How much of retirement nest egg spent on house?

[gmi3804]

There are too many retirement planning variables besides “house paid off” and “no debt” for Internet strangers to provide accurate and sound guidance. It’s a good conversation topic, which I’ll happily participate in, but serous planning should be left to a good financial advisor/planner.

 

[Threehearts]

I think about having the proper funds for retirement all of the time. Watching my 2 elderly aunts be placed in quality assisted living centers and then on to non-medicare very good nursing homes, I realized that if I want very good care in my later years, I had better have a LOT of cash available.
My best friend's parents were of the you only live once philosophy and they are both in a poor nursing home facility and miserable. Unfortunately, both unexpectedly became quite ill in their 70's. Initially, their home sale netted 400K and that was all they had. They were in a decent assisted living but that money went shockingly quick so on to places that would break my heart to be living in.

The other thing that I am doing is rethinking WDW trips as well as other vacations. I was first diagnosed with a type of cancer 5 years ago. People encouraged me to take a dream trip- after all, life is short. I didn't, but I did take a very economical short trip. I have been saving to bolster my emergency fund which is ready cash for one year and I've also added to my savings and retirement plan.

I was found to have a second type of cancer last fall. SO SO glad, I didn't take the dream trip because I would be making devastating health choices right now if I had. The cancer I have is rare. With all the financial padding, I am able to see all manner of specialists and get medications which are not covered by my very good BC/BS health plan. I'm on the road to recovery and it is in no small part because of judicious spending and committed savings.

As you see, I vote for spending as little as possible because we are all living longer and want to have choices in our later years. What sounds like a substantial nest egg may not last very long. Saving my money has given me more peace of mind than having spent the money on a holiday or a new car and being worried all the time about whether that was a smart decision.

 

[Starport Seven-Five]

I'll point you back to my previous posts. You haven't said what your expenses (mandatory like health care, taxes, food, etc. and optional like entertainment, travel and gifts). You haven't said if you'll have other income like pensions or social security. If your current house sells for $500,000 that leaves you with $1,500,000 assets. If your retirement account is your only source of income and you spend $250,000 on top of your home sale priceeds, your expenses would need to be between $37,500 and $50,000. Keep in mind that taxes and insurance on a beach property may be quite high and maintenance can be more than inland since the salt in the air causes corrosion. Bottom line, there's no formula for taking out money to buy a house that will work unless your remaining assets and any other income you may have are enough to produce an income stream sufficient to cover all of your expenses.

This!

There isn't enough info given to give a real response. Pretty much need to decide how much income you need off your nest egg for living expenses and then that will tell you what you can spend on a house.

 

[_19disnA]

We are mid 50s retiring in 4 years. No debt (baby step 7) Will sell current paid off home (updated, in desired area) to buy new home close to the beach. Will need to spend more on the new house. Will be getting long term health care at age 60. Assets should be 2 million total after sale of the current house.

If you waited until 4 yrs prior to retiring to ask these types of questions, you have waited too long. During your working years is when you should have been dealing with a financial planner to help you plan for such things and look at the big picture of your financial situation. Buying a bigger home near the beach which will likely require more expenses to maintain may also not be your best option. Long term health care insurance doesn't cover every situation and you may end up putting a lot of money into a plan that doesn't actually cover your particular health situation.

Asking random internet strangers about how to plan for your financial future isn't the best way to go about this.

 

[amylevan]

Do you have a pension? What is your usual lifestyle, ie how much do you plan to spend to live? How much is the beach house (are we talking a $750,000 home, which would buy a shack where I’m familiar with?)

Way too many unknowns to give you a direct answer. In our case, the equity in our house is our housing budget if we were to decide to downsize in retirement. We don’t include the equity in our retirement assets at this point.

 

[Starport Seven-Five]

Asking random internet strangers about how to plan for your financial future isn't the best way to go about this.

It's not the best idea but it's also not the worst. Everyone should have at least a rough idea of how their finances work because some financial advisors are straight up awful.

 

[Anthony1971]

It's not the best idea but it's also not the worst. Everyone should have at least a rough idea of how their finances work because some financial advisors are straight up awful.

Agree.
if you seek help from a financial advisor dont just shake your head and say that’s great. Think about what you are advised and make sure it makes sense and what you are looking for is answered.
Maybe an easy way to understand this is if you redid your bathroom you woukd have an idea what you want and your style and what you want to spend as what you want simply may not fit in your budget but this alternative can. Do your own research first otherwise you may end up with a pink Toliet green vanity and a double old bar style swinging door… And you will be shaking your head yes. If the advisor isn’t right… Thank you we will think about this and move on.

 

[cedricandsophie]

I’d recommend you sit down with a financial planning professional, one thst charges a fee rather than one that is associated with an investment fund, he or she will do a thorough analysis of your current and future income, your financial needs and how long your m8ney will last, based in the decisions you need to make, our financial guy revises our analysis a couple times a year, to indicate how long our money will last depending in how Much we spend. He’s factored in when we might sell our home, which is paid for, how much we might get for it, what we would spend on a new home and adding the difference to our total investment income. Most financial planners would suggest you spend no more than 4% to 5% of your total investments each year, plus social security and any pension you might have.

 

[starry_solo]

The answer to your questions depends on many variables which you haven’t provided.

if the house is included in the $2 million in assets, what value is the house you plan to sell versus what you plan to buy. Are the rest of your assets tied up in property or are they in liquid (easily accessible) form?

what are your current expenses? Buying long term health care, if it’s even sold in 10 years, is going to be expensive and doesn’t provide much anymore. I’ve been shopping around and I can't find policies that last a lifetime, most will only have a few years timeline.

do you have a defined benefit pension? Or defined contribution pension (like a 401K)?

no kids to help out?

Edited: to change "can" to "can't" in the policies re: LTC insurance.

 

[Pea-n-Me]

Will be getting long term health care at age 60.

What does this mean? Could you be more specific, please?

 

[MrsPete]

Our house makes up just over 5% of our net worth.
Is that kinda the information you were looking for?

 

[tvguy]

What does this mean? Could you be more specific, please?

I am afraid they are planning on waiting until 60 to buy long term care insurance. If they can get it and if they can afford it at that age. We bought ours 20 years ago when we were in our 40's and the premium this year jumped 30%.

 

[tvguy]

Our house makes up just over 5% of our net worth.
Is that kinda the information you were looking for?

Current value, or what you paid for it?

 

[LiDa]

Wouldn't it be zero? You sell the house you live and use the proceeds to buy your new one?

Not everyone has a house to sell to get a new one.

 

[MrsPete]

Current value, or what you paid for it?

Current value.
We do live in "less house" than most people we know, and we live in a low cost of living area.

 

[tvguy]

Current value.
We do live in "less house" than most people we know, and we live in a low cost of living area.

My financial planner kind of puts the value of houses on the side when figuring net worth because, short of dying, you can't really cash in on that value without having to spend money to get somewhere else to live.

 

[MrsPete]

My financial planner kind of puts the value of houses on the side when figuring net worth because, short of dying, you can't really cash in on that value without having to spend money to get somewhere else to live.

That's good sense.
I also believe (obviously) in keeping housing modest. Who wants to spend more on taxes and maintenance? Who wants to spend more time on upkeep and cleaning? I'm not impressed with fancy houses.

 

[QueenIsabella]

My financial planner kind of puts the value of houses on the side when figuring net worth because, short of dying, you can't really cash in on that value without having to spend money to get somewhere else to live.

Not only that, but you can't always "time" when you access that value. If you need to sell the house for long-term care, for example (not you, personally--I know you have LTC insurance. But it's a common thought, to tap the house for LTC.). The house may be worth X, but if you need to sell in a hurry, or in a downturn, you may get much less than X. So, erring in a very conservative direction is a smart way to look at it.

 

[RamblingMad]

It’s more about annual expenses than absolute cost. 25x expenses is the general rule of thumb for how much to have saved. Another way to think about it is to not withdraw more 4% inflation adjusted each year. If you have a mortgage, then that’s one of your expenses.

 

[DisneyTexan]

Buying long term health care, if it’s even sold in 10 years, is going to be expensive and doesn’t provide much anymore. I’ve been shopping around and I can't find policies that last a lifetime, most will only have a few years timeline.

You might want to consider purchasing an LTC policy with a lump sum payment structure, or the payments can be made over several years. After the lump sum or several years of payments, no more payments are needed.

I purchased a policy by taking a cash-out refi on my house, and using that money to buy the policy. It is nice to know that the policy is fully paid off, and I don't have to worry about any premiums.

If you pass away before the policy is used, or you only get partial value out of it, the funds that initially went into the policy are returned to your estate.

If you do use the policy, the maximum benefits are far greater than the initial premium.

https://www.lincolnfinancial.com/pu.../moneyguardsolutions/moneyguardfixedadvantage