Auditioning For Retirement

If you want to change your lifestyle when you retire, it’s time to start the audition.

Now is a terrific time to research and purchase a second home that you can use now for family vacations, while testing it out for retirement down the road.

According to the most recent study by the National Association of Realtors (NAR), consumers are making “a lifestyle choice” and turning to second homes sooner in their lives. That finding affirms what we know about Baby Boomers – the prime candidates for second-home purchases – who define themselves by personal experiences and adventure. Interestingly, they are now joined by their children – the proud members of the Gen-X and Gen-Y generations – who view practical experiences as paramount in their lives. In fact, NAR’s 2010 Investment and Vacation Home Buyers Survey shows that nearly half of those who purchased a vacation home last year were under the age of 45.

No matter your age, there are two key aspects to a second home – the financial and the emotional.

And when you consider both factors, it leads to a simple conclusion - now is the time to buy a second home. Prices are down in just about every popular vacation location, and mortgage interest rates are hovering at some of their lowest levels in history (note: I will cover that more extensively in another blog post).

You can now buy a median-priced single-family house as a primary residence with about 35 percent less income than you needed two years ago. And the price of vacation properties has undergone an equally dramatic decline. According to NAR, the typical vacation home now runs about $169,000, down from $204,000 at the peak of the housing market a few years ago.

More importantly, families are increasingly seeking out vacation rentals as an alternative to hotels given the extra value you get with a vacation home – more space, added privacy and a kitchen – providing you with a solid backup to rent out your eventual retirement home to help offset the costs.

Second homes are also filled with memorable experiences, and will mostly likely net you more than a few dollars down the road. They are flexible and interchangeable in their functions: recreation, investment and retirement. They can provide you endless memories, be paid for by other travelers creating memories with their families on vacation and, when properly positioned, be traded tax-free.

If you have made up your mind to spend more quality time with your family, add to your investment portfolio or do a better job of planning for retirement, you accomplish all three by making a down payment on a second home. There’s never been a better time in the past seven years to “buy low” with the prospect of eventually “selling high.”

Attempting to predict the bottom of a targeted housing market is like trying to pick the absolute low point of a stock or bond – you won’t know until it begins to rise. I guarantee if you have the income, and don’t buy now, you’ll be kicking yourself with the “if only” – “if only I had bought the house 10 years ago…”

And think of the memories you’ll lose in the interim.