Scenario 1 vs Scenario 2 (pension, beach, weather, moving)

[SLoriginal'71]

Hi y'all. I am curious to hear opinions of what you would do if you were in my shoes and why.

So here it is, if you were me...........

You and your spouse are retiring early (50 & 53). You both have agreed that your "perfect" place to retire is in another state where the cost of buying a house is very high. You have a big retirement fund and can use 200,000 for a down payment and if buying used then some would be used for renovations.

Scenario #1
You use that 200,000 and buy a home. Your traveling will be smaller trips thru the year with maybe 1 big overseas trip every other year.
You would RETIRE in 1 year.

OR

Scenario #2
You could leave that 200,000 in your IRA and instead rent a very nice place. You would then be free to use a little of that 200,000 each year to take 1-2 big overseas trips each year along with all the smaller trips during the year. You would also be free to easily move when ever the whim hit you. The 200,000 could generate some money while it sits in your IRA. Bonus - You would RETIRE in 4 months.

Here is the kicker.....If you choose to rent then you cannot later change your mind to buy a house because you will have been spending down that 200,000.

Also a mortgage payment would not be cheaper than renting in our scenario. Just look at them as being equal.

Play nice please. I'm just curious which scenario others would choose if they had this choice. Just to let you know.....we owned a home for over 20 yrs. In the last 5 yrs we sold it, moved into the city and have rented several places. Apartment, condo in a high-rise on the 31st floor and a 3 story townhouse. So we definitely are familiar with the pros and cons of renting vs buying. For some reason this seems to be hard for us to choose which scenario we want to do. Thanks!

[NoMoreSnowForMe]

If it was me, I'd buy.

For one, buying is never equal to renting, because when you buy, your rent basically goes into a savings account (your equity) instead of out the window. You will also have some tax write-offs you would not have as a renter. Your monthly rent would also never go up. And, you can't be kicked out, and you can paint it, attach things to the walls, move walls, do what you like with it.

Secondly, if you will be moving somewhere with better weather, you may not feel the need to travel so much. Especially, if you enjoy being outside, gardening, barbecuing, going for walks, hikes, etc.

I'm picturing you moving to California from somewhere with worse weather, for instance. There are just so many things to do outside here, and so many wonderful day trips you can take to different interesting towns, mountains, beaches, deserts, etc., that you wouldn't feel the need to travel far away. Heck, where I live you can go to pretty much any type of restaurant, go to different neighborhoods that feel like you're in another country.

When I lived somewhere with weather that kept me inside, I wanted to get away and travel. But, now I'm happy to stay put and just enjoy my area, which is the SF Bay Area with lots to do and see. I'm assuming if you're moving somewhere expensive, it will probably be in an area with lots to do, too. So, you may not care about traveling so much anyway.

What an exciting time for you. I wish you the best.

[galaxyhi]

I'd rent for at least a year, spend down some of the 200, to be absolutely sure its your dream retirement area.

Even if you've visited, even often, living there may not be the panacea you thought.

Then, if the spirit moves you, find a cheaper fixer, put a buck or so down, renovate to your tastes on a budget, instead of buying a fresh property.

But that's me, your results may vary.

I just wouldn't want to choke on a mortgage or rental unless I knew for sure id want to live there.

And if it comes to it, the overseas trips can become further apart or eliminated if need be as a cushion.

[Mr5150]

I’d opt for living where you would be happy. Plain and simple. P

[oldsoldier1976]

if your ideal is to take trips then 2. If you plan to set down roots in an area that you enjoy then 1. The retire timeline notwithstanding.

[Clemencia53]

Rent first.

You might not like the area or even each other and end up going your separate ways.

[beer belly]

I would opt for Scenerio #1 with one change.....rent for a year before buying

[snapdragon1]

I dont consider 200,000 that much money. So if you are thinking you are wealthy you are not. I think it would be best if you worked more years.

Ok you dont want to do that.

Well I would say rent for 3 months,so you can see if you are happy in that area, then buy a home,nothing like secuity in my book.

Plus traveling is nice but not all its cracked up to be.

[MadManofBethesda]

Originally Posted by NoMoreSnowForMe

If it was me, I'd buy.

For one, buying is never equal to renting, because when you buy, your rent basically goes into a savings account (your equity) instead of out the window. You will also have some tax write-offs you would not have as a renter. Your monthly rent would also never go up.

This isn't necessarily true anymore. Under the new tax law, if they don't have $24,000 in itemized expenses, then they get no tax benefit from owning as opposed to renting.

[rjm1cc]

Too little info. Retiring at that age and 200,000 being very important to your life style tells me you don't have enough money unless you are getting a big inflation adjusted pension and have a couple of million in investments.
Is your IRA taxable? Pull it out in one year and a good part will go to taxes.
I would hire an advisor to review your plan as a second opinion.