This article was written by Darrow advisor Kristin McKenna, CFP® and originally appeared on Forbes
When should you buy your retirement home? Buying a retirement home too early could be short-sighted, despite long-term intentions. Whether you’re in your 30s or 60s, it’s important to objectively weigh the pros and cons before purchasing a retirement home to avoid making a potentially costly financial decision.
The temptation to buy your retirement home while you’re still working
There are several common reasons investors may be inclined to purchase their retirement home, before they actually retire:
- Fear of missing out (FOMO): homebuying is a very emotional time for many investors and it’s common for the fear of missing out to drive purchasing decisions. Perhaps you’re convinced the property is a ‘really good deal’ or values will skyrocket, leaving you priced out of the market in retirement. Either way, fear isn’t a good reason to buy a house.
- Justifying the purchase of a vacation home: we’ve all done it: give ourselves permission to buy something we want—but don’t need. Especially for individuals still a ways off from retirement, a vacation home may seem like the perfect reward for all the long hours, even if it is a stretch financially. But think of how much we’ll end up saving when we retire here!
- Ready to retire, just not financially: especially for individuals or couples nearing the end of a long career or getting close to an early retirement date, the day you can finally turn in that ID badge cannot come soon enough. But if you need to keep working to bridge the health insurance gap before Medicare or build more savings, buying your retirement home early may be able to help you feel closer to your end game. Without careful planning, this could extend your retirement date.