Every so often, some financial expert pops up to discuss whether the retiree, or soon-to-be-retiree, should buy a second home, as a vacation home.
All too often, the “expert” lays out a cogent, informative argument setting out the pros and cons from a financial perspective. Often times, the argument will include the inheritance issue as well – leaving it to the kids (or not).
I rarely find fault with such technical discussions, but I do wish, those who write such stuff, would ideally be in the retirement age group themselves – and thus appreciate that there are various non-financial issues involved, rather than merely recognize that financial matters exist, and only pay lip service to them. The fact is that non-financial issues are probably of much greater importance than just the money.
So, leaving the money aside i.e. I will assume you could afford the vacation home, and that the financial aspects can be set aside for the moment, and that the non-financial issues can be aired.
I think the two principal non-financial issues are :-
1.Do we want to feel obliged to go to the same place pretty much every time we toddle off on holiday …?
2.As we get older, and perhaps we aren’t able to travel so much, or maybe even at all, how will we feel about having the place …?
I believe that the former is a moot point. Yes, perhaps we do have a “tick list” of places to see, but as we get older, generally speaking, the desire to travel to exotic places, while real, is something we may only do once a year at best. In other words, while we probably do have the time to have more than one vacation a year, we probably don’t have the yearning to see the Taj Mahal every time. Hence, having a permanent away home may be useful.
The second point above is clearly a pertinent issue – however – my feeling is that there’s no point in worrying about future medical problems until they arrive. So, the accountant in me would look at the cost of buying the vacation home plus add in the annual running costs (including travel expenses to get there), then divide by a realistic number of years, to determine the value proposition. If that result shows a manageable amount over the period of years when you can reasonably expect to be able to travel easily, then the vacation home may be a perfect thing for you. Anything beyond those years thus becomes a bonus.
Finally, the “fed up” factor of the same place, time and time again, becomes much less of an issue as our years advance and our likes and dislikes change. More so, if you furnish the place to have all the things you have at home, in your normal surroundings, then the away home is truly a “home away from home”.
If the numbers work, (yes, back to the money), then the value proposition might just be worth a look.