Retirement Travel, Wealth Management

Through smart money management and well-planned investing, affording a vacation home in retirement is a goal almost anyone can achieve.

How to Afford a Vacation Home after Retirement

1. Maximize Retirement Funds

One of the best ways to afford a vacation home is to utilize retirement funds that grow over time, particularly 401(k)s and Roth IRAs.

Maximizing employer-matched 401(k) contributions and utilizing the tax advantages of Roth IRAs can leave retirees sitting on a large sum of cash when they walk away from work.

2. Goal-Driven Investing

Investing in assets, such as stocks and bonds, can also help build enough wealth to make a vacation home a reality.

However, the key is to invest according to one’s risk tolerance and capacity, which will dictate which asset allocation model is the best-suited. Younger investors might consider a more aggressive model, while older investors might invest more conservatively.

afford a vacation home investment

Portfolio Management

Portfolio management, which involves a Certified Financial Planner Professional™ managing a client’s investments according to their objectives, is also a possibility. It helps to take much of the guesswork out of investing.

3. Achieve Financial Goals

Aside from investing in stocks and retirement funds to grow one’s wealth, simply setting aside set amounts of income each year is a great way to build long-term wealth.

Increasing the goal savings amount each time one’s salary or income goes up will add up over time.

4. Use the Vacation Home for Income

In addition to serving as a welcome getaway from daily life, vacation homes can be a valuable source of passive income. Renting the home out to tourists when it is not in use can help pay back a portion of its costs.

The sale of a vacation home can also result in a net increase, depending on real estate prices and the amount of time for which the home was owned.

afford a vacation home rental

Vacation Home Factors to Consider

There are some additional factors to consider before purchasing a second home:

  • How often the home will be used. If the vacation home will only be occupied for a few weeks out of the year, renting might be a better option.
  • Maintenance costs. Repairs, cable, electrical costs and more can add up over time.
  • Property taxes should be calculated prior to the purchase of a vacation home.

While the purchase of a vacation home is a worthwhile, achievable goal, it’s recommended to meet with a Certified Financial Planner Professional™ beforehand to organize finances.

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