A second home is a luxury that many people dream about. Owning a second home can also provide practical benefits. For baby boomers who are considering downsizing, relocating, or a split-living arrangement in retirement, purchasing a second home before you retire can make sense. Here are five potential benefits:
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Build equity in an alternative investment. Home values have fallen, even in vacation home markets. This presents opportunities for second home bargain hunters. When home values rebound, homes in high demand locations, such as lakefront property, should appreciate quickly. Also, depending on how you use your second home, some of the capital gain when you sell it may be tax-free.
Test a retirement destination. Maybe you are a city dweller fantasizing about retirement in a rural or active adult community. Perhaps you are tired of yard work and think condo living is for you. Purchasing a second home gives you a chance to test drive your fantasy over a period of years, not days, and before you make a final relocation decision.
Create family bonds before downsizing. A tricky part of retirement downsizing is navigating the loss of emotional attachment to a long-time family home. If you purchase a second home as part of a plan to live there when you retire, you can begin building family memories and attachment to that home. This will make the eventual downsizing and relocation event much less traumatic for everyone.
Reduce work life stress. If you choose a second home that is easily drivable from your primary home, you now own an instant stress-buster. You can spend weekends there on a whim, which provides an immediate vacation experience. Just knowing you have that option can make even the worst work weeks more tolerable and perhaps keep you on the job longer.
Provide a true family legacy. Part of retirement planning includes deciding if you want to leave something for your children. Inherited money is nice, but could be soon spent and forgotten. A second home in a special location can be part of a shared family bonding experience, including those eventual grandchildren who visit. These family bonds can transform that second home into a family legacy that you leave behind instead of cash. That is our hope and plan for our second home.
A second home should not be a budget-buster. But if you are in a financial position to handle it, consider these and other benefits of owning a second home as part of your overall retirement planning.
Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.