gse36 at RE Talks 23 Jun 2011 1:28pm -
“I know 2 people in their 40′s who just retired in Toronto ($1.2M equity in Vancouver home, paid it off, bought $600k in Toronto, plus have investment savings (and will later cash out RRSP savings)). Actively invested.
They chose retirement in Toronto as opposed to working and living in Vancouver. Sure, they could buy a condo in Vancouver, but they wanted a house. Sure, it may not be as beautiful, but there’s something to be said about having 16 hours a day to yourself and spouse (assuming 8 hrs sleep) = 112 hrs a week.
[Compare this with] what they had before: 9 hour work + 1 hr commute each way (*2) + 8 hr sleep = 5 hr left to themselves 5 days w eek. = 25 hours a week + 32 on weekend = 57 hr a week. + all the anxiety and stress from their jobs + occasional overtime, etc.
They have 2x as much free time as before. They are in excellent physical shape, and go travelling a lot (yes, and back to Vancouver too), volunteer a lot. Basically doing all the things they enjoy. Contribute back to society, and help those around them. They felt this was more meaningful than paying the bank interest and paying for a modest house.
Given there’s 20 years to normal retirement age, and they get 2x more time to do what they want than others, then they essentially are having 20 years more enjoyment than if they lived in Vancouver. More importantly, it is while they are still relatively young.”
Two working, tax contributing citizens fall off the map because the price of their home hits ‘x’. This is one type of ‘misallocation of resources’ that occurs with speculative manias in RE.
This kind of move makes perfect sense for the couple, provided they do indeed have enough funds for 30+ years of retirement. It should be emphasized that their easy retirement is being funded by another couple taking on the opposite end of the deal: a very large lifetime liability.
This reminds us of a recently suggested strategy: Sell your house in Vancouver, buy 3 or 4 or 5 almost identical properties in the US (depending on city/state), live in one and live off the rental income from the others, retire.
How long can this kind of price differential last?