Choice: Move to a swankier house and work 3 xtra years to retire, or stay put.?

Question

1. Current house is fine, but more space would be nice.
2. Difference is retiring in 20 years, instead of 17 years.

Answer 1

Are you already paying down your debt(s) as quickly as possible? You may be able to do both the swanky house AND early retirement.

The classic way to get debt-free as quickly as possible is to pay down your highest-interest loans FIRST, as they cost you the most. Then when your first debt is paid in full, put that monthly payment toward the NEXT-highest rate debt. Then the next, etc. etc. Eventually you'll end up with a fair amount of extra money each month that you can use to pay down the mortgage more quickly.

There are other possibilities too -- you could move into the swanky house now, knowing it will appreciate more in those 17 years, and you could sell it at that time and retire into a smaller place (or a less-expensive location) with your equity. This works because your swanky house gives you more leverage for appreciation. Let's say you move out of a $400,000 house into a $500,000 house -- your appreciation is higher on the new house because the basis is higher.

I ran a quick check on the compound interest calculator I included in the Sources field, and was surprised. Compounding a $400k house at 5% per year for 20 years actually nets you LESS than compounding a $500k house at 5% for 17 years -- you're almost $85,000 ahead after 17 years with the more expensive house.

Admittedly, that's excluding the value of any investments you would have made with the difference between the mortgage payments on your $400k house and the $500k house; it should be easy to make more than 5% on the difference, but now you have a target figure -- $85k -- that lets you know whether it's a good or a bad thing to do.

The final question is, of course, taxes. If you invest your monthly overage in a 401(k) or IRA, you get a tax break on it now equivalent to your federal tax bracket -- it typically costs about $70 out of your paycheck to save $100 in a 401(k). And if your company matches, your retirement fund can grow by the amount that they match each year. That can be a strong incentive to stay with the 401(k).

Conversely, the interest on your home is also tax-deductible, so for the first few years in particular the difference between the lower and higher mortgage payments will be offset, to some extent, by the difference in your taxes. Meaning you can have less withheld, which may let you continue your savings even at the higher mortgage level.

So there's a look at how you might be able to "have it all" -- let your house do some of the work of building your nest egg and retire early WITH the big house. It's certainly worth looking into.

All the best!

Answer 2

Since you won't be retiring for 20 years, I would recommend getting the swankier house. Work is much more appealing when you have a lovely place to come home to.

If you were only a couple years away from retiring, I would say stay where you are.....when people retire they usually move into a smaller place and buy 2nd or 3rd vacation homes.

Answer 3

If you only had a few more years before retiring, then I would say stay put. But seeing as you have almost 2 decades left to work anyways, why not spend those two decades in comfort and a little lux. I'd be movin.

Answer 4

Stay in your current house and enjoy your retirement earlier. We all work too much as it is. And sometimes we get caught up in material things instead of what would actually make us happiest.

Answer 5

Work 3 years and stay put

Answer 6

This question can only be based on your priorities. Who are you trying to impress, yourself or others?

Answer 7

Enjoy life while you can!