Property or cash?

[BeAzureAnt]

Hi all. Seeking some advice here. We have a paid off house worth ca 400K and about 625K in the bank (NS&I direct saver), and 225K in private pensions. We'll also get UK state pensions and I'll get another 14K a year in workplace pensions. Husband is 60, I am 59. He plans to work another 3-4 years at 45K a year, and I am retired. No debts, no children/relatives to leave bequests to, and our estate will be left to charity. We live on about 25K a year for the two of us. We live off interest, some of DH's salary and bank the rest.

The house we are in is nice...we did it up and it suits us all right, but we saw a much nicer house for sale that would cost 675K...basically our savings and little more. It is slightly bigger but has a much larger garden and in a better area, and the house itself is so much nicer in terms of decor, layout and features.

I'm wondering if it would be better to buy the nicer house, or just stay put so we have enough for private care later and be grateful for what we have. I really like the house, but am getting cold feet about the loss of our savings. We are not great travellers, nor go on cruises, nor have fancy cars or expensive hobbies. Husband would like to buy a used electric car in the next couple years, as his car is about 10 years old. Thanks for any thoughts.

Consider practicality. My parents moved to a bungalow, in a village with shops in short walking distance.

I would not be spending all the money on property. Property is not a liquid asset, hard/takes time to sell. So make sure you emergency fund and other liquid assets are sufficient, especially in the years before State Pension starts.

Enjoy your young retirement years. Your fitness level will likely be higher now than in twenty years time. Spend some money on experiences. Don't plan to go on a cruise in Norway and then never do it. Make time to do that whilst you can.

Spend money on things to make your life easier. That may mean adaptions to home, may mean more help around the home/garden.

Yes, these funds are Ok, but thanks for the reminder.

Thank you. Well, we spent our youth in a touring caravan on holidays seeing the world. I'm not so sure we will ever be cruising just because we don't want to do so. We've set up our current house to have a walk in shower/wet room, and we can have a bedroom downstairs if we need it. All the windows/doors have been replaced, there are hardwood floors for easy cleaning, and we decluttered quite a bit so there are no tripping hazards. we have a gardener who does our garden. I do however still clean our house! That might change! :-)

Unless I've got my sums catastrophically wrong, if you buy the bigger house you'll still have a fair amount of savings left? If the new house costs £675K plus let's say a conservative £50k in costs of moving (estate agents fees, legal, stamp duty, moving and new furniture, decoration etc for new house - you may well not need to spend anything like as much in reality), that's £725k max. If you realise £400k from selling current place then you'll only need to draw down a bit more than half your current savings and will still be left with over £300k in the bank, with healthy pensions also? If you can happily live off your state and private pensions, £300k is a comfortable enough cushion to fund care IMO - if you get unlucky and you both need 5 years plus of full residential care (which by no means everyone does) then the house will end up having to cover some of that but as you don't particularly 'need' to leave an inheritance for any dependents that's not so bad?

That being said retirement is usually a time to consider downsizing rather than a bigger house, just for ease really, you would be wise to consider whether that lovely big garden will end up being more of a burden in later years, equally a beautiful period property can need a lot spent on it in maintenance and can be impractical if stairs etc become a problem. But you're still both young still and if you think you'll get a good ten years + love out of it then why not?

You've got about the right financial picture. I've just never bought a house because I've loved it. I bought really because of affordability and practicality. The house is in good tick. This is probably the first time I've thought about buying something I love.

I've thought about the garden a lot, but think we could handle taking care of it for a decade. We are both in very good health and fit. I've had a gardener do it in the past because we've been busy, not because we cannot.

Gardens can easily be changed to be manageable. You just need to factor in the cost of doing it. We are gradually getting rid of beds and having more grass. It’s still a great garden though. You certainly could enjoy another house for 15 years. You are hardly old.

To release money, just sell it! I could never manage on your pensions but will they deliver a lump sum? Costs of running a bigger house are more but it’s obviously a pleasure to live somewhere better. We like expensive holidays and cars (definitely not cruises!) so have expensive tastes. We are 10 years older than you but we like to live. So work out priorities and costs.

Yes, the pensions give a lump sum. We've always just had one car, bought used, and ran it a good ten years, so that isn't such a big deal to us. Holidays are usually walking ones or camping, and we have a touring caravan we bought used and fixed up. I think we have just been really frugal our whole lives and saved money, so I haven't thought a lot about having a home that was more of a desire than a necessity. Our jobs were both full on too...very busy and demanding jobs in the service profession, so we didn't have much time to ourselves.

I kind of realised we had a lot of money in the bank and thought, well, we aren't getting younger, what should we do with it that might be nice for ourselves. My husband is happy where we are and content to work for a good many more years...he likes what he does...I don't think he ever thought about not working! He's pretty much happy anywhere....our current house is fine with him, but he said if I want the other one, that's OK too. I just thought it was a bit indulgent of me really. Anyway, thanks for your thoughts.

@BeAzureAnt I would not say it’s indulgent. You could easily enjoy it for many years to come. I like a house set up for my needs. You have a lot in the bank! If that really is where it’s invested? We have our money managed and, yes, it’s long term investments, but I would look at every avenue to make your money work for you. We like to fund what we enjoy and DH is just giving up (part time) work at 72. He’s always enjoyed it.

You are not old but getting the most out of where you live is important and you won’t lose money.

If you have any plans to live in a retirement community make sure you rent and don't buy. There are some real horror stories of people losing huge sums of money when they've bought retirement homes.

Thanks. It isn't a retirement community, but I appreciate the proviso.

Thanks. That is where the money is. I think we just left it there and didn't think about it a deal. It came more to the fore when I retired...given a buyout to retire early.

I would not leave that amount in the bank. You do know £85,000 per account is the limit for repayment if the bank fails. So hopefully it’s spread around a bit?

Thanks. NS&I is a state-owned bank that's backed by the UK government's HM Treasury. It is completely secure. Max you can put is 2 million.

I would move, on the proviso that the new place is suitable if you start to lose mobility. Eg are there lots of steps to get to the door, is there a downstairs loo, is it near a bus to town? You will still have a large chunk of savings left over and a house in good nick.

Your money will not be working well for you in cash in the bank. If your husband (and possibly you) hasn't taken any pension yet, look to max it out to get the tax benefits. You can then take the 25% tax free lump sum back at a later date. Consider stocks and shares isa's too.

Yes, National Savings is secure but I was assuming you meant a standard bank! I would look at a variety of investments too. Our share portfolio is now all ISAs. I would possibly take financial advice on building a varied portfolio.

Thanks. One step to the door, downstairs loo, about a mile to a bus stop to a decent market town. It is better located than our current house.

No, we have taken no pension.

Personally, if I was to move, I’d want to be in the market town. Not a bus ride away from the centre.

Rubbish interest rates though🙁
I don't have as much spare as you OP but I always look for the highest rates!

Everyone has their preferences. I like quiet, you like more convenience. That’s fine.

3.75-4% isn’t too bad. It isn’t as high as some of the other vehicles, true, but it is secure and government backed, so there are always trade offs.

@BeAzureAnt Not sure what happens in your market town then! Ours has lovely and very popular residential roads. They have everything you could want within 1/4 mile. Expensive though.

Other savings are secure below £85,000. ISAs are sheltered from income tax so you put in £20,000 pa. This gives them better returns. Usually!

That’s a very large amount to have in cash. Are you very risk averse?

If you can genuinely live on £25k a year you can certainly afford the bigger house. Your state pensions plus DB workplace pension will give you more than that and increase with inflation, so you can keep the DC pension in reserve and use some of your savings to take you up to state pension age.

Yes, we genuinely live on that. We do most of our own cooking, take caravan trips for holidays, have one car, and entertainment is country walks, listening to the radio, doing crosswords, reading. We used to vegetable garden before careers became all consuming. Might take that up again. We also spent time doing DIY on our house.

There is that in cash…i forgot that DH bought some gold about 25 years ago, and so we have 30K there for emergencies. I’m not sure about risk averse…it was just not thinking a lot about what to do with the money. Our needs were simple, we kept saving, and putting it into the account. But it is a lot of money, and I kind of forgot how expensive housing is here…we bought a fixer upper for cheap and did it up paying cash along the way.