Myth #6: I Need To Invest in a House (part 2)

Another factor that works against downsizing is that people have grown accustomed to a certain standard of living they aren’t willing to sacrifice after retiring. Time after time, my clients stay in the home they lived in for years. Or they buy something of comparable cost elsewhere.

Ask yourself what it will really be like after retirement. What kind of a lifestyle will you be living? Will you truly be willing to live with less, or is your vision romantically tinged? Romance is fine. I’m all for it. But, if you are basing your financial future on it, watch out. I’m not suggesting that you give up your dream. You can have it if you plan for it, but be realistic. Many of my recently retired clients report they are spending more money than they thought they would—or planned to.

A couple I know has an enormous home with multiple bedrooms, a three-car garage, and a large yard. Their kids are in college. Now there are only two people living in this huge house, which has appreciated nicely since they bought it. The husband, 52, is a retired legislator who now has a full-time job in private industry.

They could easily sell the home, find a smaller place, and realize a six-figure gain. But the husband wants a large garage for his racing boats and for a shop. The wife wants a big yard and wants to live in an upscale neighborhood. Add it all up and you have a couple that is not going to realize a gain from the sale of their current home because they aren’t going to sell it. They are unwilling to shift to a less expensive lifestyle.

Many of us could live in a smaller and less expensive home right now. But it seems ingrained in our culture that we must move from a large home to an even larger home—otherwise, we feel we’re not really getting ahead.

We forget that we are buying into more than just a bigger house: besides the mortgage being higher, the real estate taxes are higher and the insurance is more. It costs more to heat it, to light it, and to maintain it. It takes more after-tax income on a monthly basis to maintain a larger house, so we have to work harder to keep up with the expenses. The extra work usually means less time available to enjoy the very home we are working to buy.

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One thought on “Myth #6: I Need To Invest in a House (part 2)

  1. Like so many expenses – it boils down to personal choice and the level of income/assets. If a couple earns $200,000 per year and has a $10 million net worth, living in a 5000 sq ft home is perfectly acceptable. But if a couple is more “middle class” and has a decent sized mortgages, it gets more complicated.

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