Author Topic: Best way to plan/save for relocation?  (Read 300 times)

startingsmall

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Best way to plan/save for relocation?
« on: July 16, 2017, 12:58:31 PM »
tl;dr - We want to relocate to a higher-COL area in ~5 yrs. Where should we save the money that we plan to use for moving expenses and our house downpayment?

For those who are patient enough to read the details.....

Although the future goals of Mr. Startingsmall & me shift around with relative frequency, I think we've finally settled on something important... which is that our current location is not offering much for either of us and we will, at some point, need to leave. He is unhappy with the work options. I'm unhappy with the place itself - the geography, the local culture (picture Confederate flags everywhere), the work options, etc. I expect that the schools will also be a poor fit for our daughter. (And yes, I know, most kids can do well anywhere... but as a parent with an IQ in the upper 0.1% - the 99.9th percentile - I expect that my child will likely need/benefit from services that will not be offered in our school district. I realize that's controversial, and maybe I'm wrong and she won't turn out to be crazy-smart like me - which would be a HUGE blessing for her, I think!! - but I'm trying to be prepared. And yes, I realize that's kind of weird to even include this info in my post, but I feel like it's relevant and so I'm leaving it, even though I'm a bit self-conscious about doing so. Anyway, the schools around here do very little differentiation.)

Anyway, with that in mind, we are preparing ourselves for a likely relocation in 5ish years. Maybe sooner, maybe later... there are a lot of factors that go into the timing that I won't get into here. So I'm trying to think about what we can do now to better position ourselves for that change when the opportunity arises.

Currently, we own a home, purchased one year ago for $230k. We could likely sell the home today for $250k (our neighbor's home just sold for that and has fewer upgrades than ours... we bought in "THE" school district for our county and values tend to go up,up,up) and our remaining mortgage is $195k. So there's ~$55k of home equity.

Other assets:
$200k in retirement accounts (401k + rollover IRA + Roth IRA + church pension plan)
$6.5k HSA
$18.5k Capital One 360 savings @ 0.75%
$18.5k in daughter's 529 (she's starting kindergarten this year, so college is still 13 years away, but we put all cash gifts for her in the 529)
$2k checking

Our income/expenses are kind of in a state of flux right now -- I just started a new job last month with production-based pay; the insurance situation is kind of odd because my husband & daughter were going to get insurance through his job but he was denied due to a pre-existing condition (damn churches and their non-ACA-compliant plans!!) so now they're on COBRA and we have to decide whether to move them to my work insurance at the next open enrollment in a couple of months or leave them on COBRA for another year because it's actually cheaper than coverage through my current job; and my daughter will be starting kindergarten soon so we'll kick the daycare expenses. My best guesses for how our situation will finally stabilize are:

Combined family income ~$150k/yr
Expenses (incl. giving) ~$4.5-5k/mo (not fabulous, I know, but a huge improvement over where we started... spouse is finally showing interest!!)

We have two possible destinations for this expected relocation in 5ish years. One is in the mountains, about 1.5 hrs from where we currently live - so the advantage is that I could keep my current job, which is midway between our current home and the mountain community. The schools would be better than where we currently live, more to do, cooler summers, more progressive, etc.  One is at the beach, in my hometown, near my parents - so we'd have family nearby and a built-in network of friends, lots to do, near the beach, and the school district has an AMAZING gifted program (including an entire gifted magnet school). I would need to find a new job if we moved to the beach community, but jobs in that area tend to pay 10-20% more than my current job and we'd save ~6% in state income tax.... so I'm pushing for the beach relocation, but my husband isn't a huge fan of the heat/humidity so it's not a sure thing. The eventual, far-off goal is to become snowbirds between the two locations, but we'll move to one first and add the snowbirding thing in later down the road as finances allow.

It's certainly possible that we won't actually relocate at all..... but I think a move is very likely (let's say >80% chance) and it's a dream that keeps me motivated, so I've decided to focus on working towards that goal. If it doesn't happen, we can always shift the money towards something else. (Earlier FIRE - though FIRE in this location isn't very motivating because I just plain don't like it here! - or better vacations.)

In either of the future destinations, we would likely spend ~$300-350k on our new home. That would put us in good, close-in locations without taking a huge step downwards from our current home. I would also like to be able to make a large enough downpayment on said home that our mortgage payment stays at our current level at the highest, or preferably even lower (so our cash flow needs go down some and I can maybe cut back to PT work in the new location).

So... the goal is to have a big downpayment in 5 years. We currently put ~$15-20k/yr into retirement accounts and anticipate having ~$30-40k/yr to put "somewhere else" after that (depending on my bonuses, unexpected expenses, etc). What would you do with the money?

1. Taxable account. I was planning to open one of these this month anyway..... but is 5 yrs too short of a time horizon for VTSMX?
2. Cash? I feel like I already have way more than necessary sitting in cash, so I'm kind of dismissing this option. Then again, I know we'll need a good chunk of cash to move, especially if I want to go PT or start doing relief work or something else with a less-steady income. Still, I feel like our current cash reserves are more than adequate for now and we can always beef that up during the last year or two as we get closer and have a better plan.
3. Pay extra on  our current mortgage?  I know the argument is typically against that, but it seems like a way to sort of split the difference btwn the pros/cons of market/cash. We could have our house almost paid off by the end of 5 years, meaning that everything we get from the sale of our house would go into the downpayment on the next house. The biggest downside, I think, is that it could complicate things if we decide to sell this house and move directly into a new house without renting during the transition. (I'd normally rent in a new area before buying, but we're very familiar with both areas we'd be potentially moving to so there's a chance we may skip that step and do an immediate sell/purchase maneuver.)

Trying to figure out a plan, so any advice/thoughts would be appreciated! My current plan is to split it 50/50 between early mortgage payments and taxable investing, but I'd love to hear other suggestions.




« Last Edit: July 16, 2017, 05:11:18 PM by startingsmall »

startingsmall

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Re: Best way to plan/save for relocation?
« Reply #1 on: July 17, 2017, 10:42:39 AM »
In other news, the #1 thing keeping my husband in our current area is that his parents live here. Yesterday, they announced that they're seriously considering moving away soon... so I would now say our chances of moving are >90% and it may be sooner than the 5-yr point.

Hooray!! But now I definitely need a plan.

Molzy

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Re: Best way to plan/save for relocation?
« Reply #2 on: July 17, 2017, 11:12:48 AM »
Posting to follow - we are in a similar situation, wanting to move closer to family in the next few years, but the cost of living difference is a little frightening.

affordablehousing

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Re: Best way to plan/save for relocation?
« Reply #3 on: July 17, 2017, 12:09:40 PM »
I think you're on a great track. I know the conventional advice, and the advice given to me was to save your money in cash so you don't lose it in the market for your home purchase, but I think when you are looking 5 years out, and saving a considerable amount each year, you don't entirely want to miss out on the market. You have the backstop of your retirement accounts to draw on, so if the stock market went to $0, you could still access some money from 401K's (assuming it's not all in the market) to purchase a house with. You might want to invest some of the money over the next 5 years in something housing correlated, so if your investments go down, house prices may also be going down or softening.

Consider too the selling costs when you look at home equity. I'm assuming you netted those out in the sales price of your house, but otherwise selling and closing costs might eat up the appreciation you got in your home.

Also, if your kid is really smart, you might want to consider private school. I know its forbidden to talk about that, but if your child really has intellect that's not being stimulated by available school systems, you might want to consider private school to make sure they are stimulated appropriately. Just my .02. Just as you're seeing the negative effects of living in a small town, so too is being a smart kid in an even somewhat smart school.

startingsmall

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Re: Best way to plan/save for relocation?
« Reply #4 on: July 17, 2017, 12:45:00 PM »
I think you're on a great track. I know the conventional advice, and the advice given to me was to save your money in cash so you don't lose it in the market for your home purchase, but I think when you are looking 5 years out, and saving a considerable amount each year, you don't entirely want to miss out on the market. You have the backstop of your retirement accounts to draw on, so if the stock market went to $0, you could still access some money from 401K's (assuming it's not all in the market) to purchase a house with. You might want to invest some of the money over the next 5 years in something housing correlated, so if your investments go down, house prices may also be going down or softening.

Consider too the selling costs when you look at home equity. I'm assuming you netted those out in the sales price of your house, but otherwise selling and closing costs might eat up the appreciation you got in your home.

Also, if your kid is really smart, you might want to consider private school. I know its forbidden to talk about that, but if your child really has intellect that's not being stimulated by available school systems, you might want to consider private school to make sure they are stimulated appropriately. Just my .02. Just as you're seeing the negative effects of living in a small town, so too is being a smart kid in an even somewhat smart school.

Thanks for the feedback and thoughtful response!! I do all of my investing through Vanguard... I'll have  to look around a bit, but surely they have funds that are more real-estate driven and I really like your logic!!

Unfortunately, private schools in our current area aren't an option. Within a 45 minute drive, there are only 2-3 private schools and their emphasis is religious fundamentalism, not academics. Assuming my kiddo turns out to meet the gifted threshold (a pretty safe bet given my knowledge of IQ heritability), I would really like her in my hometown, in the school that I grew up in. I realize there have surely been changes in the 20 yrs since I graduated, but there is much to be said for growing up in an environment where the "weird kids" are normal.
« Last Edit: July 17, 2017, 01:30:43 PM by startingsmall »

affordablehousing

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Re: Best way to plan/save for relocation?
« Reply #5 on: July 17, 2017, 01:08:48 PM »
Good luck! And don't take my school thoughts too seriously, I realize it's super location specific. I just introduced the idea in case there are other significant expenses to consider.