Can We Afford Two Homes? - Jill on Money with Jill Schlesinger

Summary

Summary of "Can We Afford Two Homes?" Episode of Jill on Money with Jill Schlesinger

Release Date: December 9, 2024

I. Introduction

In the December 9, 2024 episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the financial complexities of maintaining two homes during retirement. Addressing a pressing question from a listener, Jill and her co-host Mark Talarico explore whether retirees can feasibly afford both a primary residence and a second retirement home without jeopardizing their financial stability.

II. Listener's Profile

At [03:54], Mark Talarico introduces the listener, Mark from the Midwest, who is seeking advice on his and his wife’s retirement plans.

Ages and Employment:
- Mark: 67 years old, currently working full-time.
- Wife: 62 years old, also employed full-time.
Joint Annual Income: Approximately $290,000.

III. Financial Overview

Jill and Mark assess the listener’s current financial standing, including savings, retirement accounts, and existing mortgages.

Retirement Savings:
- Traditional IRAs: $200,000
- Traditional 401(k)s: $170,000
- Roth Accounts: $260,000
- 403(b) (Wife’s): $110,000
- Health Savings Accounts (HSAs): $100,000
- Brokerage Accounts: $50,000
- Cash/CDs: $130,000
Real Estate Holdings:
- Primary Home: Valued at $325,000 with a remaining mortgage of $70,000 at an interest rate of 2.58% ([06:31]).
- Second Home (Retirement Home): Valued at $550,000 with a mortgage of just under $300,000 at an interest rate of 7.99% ([06:58]).

IV. Discussion of Two Homes

The core of the episode revolves around the financial implications of maintaining both properties post-retirement.

Original Plan: Sell the primary home upon retirement to pay off the mortgage on the second home ([07:21]).
Proposed Change: Mark’s wife considers keeping both homes to stay close to their children, leading to increased monthly expenses.
- Current Monthly Expenses: $14,000 when maintaining both homes and supporting associated costs like travel ([10:00]).
- Expenses if Selling Primary Home: Reduced to $8,000 monthly ([10:44]).

V. Retirement Planning

Jill and Mark dissect the retirement income streams and spending needs to evaluate sustainability.

Pension and Social Security:
- Wife’s Pension: $1,700/month
- Wife’s Social Security: $2,900/month if claiming at age 70 ([09:02]).
- Mark’s Social Security: Over $4,000/month ([08:56]).
Total Projected Income: Approximately $8,600/month from pensions and Social Security.
Spending Gap: With expenses at $14,000/month, there is a significant shortfall that would need to be addressed through savings or mortgage adjustments.

VI. Financial Recommendations

Jill offers a candid analysis and actionable advice to bridge the financial gap.

Primary Advice: Maintaining two homes is financially untenable given the current savings and income projections.
- Quote: “[...] this is a terrible idea. [...] you cannot, like this. You don't have that much money.” ([12:38])
Options Presented:
1. Sell the Primary Home: Use proceeds to pay off the second home’s mortgage, thereby significantly reducing monthly expenses.
  - Benefits: Eliminates high-interest payments on the second mortgage, reducing overall financial strain.
  - Quote: “Sell your primary, get the money out, pay down the mortgage. Boom, you're done.” ([13:16])
2. Rethink Retirement Plans: If keeping both homes is non-negotiable, the only viable option would be to continue working beyond the planned retirement age to support the additional financial burden.
  - Roth Conversions: Jill advises against Roth conversions in this scenario, stating, “The answer to that is no” ([11:07]).
Additional Recommendations:
- Maximize Retirement Contributions: Continue contributing up to employer matches in retirement accounts.
- Utilize Brokerage and Cash Reserves: Allocate a portion of the $700,000 in savings to bridge the income gap, ensuring funds remain accessible for emergencies or opportunities.
Final Considerations: Jill emphasizes the importance of aligning retirement plans with financial realities, highlighting the necessity of making tough choices to ensure long-term stability.

VII. Conclusion

The episode concludes with Jill reaffirming the critical need for retirees to evaluate their financial capabilities realistically. By prioritizing financial security over the desire to maintain multiple properties, retirees can safeguard their retirement years against unforeseen economic strains.

Closing Quote: “Change your work, change your wealth, change your life.” ([18:13])

Listeners are encouraged to reach out with their financial questions and consider subscribing to Jill on Money Live for additional resources and support.

This comprehensive discussion underscores the significance of meticulous financial planning in retirement, especially when contemplating substantial lifestyle changes such as maintaining multiple residences. Jill Schlesinger provides clear, objective guidance to help listeners navigate these complex decisions effectively.

Transcript

Jill Schlesinger (0:00)

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Mark Talarico (2:54)

Yeah. Something changed with the license, and I think we were prevented from doing it. That's why we went down the Joel Goodman Road.