Early retirement, vacation home or travel? Hard decision

[Anonymous]

My friends parents retired a decade ago, and have been renting beach houses in different locations across the U.S. for Feb-March and doing some other travel. One year, they travelled to Gulf Shores and really liked it, and the next year rented there from Jan-Apr. Now they are ready to buy a place there.

It took them a decade of travelling all over to find the location where they really wanted to put down roots. Once they buy their vacation house, they will probably sell their main residence (in the cold Midwest) and permanently stay south.

[Anonymous]

Make sure you've factored taxes & depreciation into your equation, OP. We rented out our primary residence in DC and now live in our second home in Portugal. Income from the rental pays off primary home mortgage, which lets us keep a toehold in case we ever want to come back to DC again. Also, we take depreciation on primary home to lower our US taxes. The second home was bought outright, so no mortgage expense on that, plus COL is much cheaper than DC, and we are tax free in Portugal.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't see the appeal of a vacation home personally, so I'd vote against that.

Well, you would eventually sell or rent out your "work" home and move into your vacation home. You would either have the proceeds of the home sale or rental income to play with during retirement.

Yes but the OP is already retired, or will be soon. Why would you need a vacation home once you are retired and don't need a "work home". Your vacation home is your home.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Okay, I don't mean to piss anyone off or come off like a troll but here's my dilemma and I was hoping for opinion's from other's that might have been in the same boat. I was able to retire fairly young at 55 along with being financially set for life. The problem is my wife and I love to travel but at the same time would love to buy a vacation home for retirement. The issue is I really can't do both and spend the kind of money I'm looking at.

I guess my big question is, would you rather have a vacation home or several beautiful vacations around the world each year? Seem's like it should be easy to answer but it's not. Any serious suggestions or past experience would be appreciated. Also, I've heard all the pro's and con's of owning a second home.

Sorry to break it to you, but if you cannot afford to do both, you are not 'set for life'.

This is just silly. Typical DCUM snark. Of course someone can be "set for life" but not feel comfortable buying and maintaining two homes and traveling extensively. Or, perhaps they could afford to do all three for some period of time, but it wouldn't leave the kind of "cushion" that they need to feel comfortable that their money will last as long as it needs to. Retirement calculators just give you predictions -- most of us don't want to cut it that close.

When someone says set for life, I think it has a connotation of a level of income that is not going to really restrict your activities. Technically, if you live in a trailer that costs $500/mo and you are collecting 2k a month in SS, ypu would be set for life, but I don't think that's what most people think of when they hear that term.

But define "really restrict your activities." If you mean truly unlimited, then almost no none would ever retire. If you want to retire early, and come up with a budget of say, $250,000 per year in retirement, and you save enough money to throw off that much income every year (on average, adjusted for inflation), by my definition you could be "set for life." With that income, you could afford a million dollar house (you probably have about that much equity in your existing house), and be able to spend $20 to 30k per year on travel, but you probably couldn't afford a million dollar beach house, as well (depending on what else you spend money on -- country club, boat, etc). I know, because I'm doing this calculation right now. If you want to have money to travel extensively and have the beach house, you're going to work a little while longer. But that doesn't mean that, if you decide that second home isn't important to you, that you aren't "set for life."

To me, "set for life" means you have millions and can factor in the cost of the very best around the clock private nursing care if you or spouse should need it, and have money left over to leave some inheritance.
You and the OP are well off, planned well, doing great, but "set for life" is not what I'm getting out of either of your situations. (No snark intended, it was just an interesting phrase to use to describe the OP's situation)

[Anonymous]

Easy. Travel.

[Anonymous]

Travel is what young people place first. When you get oldr it is not as appealing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Okay, I don't mean to piss anyone off or come off like a troll but here's my dilemma and I was hoping for opinion's from other's that might have been in the same boat. I was able to retire fairly young at 55 along with being financially set for life. The problem is my wife and I love to travel but at the same time would love to buy a vacation home for retirement. The issue is I really can't do both and spend the kind of money I'm looking at.

I guess my big question is, would you rather have a vacation home or several beautiful vacations around the world each year? Seem's like it should be easy to answer but it's not. Any serious suggestions or past experience would be appreciated. Also, I've heard all the pro's and con's of owning a second home.

Sorry to break it to you, but if you cannot afford to do both, you are not 'set for life'.

This is just silly. Typical DCUM snark. Of course someone can be "set for life" but not feel comfortable buying and maintaining two homes and traveling extensively. Or, perhaps they could afford to do all three for some period of time, but it wouldn't leave the kind of "cushion" that they need to feel comfortable that their money will last as long as it needs to. Retirement calculators just give you predictions -- most of us don't want to cut it that close.

When someone says set for life, I think it has a connotation of a level of income that is not going to really restrict your activities. Technically, if you live in a trailer that costs $500/mo and you are collecting 2k a month in SS, ypu would be set for life, but I don't think that's what most people think of when they hear that term.

But define "really restrict your activities." If you mean truly unlimited, then almost no none would ever retire. If you want to retire early, and come up with a budget of say, $250,000 per year in retirement, and you save enough money to throw off that much income every year (on average, adjusted for inflation), by my definition you could be "set for life." With that income, you could afford a million dollar house (you probably have about that much equity in your existing house), and be able to spend $20 to 30k per year on travel, but you probably couldn't afford a million dollar beach house, as well (depending on what else you spend money on -- country club, boat, etc). I know, because I'm doing this calculation right now. If you want to have money to travel extensively and have the beach house, you're going to work a little while longer. But that doesn't mean that, if you decide that second home isn't important to you, that you aren't "set for life."

To me, "set for life" means you have millions and can factor in the cost of the very best around the clock private nursing care if you or spouse should need it, and have money left over to leave some inheritance.
You and the OP are well off, planned well, doing great, but "set for life" is not what I'm getting out of either of your situations. (No snark intended, it was just an interesting phrase to use to describe the OP's situation)

People who are in this situation do have "millions." If you want around $250,000 in income over a long period of time (plus adjust for inflation), particularly if you want to retire early, you're going to need around $8 million in savings. If all goes well, you will probably leave an inheritance for your kids, but that's a safe amount. Sure you can take the $8 million and buy a beach house and travel extensively, but think about all the folks on this forum complaining about being "poor" on $300k. Obviously, they're not, but choices always have to be made. You have to hit over ten million or so to live the life you're talking about.

[Anonymous]

Anonymous wrote:Travel is what young people place first. When you get oldr it is not as appealing.

That's why I touched foot on all seven continents in my 30s. I knew it wouldn't be as appealing in my 70s.

[Anonymous]

Come on, those world cruises seem pretty appealing to people in their 70s. They're not climbing Kilimanjaro, but they're still traveling.

To the Portugal PP, how are you tax free??

[Anonymous]

Anonymous wrote:

Anonymous wrote:Travel is what young people place first. When you get oldr it is not as appealing.

That's why I touched foot on all seven continents in my 30s. I knew it wouldn't be as appealing in my 70s.

Ha! My mom just climbed Kilamanjaro at 61. She travels all over the place, like crazy destinations. There are no cruises or all inclusive stays for her. She's done the Andes in Peru, China, hardly a country in Europe she hasn't touched, all over Alaska last summer, including hiking Denali, and is currently making her way all around Africa.

I have a vacation home. It actually breaks even, as we also rent it out part time. Not much to manage as we have a management company that handles all upkeep. Basically we break even after all is said and done.

For the vacation home, our biggest fans are our kids. They absolutely love it there are are building incredible memories. It certainly is not for everyone because it can be very expensive. However, if I couldn't make money off it and I had to choose between vacations or 2nd home, it would be vacations.

[Anonymous]

Anonymous wrote:Come on, those world cruises seem pretty appealing to people in their 70s. They're not climbing Kilimanjaro, but they're still traveling.

To the Portugal PP, how are you tax free??

Portugal has a non-habitual tax resident program to attract foreign capital. We only pay US federal & that is also at quite low, considering that it is not salary income but rather dividend and cap gains countered by aggressive loss harvesting. Plus write offs for mortgage interest and depreciation.