. The modern house has FAR more problems, let me tell you... but we need the space and I’m not afraid of putting in some sweat equity.

You can afford this without even thinking. Around here we call these posts “humble brag” just buy it and enjoy.


And 325k for 2500sqft is not HCOL. Medium at best.

Grt2bOutdoors
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Re: “Upsizing” are we foolish?

Post by Grt2bOutdoors » Sun May 26, 2019 6:54 am

jharkin wrote:
Sun May 26, 2019 6:38 am
leeks wrote:
Sat May 25, 2019 6:16 pm
What's wrong with a 60+ year old house? The older construction is often sturdier than the newer. Of course it can have issues but so can a 20-year-old house, or even a 2-year-old house. Would it be cheaper if you bought an older place and renovated to bring it to your preferences?

If you are currently spending $105K per year, there are clearly opportunities to cut costs if you prefer a larger house. You can surely make it work if you want to.

Edit: I missed the $1.5 million in taxable savings in my first read. I'm not sure why you are asking this question, I must be missing something. Why do you think you can't afford to spend $350K? Couldn't you spend that in cash and still have enough money to retire *now* if you wanted to?

+100


You can afford this without even thinking. Around here we call these posts “humble brag” just buy it and enjoy.


And 325k for 2500sqft is not HCOL. Medium at best.
It’s not $325k, it’s $625k ($325k is additional spend over existing home equity).
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

dbr
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Re: “Upsizing” are we foolish?

Post by dbr » Sun May 26, 2019 8:21 am

jharkin wrote:
Sun May 26, 2019 6:38 am

You can afford this without even thinking. Around here we call these posts “humble brag” just buy it and enjoy.
Yep, it is a lot more pleasant to tell someone they are fine than to break the bad news that their hoped for plan has no way of working.

cdu7
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Re: “Upsizing” are we foolish?

Post by cdu7 » Sun May 26, 2019 8:28 am

Don’t forget to factor in HOA/assessment monthly fees if you are moving into a townhome.

randomguy
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Re: “Upsizing” are we foolish?

Post by randomguy » Sun May 26, 2019 8:33 am

jharkin wrote:
Sun May 26, 2019 6:38 am

+100

I am selling a 1790 house to move into a larger 1990s house. The modern house has FAR more problems, let me tell you... but we need the space and I’m not afraid of putting in some sweat equity.

You can afford this without even thinking. Around here we call these posts “humble brag” just buy it and enjoy.


And 325k for 2500sqft is not HCOL. Medium at best.
You are not buying a modern house. Your buying a 20+ year old one. That is about when everything starts to need to be fixed. It is all about maintence when talking about old houses. You need to figure where a house is in the HVAC, electrical and plumbing upgrade cycles along with the cosmetic stuff. That stuff is far more likely to cause issues than the age of the wood. It isn't something to scare you off but you do need to be aware of it and factor it into the price you pay.

Small Savanna
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Re: “Upsizing” are we foolish?

Post by Small Savanna » Sun May 26, 2019 8:34 am

Buy the bigger house and enjoy it while your child is at home. Houses are usually a good store of value, and you can always downsize after you retire.

sport
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Re: “Upsizing” are we foolish?

Post by sport » Sun May 26, 2019 8:46 am

If possible, I would suggest moving into a house where everything is on one level. Then, if you decide to stay there indefinitely, you will not have to deal with stairs as you get older. We moved from a 1700 sq ft house on three levels to a 2000 sq ft house on one level for a retirement home. The new house cost more than twice what we realized for the sale of the old one. However, our economic situation improved during the 35 years we spent in the old house, where we raised two children.

jharkin
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Re: “Upsizing” are we foolish?

Post by jharkin » Sun May 26, 2019 9:02 am

Grt2bOutdoors wrote:
Sun May 26, 2019 6:54 am

It’s not $325k, it’s $625k ($325k is additional spend over existing home equity).

OP stated " spend the difference between our homes worth and about $325,000". If he meant it the way you think he should have said the sum of equity and 325k.

jharkin
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Re: “Upsizing” are we foolish?

Post by jharkin » Sun May 26, 2019 9:08 am

randomguy wrote:
Sun May 26, 2019 8:33 am
You are not buying a modern house. Your buying a 20+ year old one. That is about when everything starts to need to be fixed. It is all about maintence when talking about old houses. You need to figure where a house is in the HVAC, electrical and plumbing upgrade cycles along with the cosmetic stuff. That stuff is far more likely to cause issues than the age of the wood. It isn't something to scare you off but you do need to be aware of it and factor it into the price you pay.
1990s seems pretty modern from my frame of reference. All the building techniques are pretty much the same as today. What you are referring to is brand new construction - which I wont touch with a 10 foot pole, quality of materials and workmanship have gone downhill even in the last 20 years and they dont even build proper masonry chimneys anymore :(

Anyway the house I am buying is fine major system wise. Roof is 5 years old, entire heating system is brand new, AC is only about 10 years old. The problems include a deck that's rotting out (sloppy build),a dank basement that needs to be ripped out (whoever thought carpet in a basement was a good idea :( ), need for a radon system (I guess they couldn't be bothered to ever get it tested), some rotten trim because they planted shrubs too close to the siding, and the general miscellaneous stuff,chipping paint, etc. from homeowners that where not maintenance minded.

The upshot is I get the big contemporary house for only about 65% the $/sq as I am able to sell the small antique house (which I have restored to immaculate condition) for, and I get an established large wooded private lot which is impossible to find in new construction. And I can fix all the issues for far less than the new construction premium.

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ChowYunPhat
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Re: “Upsizing” are we foolish?

Post by ChowYunPhat » Sun May 26, 2019 9:27 am

Two opposing thoughts on this one. You are fine from a balance sheet perspective...OK to take some near basis taxable money out of the game (if available) and spring for the new house. This is what you have been working for and sacrificing for. You do not get to $3MM of investments without some level of sacrifice on the incomes you've described. We're in a similar boat and housing is one of the things we value...our home is a place of a peace and rest and this is a spendy area in our lives.

OTOH, think through the tax implications and if you'd have to buy the new home on a contingent basis...that is would you have to sell the existing home first to cover the down payment? With the reduced household income, I suspect you'll struggle to qualify for the upgraded home mortgage at 80% LTV. If you're willing to take a few steps in faith, recommend shopping mortgage rates with a couple of lenders and explore the tax consequences of liquidating some of your taxable investments to support the transaction(s).

Good luck to you!
A wise man and his money are friends forever...

EnjoyIt
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Re: “Upsizing” are we foolish?

Post by EnjoyIt » Sun May 26, 2019 9:35 am

You have $3.2 million and will need $325k extra for the new house. That leaves you with $2,875,000. If left untouched for for the next 5 years it will grow based on the following returns:
5% - $3.67 million
4% - $3.5 million
3% - $3.33 million
2% - $3.17 million

At your current spending, even $3.17+ million will cover all your needs. Though I think your spending will increase a bit in the bigger house. Higher property tax, utilities, and repair costs but the $3.17+ million should be plenty especially if you allow yourselves some flexibility if a poor sequence of returns hits at retirement.

One thing that perplexes me is why your expected SS is so low. How did you get to those numbers.

Also, if you have $1.5 million in taxable and dividend income is 2% in conjunction with the $135k/yr income considering 1 dependent and under 17 years old your Federal income tax is $18,799. Done with the help of www.taxcaster.com We can round up to $19,000 leaving you with $116k to spend. The question is, will the $116k be enough to cover the increased property tax, utilities, maintenance of the larger home and still have enough to help add to your child's 529? You may need to cut back a little or eat up your investments a little.

I hope I gave you a backbone of information to help figure out your own math. I think you can comfortably afford the more expensive home.

Thegame14
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Re: “Upsizing” are we foolish?

Post by Thegame14 » Sun May 26, 2019 9:39 am

Turkishcoffee wrote:
Sat May 25, 2019 6:47 pm
crre wrote:
Sat May 25, 2019 6:39 pm
i too would not be so quick to dismiss a 60+ year old house. in fact, i would prefer it. also, define "small" and "very tight".

finally: when i was in your situation many years ago, the best advice i ever got was not to buy too much house. instead of moving, we added a bedroom for what it would have cost in taxes and fees to move. is that possible in your current house?
Hoa community won’t allow build outs. We have 1700sq feet of space.
1,700 SQ feet is NOT small or TIGHT, we have a 1,900 ft sq house with two kids two dogs and basically an entire floor that is barely used. We also plan for a third child and still have "enough room", so I think something is wrong......

cherijoh
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Re: “Upsizing” are we foolish?

Post by cherijoh » Sun May 26, 2019 10:42 am

Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
Basically, our home is small, very tight and to move the only construction we would be interested in is a town home giving us about 800 square feet more than what we have now. Everything else is old 60+ years in the area.

But so close to retirement we feel we are doing it wrong “upsizing” when we will be empty nesters in 7 years. We would need to spend the difference between our homes worth and about $325,000 to get a bigger place. Is this foolish?

Here is our situation:

Home paid off
Ages 51/51
Child 11
Debt- 0
Income combined :$135000
Annual spend is about $105000
Total tax deferred savings: $1700000
Total taxable savings $1500000
Asset allocation is 65/35 stocks to bonds in a three fund portfolio
Expected SS at 62/68 $10,000/$14000

Are we in a position to gain some more comfort? Are we being foolish? Is this going to derail our retirement plans?
Are you currently contributing anything to your retirement accounts? If so, how would the new house impact this?

Would you take out a mortgage or sell some of your taxable assets to make up the difference in the value of your home and the new place? If taking out a mortgage, how much would that add to your monthly expenses? (Without trimming elsewhere that could leave you spending more than you are taking in). If selling assets, how much of a tax hit would you take? In other words, how much would you need to liquidate to net the $325K that you need? Also, what is your plan to tap the home equity you already have tied up in your current house? Coordinating the sale of one house to purchase another can be tricky.

In your current home with your current asset base, you are set for retirement. If you lost your job tomorrow, you would be able to have a comfortable retirement without finding another job. If everything goes as planned (i.e., working another 7 years, no extended recession) you would probably be okay for an easy retirement depending on how you finance the new house and whether you are successful at trimming other expenses to make up for the added costs of a new larger home (higher taxes, insurance, utilities, HOA dues, etc).

But you need to consider that if there is another serious recession and/or you lost your job, you would no longer be in a position to immediately retire without finding a new job if you upsize to the tune you are considering.

I speak from experience in saying that finding a job with an equivalent salary is very difficult at your ages and even more so if the economy has tanked. I ended up working 7 years before I got back to my previous salary at the first megacorp. But I wasn't spending anywhere near the percentage of my salary that you are, so I didn't have to make any painful choices. If you end up in a lower paying job, that would likely force you to work longer to minimize the number of years before you can draw SS. NOTE: I see that you previously had a significantly higher salary, so you may have already experienced a taste of this.

My motto is hope for the best, but plan for the worst. I think you need to spend some time fleshing out the financial details of your two paths and decide whether you are willing to potentially compromise your retirement lifestyle for a bigger house now.

IMO, 1700 sq. ft should be ample space for 3 people. But I don't know the layout of your home. Have you considered doing some renovations to make your current house more livable? You could do a whole lot of renovation for a lot less than $325K.

bltn
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Re: “Upsizing” are we foolish?

Post by bltn » Sun May 26, 2019 10:49 am

Congratulations on your retirement money accumulation at your age.

I think you could increase your house size to around 2500 square feet if you really think it is desirable. What is enough room in a house is subjective with different people having different ideas about that. For you to have accumulated your savings with your salaries by your age shows that you know how to manage your money and be frugal as necessary. Take the 325,000 out of savings, add it to the equity in your current home, and buy the new town house with cash. Then reaccumulate as much of that money as you can before you retire.

Let s look at you retirement prospects. Retire at age 57, hopefully with your3.2 million dollars back in place through aggressively saving and growth of your funds. Assuming you re looking at 35 years of retirement, you should not take out more than 3-3.5% of your nest egg while waiting to start social security (or afterward) . 3.5% of 3.2 million is 112,000 annual income before taxes. Despite some experts saying a retired couple can live on 75-80% of their pre retirement income, I would not count on that.

I guess what I m getting around to is, if you spend the money upsizing your home, you might consider compensating for that by working and saving for 3-4 more years than your original plan of retirement.

You ve got some options. Your accumulation shows that you know how to manage these options.
Best of luck.

recalcitrant
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Re: “Upsizing” are we foolish?

Post by recalcitrant » Sun May 26, 2019 6:44 pm

Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
Long time lurker and enjoy this website.

Weve lived much the bogleheads lifestyle without knowing what a bogleheads was, but have certainly steered my investments to greater simplicity in the last few years I’ve read posts here.

My spouse and I have 1 child, age 11. We live in a strong school district in which we would like to stay for reasons most closely related to less interruption of our child’s life in school.

We live in a relatively HCOL area in a carriage house (connected twin). Spouse and I are both 51 and hope to retire in 5 - 6 years.

Basically, our home is small, very tight and to move the only construction we would be interested in is a town home giving us about 800 square feet more than what we have now. Everything else is old 60+ years in the area.

But so close to retirement we feel we are doing it wrong “upsizing” when we will be empty nesters in 7 years. We would need to spend the difference between our homes worth and about $325,000 to get a bigger place. Is this foolish?

Here is our situation:

Home paid off
Ages 51/51
Child 11
Debt- 0
Income combined :$135000
Annual spend is about $105000
Total tax deferred savings: $1700000
Total taxable savings $1500000
Asset allocation is 65/35 stocks to bonds in a three fund portfolio
Expected SS at 62/68 $10,000/$14000


Are we in a position to gain some more comfort? Are we being foolish? Is this going to derail our retirement plans?

Can you afford it? Yes. But in your 50’s I don’t know why you’d want more to maintain for just three people, but that’s just me.

Good luck.

Quaestner
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Re: “Upsizing” are we foolish?

Post by Quaestner » Sun May 26, 2019 6:57 pm

You've positioned yourself financially quite well in my estimation. Given what you've told us, I think you should give yourself permission to trade some stocks and bonds for some additional personal real estate (and some extra comfort). Quality of life matters!

Slinky
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Re: “Upsizing” are we foolish?

Post by Slinky » Sun May 26, 2019 8:11 pm

You have the money, just beware of the traps of a bigger home. It will all add up so you need to be prepared that it will cost more than just the initial outlay.

bltn
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Re: “Upsizing” are we foolish?

Post by bltn » Sun May 26, 2019 8:44 pm

jharkin wrote:
Sun May 26, 2019 6:38 am
leeks wrote:
Sat May 25, 2019 6:16 pm
What's wrong with a 60+ year old house? The older construction is often sturdier than the newer. Of course it can have issues but so can a 20-year-old house, or even a 2-year-old house. Would it be cheaper if you bought an older place and renovated to bring it to your preferences?

If you are currently spending $105K per year, there are clearly opportunities to cut costs if you prefer a larger house. You can surely make it work if you want to.

Edit: I missed the $1.5 million in taxable savings in my first read. I'm not sure why you are asking this question, I must be missing something. Why do you think you can't afford to spend $350K? Couldn't you spend that in cash and still have enough money to retire *now* if you wanted to?

+100

I am selling a 1790 house to move into a larger 1990s house. The modern house has FAR more problems, let me tell you... but we need the space and I’m not afraid of putting in some sweat equity.

You can afford this without even thinking. Around here we call these posts “humble brag” just buy it and enjoy.


And 325k for 2500sqft is not HCOL. Medium at best.
“Humble brag” is an interesting term which may discourage the participation in the forum.
Personally, I like to have very successful people discuss their situation and express their concerns. I feel I may learn more from them, than from people in the same situation I was in 25 years ago. However,I ve reached an age where I do enjoy giving advice to younger investors. For what it s worth!

bltn
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Re: “Upsizing” are we foolish?

Post by bltn » Sun May 26, 2019 8:45 pm

Slinky wrote:
Sun May 26, 2019 8:11 pm
You have the money, just beware of the traps of a bigger home. It will all add up so you need to be prepared that it will cost more than just the initial outlay.
Good point.

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Turkishcoffee
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Re: “Upsizing” are we foolish?

Post by Turkishcoffee » Sun May 26, 2019 9:54 pm

Not meant to be a humble brag, for what that’s worth. And our current home value is $399 k and to gain space in the realm of 2500as feet would be $650k so a difference of 250-300k

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Watty
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Re: “Upsizing” are we foolish?

Post by Watty » Sun May 26, 2019 10:42 pm

Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
hope to retire in 5 - 6 years.
One thing that has not been mentioned is that you could just rent a larger place until your kid graduates high school and you are ready to retire.

If you wanted to you could even keep your current place and rent it out until you are empty nesters then move back into it.

Admiral
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Re: “Upsizing” are we foolish?

Post by Admiral » Mon May 27, 2019 7:59 am

My home is apprx 150 years old. 1850ftsq+finished basement.

New homes in my area are quite large (min. 3,000 ftsq) and are selling for at least $1.5m. Often close to $2m. I see them going up all the time. The construction is incredibly shoddy (materials and workmanship). Some of these are built by nat'l companies like Toll etc. There have been numerous lawsuits (incl class action) over things like leaks/water penetration etc. These are paste-board/composite walls with Zip System greenboard/gypsum, often covered by vinyl siding and, on the facade, one course of brick.

I would not buy new construction if you put a gun to my head, esp if I could afford to buy an older home. My home is not w/o its problems, it does cost time and sweat equity to maintain. But at least I know it won't blow away in 80mph winds.

Just my $.02.

stoptothink
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Re: “Upsizing” are we foolish?

Post by stoptothink » Mon May 27, 2019 8:03 am

Watty wrote:
Sun May 26, 2019 10:42 pm
Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
hope to retire in 5 - 6 years.
One thing that has not been mentioned is that you could just rent a larger place until your kid graduates high school and you are ready to retire.

If you wanted to you could even keep your current place and rent it out until you are empty nesters then move back into it.
This isn't a financial question - they can afford it, period - but I don't know why this hasn't been brought up yet; seems like the logical answer.

BeneIRA
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Re: “Upsizing” are we foolish?

Post by BeneIRA » Mon May 27, 2019 8:14 am

Watty wrote:
Sun May 26, 2019 10:42 pm
Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
hope to retire in 5 - 6 years.
One thing that has not been mentioned is that you could just rent a larger place until your kid graduates high school and you are ready to retire.

If you wanted to you could even keep your current place and rent it out until you are empty nesters then move back into it.
This was exactly what I was going to suggest. In seven years when the kid goes to college, I can't imagine the OP will want that big of a house and the older house will probably look better and more importantly, it is the devil you know. I would project putting some maintenance into the new purchase, new furniture, cost of moving, etc. I would rent a bigger place for a year, rent out the old place and see how you like it, OP. You may decide it isn't for you and all of the maintenance isn't your problem.

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PoultryMan
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Re: “Upsizing” are we foolish?

Post by PoultryMan » Mon May 27, 2019 8:32 am

stoptothink wrote:
Mon May 27, 2019 8:03 am
Watty wrote:
Sun May 26, 2019 10:42 pm
Turkishcoffee wrote:
Sat May 25, 2019 5:48 pm
hope to retire in 5 - 6 years.
One thing that has not been mentioned is that you could just rent a larger place until your kid graduates high school and you are ready to retire.

If you wanted to you could even keep your current place and rent it out until you are empty nesters then move back into it.
This isn't a financial question - they can afford it, period - but I don't know why this hasn't been brought up yet; seems like the logical answer.
I’m trying to understand how renting is a wise financial move for the OP

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MossySF
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Re: “Upsizing” are we foolish?

Post by MossySF » Mon May 27, 2019 9:35 am

My experience -- when you get a bigger house, you buy more junk to fill it up. And then the bigger house feels cramped again.

Twiggsapproved
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Re: “Upsizing” are we foolish?

Post by Twiggsapproved » Mon May 27, 2019 1:51 pm

MossySF wrote:
Mon May 27, 2019 9:35 am
My experience -- when you get a bigger house, you buy more junk to fill it up. And then the bigger house feels cramped again.
^^^^^^^
This

betterinvestor2012
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Re: “Upsizing” are we foolish?

Post by betterinvestor2012 » Tue May 28, 2019 8:31 am

financially you can do it. Take into consideration all the added taxes and maintenance. I would ask yourself if you really need the space, since you only have 3 people. Life is to be enjoyed, but going larger at your stage of life would make me pause.

Good luck

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