Making big lifestyle upgrades in retirement?

[Oddball]

There's a lot about housing here, but I'm posting in PF because it's also about overall retirement spending.

Has anyone who is FI and no longer working for money made significant lifestyle upgrades, such as a nicer home or location?

Has the expense been worth it to you? How did you feel about increasing your withdrawal rate?

I'm thinking of moving from a cheap old apartment downtown to a brand-new LEED cottage in a much quieter setting a few miles away. This would more than double my current housing costs but also diversify my assets. It would be less convenient, so I'm still weighing that.

Another factor is that I'm renting in a large building with lots of shared spaces and few people wearing masks. I've been uneasy about this. I know it will pass, but it raises my interest in detached housing.

I have been very frugal for 10 years while working toward FIRE. At my current spending level with the cheap apartment, I can get by on a 2% portfolio drawdown. With a new home, overall annual spending would rise to at least 3% of my portfolio.

It feels extravagant to double my housing costs.

Renting a nice new apartment is also an option, but it might not be quieter and also would involve shared spaces. Plus the rent would rival the house payment. Meanwhile, housing has been on a run here, averaging 10% gains for the past few years (18% in the past 12 months).

Am I just being cheap staying in the old apartment? It does have advantages besides the price.

I'm in my 50s and could probably pay the house off by Social Security time, though no rush with rates so low.

Just trying to decide whether I'm comfortable with the added spending. I'm starting FIRE a little earlier than planned after a summer layoff and have not yet experienced the 4% rule. I'm having trouble trusting a new process (https://www.marketwatch.com/story/dont-cheat-yourself-with-the-4-rule-2018-05-04) after getting steady work wages all those years.

It also feels really weird pondering a mortgage without a job! Then again, if FIRE gets boring I can always go back to work.

Anyone made any spending leaps like this post-FIRE? It doesn't have to be for housing. Maybe doubled travel spending or something else?

[Teacher Terry]

We have definitely spent much more money on travel since retiring. Some years we spent 14k. When working it was much more modest. We decided that we wanted to enjoy ourselves while we can. It sounds like you can afford the house. I like to own my space versus renting.

[jp1]

My situation is not quite the same as you, OP. SO take everything I say with a grain of salt. As most people here know I (and SO) had intended to live in our expensive rented housing in San Francisco for a bunch of years, retire, and move somewhere cheaper. Two months ago we moved to a suburban townhome that we bought. Our monthly expenses have dropped 25%. One of the things I really love about it is being able to drive into the garage, park the car, and come inside without worrying about covid.

SO and I are both still working full time. I can't answer your question about drawing down funds since we both hope to keep working for the next ten-ish years at our san francisco salary jobs. Personally I'm still focused on "this is how i want to live so I'll spend the money to make it perfect". Our next door neighbor, J, on the other hand, a super sweetheart that is in her late 70's and is focused on "I have lived here 30 years and like living here but I don't want to spend a lot of money because I don't have a lot so I'd like to be frugal" has a different attitude. She is also fine with the fact that her hot water heater door is falling off the side of the building. You have to crunch your own numbers and figure out what works for you.

[rosarugosa]

We have not upgraded since retirement. We've been really grateful this year to have our own private outdoor space to putter around in and enjoy, but that needs to be balanced against the fact that this space is our responsibility to maintain, which becomes more difficult (or expensive) as one ages.

[Yppej]

My parents are in their 80's and have been able to live in their own home because my youngest brother lives with them and helps them with yardwork and small repairs. How open are you to sharing your home as you age?

[Tybee]

We are in the process of doing this, going from a paid off house to a mortgage. We are in our 60's and both still working and will have to keep working because of this change, but we will be closer to three generations of family, which should be better for us aging, in the long run.
The new house is an upgrade in terms of space and setting, and probably a level trade in terms of location, although I will miss where I live now, a lot. So there is an element of non-choice here that I am not crazy about, just as there is an element of non-choice in your wanting to get out of the apartment building due to Covid.

I think a 3 percent withdrawal rate should be fine. That is what I am doing to supplement our pretty meager income.

If you like the new cottage a whole lot better, I would be inclined to go for it. You have more time to make more money, too, if you are only 50. Sometimes FIRE isn't as important as how and where you are living, and circumstances change.

But yeah, our housing costs will be a lot more than they are now.

On the other hand, if we stayed here, we'd have to invest money in the place, and the new place is in better shape, so it's probably a deceptive comparison. And the new house stands to appreciate a lot more than the old house, so maybe by the time we can't live there anymore, it will have gained enough in value to pay for a spot in a nice assisted living place. I watched my parents stay in their rural place way too long, and we are both committed to not doing that, but getting out when we can no longer cope.

[razz]

Your life at age 50 is a lot more than just about housing. What else do you want to do for the next years of your life - think in 5, 10, 20, etc segments?

My late DH and I scrimped, saved, paid off our farm and lived a thrifty but a very contented life. We did travel as savings permitted. I am able now, in my 70's and on my own, to afford my very comfy, convenient and fully accessible home in town with a simple lifestyle. Everything I need is readily available - groceries, library including online, banking and investment, healthcare and so much more. I deliberately and carefully chose my home setting to enable this.

I have established a support team of trades, small job workman, etc., which enables me to maintain my home.

Internet services have opened the whole world for me to explore virtually; free education like Coursera and online art lessons, communication, online church services and similar resources. I believe this online world will expand even more.

My chief responsibility is to remain active and stimulated mentally, physically, socially plus support my community. I have a dog that I walk for 1 1/2 hours each visiting as I go.

I listed all these only to demonstrate that you have a lot more to consider than just your choice of dwelling. Is all that you need now and for the next segments of your life available to you in the one new that you are considering vs any other possible alternatives that exist to be explored further?

As a Canadian, I won't comment on drawdowns due to lack of knowledge about this in the US; taxes, healthcare, etc.

[eleighj]

After you retire, wait one year before making any major changes to your lifestyle, home etc. After that time do whatever you want. You are going to find during that time that there are things that you would like to accomplish that did not even show up on your radar and others that you do not really what to do after all. The 4% rule is a number. You will find that if you give some thought and work through it for a while that in some years it could be way above 4% and in others way below, but overall your portfolio will survive. 4% is not a hard stop number.

[pinkytoe]

We made a huge leap by moving to another state when we retired. Financially, it allowed us to buy a house with cash and then save the money that would have gone to exorbitant annual property taxes. Emotionally, it took us away from family and friends which seems to become more important as one ages. We are now in the process of deciding next steps while we are still young enough to pull off another big decision. Sometimes, change itself is worth trying rather than wondering about what ifs.

[Oddball]

Thanks for all your thoughts. You're right, there's more to the story.

The cottage is in a sustainable community that's still being built out. Some homes will have solar panels, and all will be LEED certified. There are communal spaces, including a garden, activity hall, parking, and storage.

It's all ages and nestled in the city within 2-3 miles of all needs. So it's still convenient, just not as immediately as downtown. Basically, I would bike everywhere instead of walking half the time. At night I might take a cab. Or even break down and buy a car if I really needed it.

The lots are tiny, so there would be very little yard upkeep (also very little space between homes). Build quality is high, which I love. The small cottages are 1BR (some with a garage) and thus affordable.

I'll be 53 this winter and have no shortage of interests and passions to last 30-40 more years, paid or unpaid. The past decade has been all about downtown living -- bookstores, coffee shops, museums, etc. During the shutdowns, I have not missed them nearly as much as I'd expected. I would still visit them, just not as impulsively.

As for aging parents and/or potential partners, these are on my mind too, but right now they seem too unknowable to factor in. My folks are in their own home 2 hours away, still mostly healthy. When that changes, I might have to pivot. If they were to like the eco community, it could be a good place for all of us. But not sure they would.

[Tybee]

Oddball, I'd be very tempted by the eco-community. There was a recent post where Catherine posted some of these communities with shared gardening spaces, etc., and the idea is very appealing to me.

[iris lilies]

OP, it sounds like you have been living a very stripped-down life. There’s nothing wrong with that if you find it satisfying. But if you’re starting to get a sense of needing more in the way of housing, please do listen to your inner voice.

I could tell you my experience since retirement, but it’s rambling anecdotal stuff that doesn’t really relate to you.

Overall, I have turned off brakes in spending. I just bought a little condo to play with, it will eventually be my city pad. I told myself “money is no object “ in its renovation but when it comes right down to it, I can’t spend the big money. One reason is because you can’t actually get workmen to do the work! So DH is doing the work.

[Oddball]

After you retire, wait one year before making any major changes to your lifestyle, home etc. After that time do whatever you want. You are going to find during that time that there are things that you would like to accomplish that did not even show up on your radar and others that you do not really what to do after all. The 4% rule is a number. You will find that if you give some thought and work through it for a while that in some years it could be way above 4% and in others way below, but overall your portfolio will survive. 4% is not a hard stop number.


Sometimes, change itself is worth trying rather than wondering about what ifs.
Thanks for these. It's been five months since my job ended, and I'm already having thoughts I didn't know I would have! I spent the first month applying for new jobs before realizing I didn't have to do that. Maybe I'll do it next year and find just the right work. Or maybe I'll stay retired. I took a long break in my 30s (working very part time) and got restless after 5 years. Good thing I went back to work, as it has given me far more freedom now.

[JaneV2.0]

I'd move into the sustainable community in a hot minute--you had me at "much quieter setting" and private dwellings. It sounds lovely, and it may be less of a financial burden than you think now. And Social Security will make it even less so. But follow your instincts, as I always counsel in these matters.

[Teacher Terry]

That community sounds great. My friend is 86 and lives alone in her house. She hires repairs and has a HOA to take care of the yard. She still cleans herself but could hire that done. I have known people in their 90’s that don’t require assistance.

[pinkytoe]

There is a little co-housing community here that appeals to me. It is like a little village with separate duplex dwellings surrounding a large communal garden. Located minutes from downtown and set in the middle of the older Victorian era houses. It appears that people of all ages live there - seniors, families, solos. The only drawback for an older person might be stairs as the units are all two-story. It is so different to contemplate how to live on your own as an older person vs having a partner. I will have to figure it out someday if I outlive my spouse but I take that into consideration even now for the next house. Not too big, etc.

[Teacher Terry]

I will move into a condo with a security lobby like I used to live in if alone. I could stay in the house and buy a big dog to feel safe. I have a security system at home but it doesn’t make me feel safe.

[Oddball]

OP, it sounds like you have been living a very stripped-down life. There’s nothing wrong with that if you find it satisfying. But if you’re starting to get a sense of needing more in the way of housing, please do listen to your inner voice.
Materially stripped down, yes, but I've had tons of freedom with no housing upkeep -- just call the manager. The inner voice is definitely suggesting a change, though, and that's what I'm trying to hear.


I'd move into the sustainable community in a hot minute--you had me at "much quieter setting" and private dwellings. It sounds lovely, and it may be less of a financial burden than you think now. And Social Security will make it even less so. But follow your instincts, as I always counsel in these matters.
If I had bought when I got here, I could have had a 1BR house or 2BR condo for $100K. But I didn't like any of them. They were old and needed work. If the current market pace keeps up here, or even slows some, the eco cottage could seem like a bargain 10 years from now.


The only drawback for an older person might be stairs as the units are all two-story.
There are stair lifts (https://www.bruno.com/stair-lifts) if needed. Or I could move to a one-story cottage (but would lose the garage).

[SteveinMN]

We are new to retirement (last May) but here's our experience:

- First, the pandemic is whacking out everything. We do not lead the lives we would without it; we'd be spending more time with the grandkids, we'd be out more (not necessarily spending money; some travel but also more volunteering). We're in a synthetic environment for decision making. It's not likely to always be like this. I'd be reticent to make big decisions based on what's going on right now.

- Health care is a huge cost. We're both roughly 61. We've got a health care savings plan that is covering our costs (COBRA for now; we looked at the exchange and, based on pre-existing conditions and income, didn't find a way to cut the price without cutting lots of coverage). When that money is gone in another couple of years, we'll figure out how to cover the gap till Medicare (and its various supplements). One option would be a part-time job that offered medical coverage or covered the cost of our own coverage.

- We've decided to stay put in our house until we can't live here any longer. Next year we plan to do some significant remodeling/updating so we can enjoy it all before the house is (eventually) sold. Actually, the house is old enough that things are wearing out, so we'll address that and upgrade a little in key places. We looked at other places, but the market here is such that we could not downsize financially. Now, Oddball, you're in a different situation in that you can't change much about your current location, but it's worth considering the various extra costs you'd run into purchasing a new place.

- I would second the advice to not make huge moves for the first year or so of independent income. We're finding that we're spending more in some areas (groceries, technology) and less in others (travel, dining out), and they're not the categories we'd have guessed as "big movers" a year ago at this time. Choose your spots carefully.

[dado potato]

Thanks for all your thoughts. You're right, there's more to the story.

The cottage is in a sustainable community that's still being built out. There are communal spaces, including a garden, activity hall, parking, and storage.



Is this a co-housing development? In principle, being an old croc myself, I like the intergenerational social opportunities that are potentially available in a co-housing community. I tend to believe anybody entering into cohousing needs excellent interpersonal communication skills (to cope), such as Rosenberg's "Non Violent Communication" (NVC). I would also say that no matter how Sand-County the site is, and how eco-friendly the developer is, the long-term quality of life depends on residents' ability to bond and solve problems which inevitably will arise.

[sweetana3]

When you buy into cohousing, the people and community are the most important thing to check out carefully. They will determine the success of living in the community. The physical plant is pretty unimportant.

And changes in the group over time can have a positive or disastrous effect on life in the community. Followed the cohousing website and message board for years.

[Oddball]

It is indeed all ages with diverse residents, but I think technically it's not cohousing. It's a for-profit B-corp owned and directed by the builder. However, once there are enough homes and residents, there will be an HOA that governs things according to the CCRs.

I know these can be fraught, and I'm not sure how I feel about it. The vision of the place is in line with my own, but personalities are fickle and turnover can result in peace or war overnight.

There are regular resident meetings/zooms that I might be able to join as a guest. Still waiting to hear back about this.

SteveinMN, thanks for your careful overview. I know the pandemic has fogged everything, but my current decision is not riding solely on it. I'm just adding it to the other reasons I was already eyeing detached housing.

Mainly noise. While I've been lucky to have mostly quiet neighbors, occasionally I'm traumatized by loud bangs when people slam doors, drop things, move furniture, or host shindigs. This has been my first experience sharing floors and ceilings, and I'm feeling my tolerance reaching its limits.

I have tried to practice mindfulness with this -- letting things go -- but am realizing/accepting that I'm not meant to be disturbed! A cottage would not be silent either, but at least any neighbor noises would not rattle the architecture.

Health expenses -- duly noted. Currently on COBRA too but will switch to ACA in January. Or expanded Medicaid. Amazingly, I would qualify if I can draw down strategically to minimize capital gains.

Wait a year -- also duly noted. I may or may not do this. I've been thinking about housing for a while, so this is not a whim or a sudden "I can't take it anymore." Just trying to be smart about grabbing a good opportunity vs. making a careless leap. There's no rush, though, so I'm doing my homework.

Whether I'm "retired" now or not is up to me. I had been working from home for many years and can opt back in if I want (economy willing). So any change in housing would be a change in office too.

[Tammy]

3 years ago we moved from a heart of downtown high rise 550 sq ft apartment, to a single story 800sq ft house, one mile from downtown. It’s over 100 years old. Our monthly housing/utilities/tax/insurance cost is about 500 less monthly.

It’s so much quieter. We have nice neighbors but it’s good to not share any walls.

[Oddball]

Quick update. The place looks better after a couple of visits and more research. But there's a snag with getting a loan. Not so easy when you're not earning a steady W-2 income. Lenders don't care about the 4% rule and have their own formulas. Bottom line is I'd have to pay cash. It would be 20% of my egg, plus CGT on the liquidated shares. But without a mortgage, I could get by on a 2% drawdown, say 2.5% for some margin.

20% of total assets in real estate seems high to me, so at the moment I'm leaning toward the "wait a year" advice above. Or until I decide to go back to work.

[iris lilies]

Quick update. The place looks better after a couple of visits and more research. But there's a snag with getting a loan. Not so easy when you're not earning a steady W-2 income. Lenders don't care about the 4% rule and have their own formulas. Bottom line is I'd have to pay cash. It would be 20% of my egg, plus CGT on the liquidated shares. But without a mortgage, I could get by on a 2% drawdown, say 2.5% for some margin. 20% of total assets in real estate seems high to me, so at the moment I'm leaning toward the "wait a year" advice above. Or until I decide to go back to work.20% in non-income producing real estate, your home is kind of high. You are cautious to look at it that way. Most people would think that’s fine.

[Tybee]

It would be so cool if you could rent there for a year and see if you liked the communal aspect before buying.

You can usually get a mortgage if you show a steady withdrawal from the account--like you take a distribution of x per month, they will often accept that. My brother did that.

[JaneV2.0]

There's a lot to be said for actually owning a home outright.

And my house probably occupies half of my retirement nut, at least. I haven't figured what SS and my Pension amount to in the mix.

I'd keep an eye on that property.

[razz]

If this is a builder owned operation, can it be sold?

[Rachel]

Such an interesting discussion. To anyone under age 60 who is balancing work-life and finances: my experience is that it is very hard to predict what your body and your emotions will do as of age 65 and older. I thought I would work full time until age 70. At age 65 I hit a wall both physically and emotionally and white knuckled another year to retire at age 66. I'm *so glad* that I didn't over-extend financially and that I could pull that plug at 66.

That said, if you are a person who is sensitive to noise, setting yourself up in a quiet environment might be well worth some sacrifices in other areas.

Good luck and let us know how you do with this over time.

[Gardnr]

Quick update. The place looks better after a couple of visits and more research. But there's a snag with getting a loan. Not so easy when you're not earning a steady W-2 income. Lenders don't care about the 4% rule and have their own formulas. Bottom line is I'd have to pay cash. It would be 20% of my egg, plus CGT on the liquidated shares. But without a mortgage, I could get by on a 2% drawdown, say 2.5% for some margin.

20% of total assets in real estate seems high to me, so at the moment I'm leaning toward the "wait a year" advice above. Or until I decide to go back to work.

We have our primary home and a mountain cabin. 26% of total assets. No debt. From my viewpoint, 20% is fine. However, only you can decide if that feels safe for you.

I realize you're still young. Keep in mind, many folks over 50 have a very hard time getting hired especially after a gap in employment. I don't know what your work has been nor how your job market looks. I just don't want you to assume you can jump back into a job because you want one.

You have much to consider as you make decisions for your next life chapter.

[dado potato]

Lifestyle upgrade in retirement?

It is commendable to look before you leap.

I have always paid cash on the barrel-head. As a retiree on a fixed income, my limit is 16% of total assets in owner-occupied real estate. Local markets may make that limit easy. difficult, or impossible. It is easy here, where the wind sighs in the pine needles.

[bae]

Inspired by YMOYL, I "retired" when I was in my mid-30s, > 20 years ago.

I draw 4%.

In the first few years, I was a bit hesitant to "upgrade" my lifestyle much, as I wanted to reassure myself that I wouldn't somehow run out of capital before I ran out of remaining days to live.

Now in my mid-to-late-50s, and having just survived a divorce that reduced my asset base considerably, I am changing my philosophy a bit. It is unlikely that as I age that I will be healthier, more robust, more mentally and physically flexible, and so on.

Thus, I am (prudently?) upgrading my lifestyle a bit (*), because I'd rather enjoy my remaining years as best I can, rather than scrimp and save - this is the only life I get, it isn't a rehearsal for "a better try".

Covid of course has restricted my lifestyle changes a bit.

I also recently went through having two in-laws die after some years of decline and hospice. They both left considerable estates, and their own final years were spent refusing to spend even small amounts of money to make themselves more comfortable, because they had some Depression-era-based fears.

(*) This is mostly theoretical at this point, though I did compromise my principles and spend about $2000 this Fall having some guys help me with "landscaping" around the house for fire safety. I'll drop about another $10k on the project ASAP - there are threatening trees that need dealing with.

[Oddball]

Thanks for so many more great thoughts.


It would be so cool if you could rent there for a year and see if you liked the communal aspect before buying.

You can usually get a mortgage if you show a steady withdrawal from the account--like you take a distribution of x per month, they will often accept that. My brother did that.
Renting could be possible someday, but at this point there are few homes built and all are occupied. Maybe in a couple of years, but by then who knows how much higher the prices will be. As for showing steady withdrawals, that would require a track record (I'm guessing a year), so I'd have to wait on that as well.


There's a lot to be said for actually owning a home outright.
I know! I owned my previous home outright. I don't miss living there, but I wish I could have moved the house with me. It's a few states away in a place that no longer suited me.


If this is a builder owned operation, can it be sold?
I suppose so, but the current builder just bought it from the original developer. As soon as it's done, or close, control will be turned over to a resident HOA. This is projected to be in the next year or two.


Such an interesting discussion. To anyone under age 60 who is balancing work-life and finances: my experience is that it is very hard to predict what your body and your emotions will do as of age 65 and older. I thought I would work full time until age 70. At age 65 I hit a wall both physically and emotionally and white knuckled another year to retire at age 66. I'm *so glad* that I didn't over-extend financially and that I could pull that plug at 66.

That said, if you are a person who is sensitive to noise, setting yourself up in a quiet environment might be well worth some sacrifices in other areas.
Rachel, thanks for this. I have said similar words to younger people and am happy to hear them now. Folks in their 20s and 30s cannot imagine being over 50. They don't listen to me, of course, but that's how it goes. I am sensitive to noise, but the truth is that I have much less to complain about than what I do complain about. If I could lighten up a little. It's just easer to complain than to learn to live and let live.

I think what I am realizing here is that my assets are not as bulletproof as I might have thought. If they were double and I were looking at blowing 10%, I would jump at this. At 20%, I'm thinking twice and wondering whether a new place would really be X amount better than where I am. An owned home is a wonderful thing, but so is the freedom of renting during a transitional life phase. My last two homes became balls and chains when I decided to sell, a stark reminder of why I appreciate renting.


I realize you're still young. Keep in mind, many folks over 50 have a very hard time getting hired especially after a gap in employment. I don't know what your work has been nor how your job market looks. I just don't want you to assume you can jump back into a job because you want one.

You have much to consider as you make decisions for your next life chapter.
More blessed wisdom, thank you. I have heard about post-50 job bias and would like to think I would be an exception -- ha. Technically, I have never had an employment gap, as I have always had a freelance side gig, small but legit.

However, I'm not sure I want to jump back into my former line of work. In the first month or two after my layoff I could have grabbed two or three perfectly good next jobs and turned them down for lack of passion. I have needed this break, and I guess I'll take the consequences.


Lifestyle upgrade in retirement?

It is commendable to look before you leap.

I have always paid cash on the barrel-head. As a retiree on a fixed income, my limit is 16% of total assets in owner-occupied real estate. Local markets may make that limit easy. difficult, or impossible. It is easy here, where the wind sighs in the pine needles.
Sounds like my former rural home. Now I live where anything cheaper than what I'm looking at would be a fixer. I want turn-key if possible.


Inspired by YMOYL, I "retired" when I was in my mid-30s, > 20 years ago.
I too did this in my 30s even though I had not yet read YMOYL. I got restless after five years and went back to working full time, a lucky break that landed in my lap. So glad I did, as my original stash was way too small. I found YMOYL around that time and now have a real nest egg and some real flexibility, as long as I stay the course with YMOYL principles and don't do anything rash. Thus my hesitancy to jump at this house even though I love it.


Thus, I am (prudently?) upgrading my lifestyle a bit (*), because I'd rather enjoy my remaining years as best I can, rather than scrimp and save - this is the only life I get, it isn't a rehearsal for "a better try".
I think about this too! I could be dead in a year or a decade, wishing I'd enjoyed a quieter setting. Then again, few regrets about where I am now, despite the noise I grumble about.