[Chuck1674]

You have 400k cash and 5k a month pension
Get a huge house with a mortgage.
Medium house with smaller mortgage.
Patio villa cash and 200 k in the bank.
What are your ideas? Do the kids and grandkids visit as much as u thought. That factors into it.

[Dionysos]

Originally Posted by Chuck1674

You have 400k cash and 5k a month pension
Get a huge house with a mortgage.
Medium house with smaller mortgage.
Patio villa cash and 200 k in the bank.
What are your ideas? Do the kids and grandkids visit as much as u thought. That factors into it.

We just went through a similar decision as well, albeit different sums. We wanted to be free and clear while heading into our fun years and decided to buy a CYV for cash plus put some into improvements. After 20 years of Mortgages we always felt like we had a landlord. If it was not the bank it was the insurance company. Now we make the terms

Really depends on how comfy you are with your pension and SS.

[vintageogauge]

rent for a year and see how it feels and if the kids come down to visit.

[Toymeister]

You did not mention your age, this factors into social security. This can easily add 40% to your pension. This is a huge factor in any meaningful recommendation.

[Chuck1674]

No social security 56

[villagetinker]

OK, 6 years ago this was a no brainer, interest rates (for mortgages) was at 3% (15 years fixed), rate of return on investments well over 5%, and there was still a way to deduct home mortgage interest. ALL of this has changed, we took the mortgage, and have come out ahead but I doubt that same scenario would work today, too many things have changed, we can no longer write of home mortgage interest, home mortgage rates are higher, and investment yields seem to be lower. As I stated in the chit chat lounger, talk to your financial advisor, there are lots of things to consider.

[anothersteve]

I should have such problems!
Steve

[Boomer]

Unless you are retiring from a career that provides you with the benefit of health insurance for life for you and your spouse, you need to take a close look at what those costs could be — and be sure to project increases.

[OrangeBlossomBaby]

No social security at all OR no social security yet? That makes a difference. Certain municipal and other government employees are exempt and get a pension instead of social security. People in the private sector can get both.

If you'll be able to get Medicare when you're "of age" I'd say go for a cozy 3BD home, under $300k. Pay cash. Invest some of the rest to build up more, and sink a bit into something accessible "just in case." The $5k per month can handle all your usual expenses, including health care unless you have special circumstances. If there are no special health issues, you should be able to save some of that pension every month to add to your investments.

[valuemkt]

So Chuck .. you are 56 and retired. You have 5K pension income for life. You have 400K cash, and presumably ZERO IRA or 401K. I consider that unlikely. Maybe you;re not counting that because in most cases you can;t touch that until 59.5 (there are cases when you can). And you dont mention if you are married or not. (wife same age ?) So your social security full retirement age is 67, and your age 62 reduction is 30%.
So you made a decent living if you have a $5k pension, but its not clear if you have a full 30 years of solid earnings. So let's estimate your FRA (pls enroll in SS online to get real number) is $ 2500 / month. 70% of that is $1750. So in 6 years you'll be getting that, plus your wife (if u have one) will get a spousal benefit - lets say 850 for easy rounding. Thats $ 2600 more in 6 years, or 7600 / mo or around $ 91K / year. Some people would kill for that - others not so much.

If literally, the 400K is it - you need yourself an emergency fund .. and a home improvement fund etc. Not knowing where youre moving from and how big of a house you lived in, I would not buy a patio villa. I would look for a 3/2 courtyard villa or a smaller designer at a price point around $250-275K - perhaps north of 466 in the Spanish springs area. maybe even w bond paid. A 100K 15yr mtg at 4.5% is 765/ mo. So if your total purchase price is 300K with closing etc, you pay cash and have 100K left, take a 100K mtg and have 200K left. or some portion thereof. None of my business.. but if it were me, and i was a healthy 56 with what you described, Id still be working. but im sure theres more to the story

[Toymeister]

If you have health insurance I would concentrate on level income. I would get the estimate of your SS based upon your age that you will draw it at. 70% of your full benefit at 62, full benefit at 67. With this amount I would look at the draw down from your 400k until that age using that benefit amount. That sum that you need, let's call it your interim privately funded SS, should be deducted from your cash on hand. The amount that remains is what you have to work with. This will place the decision in laser focus.

Why do this exercise? You will want income now at age 56 not when you draw SS.

[ColdNoMore]

Originally Posted by villagetinker

OK, 6 years ago this was a no brainer, interest rates (for mortgages) was at 3% (15 years fixed), rate of return on investments well over 5%, and there was still a way to deduct home mortgage interest. ALL of this has changed, we took the mortgage, and have come out ahead but I doubt that same scenario would work today, too many things have changed, we can no longer write of home mortgage interest, home mortgage rates are higher, and investment yields seem to be lower. As I stated in the chit chat lounger, talk to your financial advisor, there are lots of things to consider.

Yep...

My wife was still working as an independent contractor when we moved here and running the numbers, it made a lot more sense to take a mortgage @3.4% out on about 1/3 of house value...and therefore allowing us the write-offs.

The invested money that would have otherwise went to pay cash for the whole house, has returned substantially more than 3.2% over the last 7 years (opportunity costs)...so it was a no-brainier for us back then.

Under the new tax laws, and being in the longest bull market in US history, it may be time to 'noodle' things out again though...to see what makes more sense now.

In the long run though, I'm simply doing it for my kids as they'll be the ones benefiting...from my choices.

[Boomer]

If the only reason you are thinking of a bigger house is for visiting grandchildren, you might want to think again. You can have fun with your grandchildren in any house in TV.

A bigger house comes with bigger costs of a lot of things. Think about what works best for you and your day-to-day life in retirement.

If you have not already done so, you might want to sit down and look at a realistic budget that fits well into your pension and maintain as much savings as you can.

I know that buying a retirement house with cash seems like the ideal thing to do. But if that requires dipping into too much of your savings, maybe that is not as perfect as it sounds.

Try taking a look at what a comfortable house payment would be within your monthly pension amount and then you could dip into savings only enough for a down payment that would leave you with a highly manageable monthly cost. Grab a fixed rate without any pre-payment penalty for paying ahead or paying off. (I don’t think those penalties are around anymore, but be sure.) Factor in closing costs, etc. 15 years would be the best choice. Yes, you would be paying interest, with no write-off but equity would be building a whole lot faster. Only you and your wife can decide which home buying scenario makes you feel more financially secure.

I am going against the usual grain of paying cash if you can because I am not so sure taking such a huge chunk out of your savings is a good idea. A cushy savings might feel better, even if it means a house payment.

I know the tax law now has changed and I know the mortgage rates are up, but not like those of years ago, not even close.

Just run your numbers and talk with each other about what feels best. Do your homework. And, as you know, all this advice we are giving is worth exactly what you are paying for it. But, hey, it’s a start.

[OrangeBlossomBaby]

The kids and grandkids could always find a rental nearby, or a hotel. Stay at a vacation rental between the Villages and Disney, and split the week between the two locations.

[retiredguy123]

I would buy the patio or courtyard villa for about $200K. I have never believed in going into debt, and have done extremely well with that plan.