The Journey Continues

Richard Connor

I WROTE MY ESSAY for My Money Journey 14 months ago. Since then, our family’s journey has continued apace—including rethinking where we live.

The highlight of the past 14 months was the addition of another grandchild. We now have four grandsons, ranging in age from five months to 10 years old. Last summer, our younger son and his wife purchased a home in Monmouth County, New Jersey, roughly an 80-minute drive north of us. Our oldest son and his family live in New York City. After some pandemic-related dislocations, our two children and their families seem solidly located in the greater New York City area.

Lots have also happened on the financial planning front. Last year was the first full year of retirement for my wife and me. I had minimal consulting income—about $850. Without significant earned income, 2022 was the year we kicked off our retirement-income plan.

I officially joined the ranks of America’s seniors and enrolled in Medicare last September. My wife followed in March. After some careful analysis and a lot of discussion, we opted to start my wife’s Social Security at the beginning of 2023, while delaying mine. Many of the articles and comments posted on HumbleDollar were helpful in making that decision.

We also completed most of the large home improvement projects we had planned, so we should have a better grasp on our budget going forward. As part of our tax return preparation, I reviewed our 2022 spending. The impact of inflation on food, gas and dining out was noticeable. I used the spending data to update our projected budget for 2023 and beyond.

We now have two fixed income sources: my pension and my wife’s Social Security. These cover our needs, but not all our wants. We’d like to pick up our travel game. We have an Alaska trip booked at the end of the summer, and we’re discussing where else we want to visit. In addition to some big trips, we’d like to take more smaller trips to see new places and to visit family and friends.

To make sure we have sufficient income for all this, I simplified our retirement portfolio and put about five years of “discretionary” expenses in a couple of Vanguard Group short-term bond funds. I was able to set up a recurring withdrawal that’ll be deposited in our money market fund on the 15th of each month.

Part of my retirement-income planning includes projecting our future tax bills, including Medicare’s Part B IRMAA costs. New Jersey has a retirement-income exclusion provision, but that benefit disappears if your income is too high. I try to keep track of our income and tax burden as the year progresses. There are two “levers” I can use to reduce our taxable income if we get close to a scary tax cliff.

First, we saved in health savings accounts for a number of years, which give us a bucket of tax-free income we can use for medical expenses, including Medicare premiums and dental or vision expenses. Second, we started Roth IRAs a number of years ago, and have done several Roth conversions, and these accounts give us another pot of potential tax-free income. On top of that, my wife’s Social Security retirement benefit is somewhat tax-preferred. At most, 85% of her benefit will be subject to federal income taxes, and New Jersey doesn’t tax Social Security benefits.

It’s now been two years since we moved permanently to our New Jersey beach home. When we made the decision to move, we acknowledged that the timing was a bit premature, and we weren’t sure if living fulltime in a resort community was right for us. We left behind family and friends in Pennsylvania, and we knew we wanted to be more involved in our grandchildren’s lives and activities.

The upshot: We’ve spent the past year seriously discussing how and where we want to spend our retirement years. Many of these discussions occurred in the car while traversing the Garden State Parkway to visit the kids and grandkids. We decided to explore either moving closer to them or purchasing a second home near them.

We connected with an excellent realtor in Monmouth County, New Jersey. She was knowledgeable, professional and patient. She showed us dozens of homes, from $300,000 condos to $1.5 million single-family homes. I ran a variety of analyses looking at our monthly cash flow and the impact on our retirement savings. We considered converting our beach home to a rental property that we might occupy part of the year.

In addition to financial considerations, my wife and I spent a fair amount of time discussing how we wanted to spend our days in the near and long term. We thought about what our days and weeks would look like. While we wanted to spend more time with our children and grandchildren, we also acknowledged that they had their own busy lives that are taken up with work, school and friends.

Meanwhile, we have friends and activities in our town. Since this is a resort town, many of our friends are “weekend” friends who we see several weekends a month. We decided we weren’t ready to give that up. Our children also enjoy visiting our beach town when they have time. This is getting more difficult for the older grandkids, who are now more involved in sports and other activities.

The more we thought about all the considerations, the more we realized we weren’t ready to make a move. I had an “aha” moment late last year as I was reviewing our budget, and estimating what the purchase of a second home would mean. I realized that the line item I assumed for travel was similar to what a second home would cost us. That begged the question: If we plan to travel pretty extensively over the next five years, why do we want a second home?

We realized what we needed was a bedroom near the kids. We can accomplish that with hotels, Vrbos and, on occasion, staying with the kids. It probably means driving more miles than we would if we bought a second home, but that’s a tradeoff we’re willing to make at this point. In five years, our thinking may change.

Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

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