Stay in current house or buy new home?

[Hawkeye225]

I touched on this a few weeks ago but more specifics now.  My 83 yo mother in law will come to live us next year and if we stayed in our current home, she would have to take the master bedroom on the main floor since she cannot do stairs.  The best we can tell, she is in good health otherwise.  Of course, it's impossible to know how long she will live and if she will need extended care (she does have a LT care policy but it's unclear to me what it will cover).

I'm 58 yo and make about $190,000/year (have cut hours back a bit and do not do overnight call, etc.).  Retirement plans and other investments of about 3.5 million.  Have about 575k equity in my house that is worth 1-1.1 million (HCOL area).  We have the option of building a new house with two main floor bedrooms which would cost about 1.6 million.  We could pay cash for the house and assuming a 5% return/year on the remaining investments, would be back up to around 3.5 million in investment assets that we could draw on at around 4% without reducing principal (about 120K/yr) when I retire at around age 65 (another alternative is to take a small mortgage).  Medicare of around 35k year.  RMD on about 1.5 million beginning at age 70.

Remodeling is not an option.  It would require substantial foundation work among the other costs and frankly, wouldn't save enough money to matter.

Difficult decision for me.  I'd take pleasure in providing a good quality of life for my MIL's remaining years with family around her but don't really want to live in the basement for maybe 10 years nor have my account drawn down for several years while it builds back up where it is today due to a new house purchase.  Of course, the new house would need little maintenance for as long as we lived in it whereas our current one will need a 60k driveway and 140k in windows over the next 20 years if we stayed here.  We do not want to move out of the area because our children and grandchildren are here.

Any words of wisdom on this one?  Thanks for the help.

[EH]

Yikes! I wouldn't be looking at a 1.6m house with that information. Sure it may work out or the market could give crap returns and you'd be in trouble. If your house doesn't work Is there not an option to buy a house in the similar price range to your current one that is perhaps a one story house with first floor bedrooms? Otherwise I would stay put and maybe buy cheaper windows...

[Hatton]

I would find out what exactly her LTC policy pays for.  My father thrived in assisted living. If stairs are her main problem then she might like living with people her own age.  Also one of my neighbors installed one of those stairway lifts when her 90 year old mother broke her hip. Another option that I have seen advertised is a granny pod which is a small one story modular home kind of built in the backyard

[childay]

So you are proposing selling your taxable investments to pay for this new house in cash?

[Hawkeye225]

Sure, we could move into another neighborhood miles and miles away from my work in a major city or closer in to a house requiring considerable remodeling anyway.

We are looking at multiple options.  Stairway lift won't work in my house without an extensive remodel.  HOA won't allow a structure built in the back yard.  Plus, with winter here, that is not a reasonable option.

No taxable investments will be sold.  Have muni bonds maturing next year.

Keep 'em coming please.

[RocDoc]

Is it possible you and your wife could temporarily move upstairs into one of the spare bedrooms and let your mother in law have your main floor bedroom? I faced this same situation with my Mom and Dad. My husband and I had a fairly large upstairs spare bedroom we relocated to and are still there almost one year later. My parents are living in luxury in our master bedroom on the first floor. It has been fun for my folks as our master bedroom and master bath is almost half the square footage of my parents whole house. It has worked out surprisingly well. We all get along together (for the most part) and now that my husband and I have cut back on work hours to travel a bit more, it's nice to have my parents keeping the house occupied while we're away.

i realize this solution wouldn't suit everyone. My husband and I privately worried if we'd make it through the first month! But we made it work and we'll do the same for my husband's Mom when she needs help. It didn't cost a penny for my husband and I to move up to the second floor so it was a "no cost" solution. If my Mother in law moves in too, then we would need to do some construction as we only have the one bedroom on the main floor. I would probably convert the library into a bedroom if my Mother in law moves in.

These recent housing post questions on the WCI forum have really been an eye opener for me. I was unaware of how extremely expensive homes are in some areas. For the price of your 60k driveway + 140k windows, you could buy a nice  2500 square foot home in a decent neighborhood where I live in Texas.

 

 

[jfoxcpacfp]

You will need to make $200k of improvements over the next 20 years...that is quite a timespan. Realistically, by then, all of the parents will have moved on to a better place and you will very possibly be ready to downsize. I can think of much better things to do with a bond portfolio than buying a $1.6M house :-)

Of course, if I recall the original convo correctly, your MIL will be chipping in on the cost, so that is a consideration. However, if your spouse has other siblings, that complicates the estate when she passes away and you eventually sell the house or leave it for your kids. And if she does have other siblings, are they also planning to help out and how?

I believe you should at least consider a nice assisted living community where she could maintain independence and develop a social life with others who are retired, need some assistance, but are in fairly good health before you make this life-altering decision.

[Hatton]

I agree that a nearby assisted living would be good to check out.  My dad lived in one for about 10 years and made lots of friends and really enjoyed all social activities.  I think lots of people have misconceptions about assisted living.

[Hawkeye225]

Roc-That's basically what we would be doing except moving downstairs.  If I'm not mistaken, you and I are the only ones that have responded that actually want our family member (MIL in this case) to actually live with us so that she can enjoy her own family including grandchildren and great grandchildren.  I do find that a bit puzzling.  And yes, housing is very expensive here and there is nothing we can do about it.  I can't earn more without moving away from my own family and who wants to hire a 58 yo as a partner?

Johanna-No other siblings.  Just my wife and all major assets for all of us have been placed into trusts, etc.  No complicating factors in that regard thankfully.

So if I'm reading the overall tone correctly, most or many here don't believe that 3.5 million at retirement with no debt is not enough assets?  It seems to me that we would have to pay thousands for her to live in a retirement home/assisted living (which she does not need at this point) so what's the difference in doing that and purchasing a home that she might be able to live in for 5-10 years without paying for the other living arrangements?

[RocDoc]

I think your plan will work and 3.5 million is fine for retirement. However, the money will have to grow back to 3.5 million by age 65 after you take some out to buy the new house. That concerns me since we are probably riding the very last gasps of a long bull market. Future returns may be low for awhile. Maybe it will be difficult to get your retirement funds back up to 3.5 million in time. Also, you are already 58. You've done great accumulating the 3.5 million by age 58. You've got enough to retire now if you didn't buy the new house. Are you sure you want to keep plugging away until 65 when you've already done so well saving?

I think it's wonderful that you support having your Mother in law move in with you! That's what my parents did for their parents so that's what I grew up with. My husband's parents also had their parents move in so he was on board too. It was never a question that my parents and parents in law would move in with us when it became necessary.  We love having them actually and it adds happiness to all of our lives. I don't know how much longer they'll be around so I'm treasuring the time. But I can also understand that living with parents and parents in laws doesn't work for all families.

I can relate about not wanting to move to a different area for work since you're already a partner. Luckily, you've done well and saved a great deal even with the expensive housing market you're in.

 

[Lithium]

I'm probably oversimplifying it a lot, but it seems that if we reduce it to two options, both leave the OP with a worst case scenario.  If MIL moves in and stays with him another ten years (which seems very improbable, due to likelihood of disability or death.  About 30% of people that age live that long).  He could live in the basement that whole time.

If he buys a new home, and the market gets zero real return for ten years (which I think is more likely than MIL living with him for ten years), what will he do?  Work till 75?  Would it mean a dramatically lower standard of living, or moving?

Not only does the second worse case scenario sound much more onerous to me, it's shrouded in far too much risk and uncertainty, which I'd avoid at the end of my career.

[Kamban]

Hawkeye225 wrote:

Roc-That’s basically what we would be doing except moving downstairs. If I’m not mistaken, you and I are the only ones that have responded that actually want our family member (MIL in this case) to actually live with us so that she can enjoy her own family including grandchildren and great grandchildren. I do find that a bit puzzling.

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Actually in his original thread a while back I said the same thing and did not want to repeat that again. We have our in-laws staying with us half the year while in USA and we would have it no other way. Also, if the OP's situation had occurred in our family there will be no question that we will vacate the master bedroom and move upstairs and give the main bedroom to them. There would not have been any other thought occurring in my wife's mind or mine. Family comes well before these smaller things like master bedroom versus a second bedroom, at least in our lives. I realize that others may not share similar opinions.

[Hawkeye225]

Kamban wrote:

Hawkeye225 wrote:

Roc-That’s basically what we would be doing except moving downstairs. If I’m not mistaken, you and I are the only ones that have responded that actually want our family member (MIL in this case) to actually live with us so that she can enjoy her own family including grandchildren and great grandchildren. I do find that a bit puzzling. 

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Actually in his original thread a while back I said the same thing and did not want to repeat that again. We have our in-laws staying with us half the year while in USA and we would have it no other way. Also, if the OP’s situation had occurred in our family there will be no question that we will vacate the master bedroom and move upstairs and give the main bedroom to them. There would not have been any other thought occurring in my wife’s mind or mine. Family comes well before these smaller things like master bedroom versus a second bedroom, at least in our lives. I realize that others may not share similar opinions.

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Kamban-I hope that's not a shot at me.  It's done deal that MIL gets the master.  I personally have been trying to get her to live with us for several years; she's family and there is no question how she should be treated.  We are simply trying to see if there is an alternative that would benefit all.  Nothing more to it.

[Kamban]

Hawkeye225 wrote:

Kamban-I hope that’s not a shot at me. It’s done deal that MIL gets the master. I personally have been trying to get her to live with us for several years; she’s family and there is no question how she should be treated. We are simply trying to see if there is an alternative that would benefit all. Nothing more to it.

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Hawkeye

I would not dream of making a snarky comment or taking potshot at you. I will just replying to Roc and you that family comes first and you had commented on it and I agreed and stated I did write that in an earlier thread. That is all.

I am glad that you are helping your MIL. You have explored other options that don't sound very feasible. By the time you have the additional realtor expenses of selling the house and the moving expenses the price difference might be more than $600K.

Say you decided to sell your current house and get $600K i equity and use that as down payment for the next house. You will have $1M mortgage and pay $88K or so in mortgage per year out of your $190K salary, if you take a 15 year mortgage. Can you live on the rest or improve income so that savings are untouched. Or pay off at your planned retirement and dip into savings. The better option is to stay put in your current house for a year or two and see how things play out.

 

[Sneezy]

I am sorry if I didn't get the whole picture, but are there upstairs bedrooms that you have kids occupying?

One option might be to kick an older kid downstairs and you and your wife could take the upstairs bedroom

My experience is that teenagers adapt to subterranean living much better than old folks such as me.

You are in good shape either way

Also remember that if you do build the new house you might choose to move out to something less expensive once your MIL is no longer with you