Never Owning a Home?

lifeonthehill · January 2014

Talk to me about this.

H and I live for free in a dorm building on a boarding school campus. We have a 3 bedroom 1 bath apartment that could use upgraded cabinets, kitchen/bathroom floors and counter tops but beyond that it is in pretty good shape for being built in the 70's. We love the free life style. Also when we get some ore senority(5 years mininmum) here and have children of our own we will be able to get a condo on campus which would also be completely free. I love this because we will be able to do so much more with our money.

However H and I started thinking about what we would do after retirement. Where would we go after this? Starting a mortgage at 65? Buy a house in full? It seems pretty scary. Any thoughts?

hoffse · January 2014

I can't remember exactly how old you and your H are, but as I recall you guys are young-ish, correct?

If you aren't paying for your housing costs, that frees up a LOT of money for you each month that most people are spending. If you want, you can consider buying a house or condo part of your retirement plan. The costs of housing will continue to go up over the next 30-40 years, but money you put in the market should also continue to go up. In your situation, I would probably be inclined to increase my reitrement savings a bit to account for the possibility of buying a house or condo cash in my retirement. Of course, you can always rent too - but if you have enough money, there's a lot to be said for owning your home outright when you are approaching an age where medical expenses, etc. are going to increase.

H and I aren't as lucky as you guys, but to give you some perspective on our housing plan, we are hoping to buy our "forever" house as our second home, perhaps 10 or so years after buying our starter house. If we stay in a starter house for 10 years, we ought to be able to pay off our student loans and then save enough for a massive downpayment on a forever home. We probably wouldn't buy until we could put 50-70% down. That sounds like a lot, but we will be saving as we go. And we simply plan to put money in the market while saving for the second house, instead of just keeping it in cash. That should increase its value considerably.

Of course this depends on how much you make, but I would think that with 30 years to plan and save (with no housing costs in the meantime), you guys would have no problem just paying cash. And if you can't, then you acquire a mortgage or rent. Bonus: if you retire in a state with no state income tax (ie: Florida), your tax savings might pay for most of your rent/mortgage. FL only requires you to live there for 6 months and 1 day out of the year to qualify as a resident. Living in AL, I know many folks who buy "vacation" houses down there, and spend enough time there during the year to be a FL resident. Then their tax savings pretty much pays for the mortgage on their vacation home. And it also means they can visit the beach for the cost of gas and food - they don't have to pay for lodging. So they reduce the cost of their vacations too. My point is there are a lot of ways to plan it. And if you guys are thinking about it now, you two will come up with something that is workable for your lifestyle.

maple2 · January 2014

As my parents near retirement, they are actually looking into selling their house and moving into a condo or some other sort of place where they won't be responsible for all the upkeep and maintenance. They haven't decided yet if they would prefer to own or rent, but I do think its pretty normal for people to re-assess their housing needs as they approach retirement. In general, I don't think there is anything inherently wrong with never owning your own house. Lots of people never do either because they can't afford to or because they don't want to take on the responsibilities and risks that come with home ownership.

In your situation, I would probably do what pp suggested and save more right now. You presumably have more discretionary money since you don't pay for housing and you should plan on your costs increasing after you retire since you will have to pay for housing then, so more saving now is a good idea. When the time comes, you should then have the financial flexibility to make whatever housing decision will best meet your needs.

cbee817 · January 2014

You may change your mind once you have kids- it's nice to have a single family home with some type of yard for them... give your family some of their own space. I lived in apartments/rented houses with my mom until she bought a house when I was 15- I never had the feeling of a childhood home and I'm really happy I can give my girls that. Just something to think about.

Xstatic3333 · January 2014

I like the idea of saving up slowly to either buy outright in retirement or have a very minimal mortgage. What a great opportunity you guys have without needing to pay rent! I have some friends from church who are in a similar living situation at a local college. Now that they have LOs, they love the community spirit and easy access to babysitting that living on a campus provides.

lifeonthehill · January 2014

Xstatic3333 said:

Now that they have LOs, they love the community spirit and easy access to babysitting that living on a campus provides.

This is why we don't think we will want to be living off campus while here. We both feel like this isn't just a job it is a lifestyle.

hoffse said:

I can't remember exactly how old you and your H are, but as I recall you guys are young-ish, correct?

22 and 24

Thanks for the responses everyone. I am going to start looking to see what we should be saving to make this possible.
I guess I am just feeling a little worried right now but once we are matching for retirement and maxing out both Roth IRAs I think I will feel better.

hoffse · January 2014

Alyssa, you guys are so young that once you get your contributions up a little, you will retire with so much money you won't know what to do with it. Seriously. Just keep saving, investing, and living within your means. I would bet that by the time you hit 30, you and your H will have 6 figures in your retirement accounts. After that, it really starts to compound a lot faster. Buying a condo or house cash during your retirement would be an excellent use of some of your money. Besides, a house is an asset and an investment in its own right.

lifeonthehill · January 2014

hoffse said:

Alyssa, you guys are so young that once you get your contributions up a little, you will retire with so much money you won't know what to do with it. Seriously. Just keep saving, investing, and living within your means. I would bet that by the time you hit 30, you and your H will have 6 figures in your retirement accounts. After that, it really starts to compound a lot faster. Buying a condo or house cash during your retirement would be an excellent use of some of your money. Besides, a house is an asset and an investment in its own right.

Well there is a positive spin on things! Thank you for that.

I am glad I have this board. It has helped me be so much more aware of all thing money.

Never Owning a Home?

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