Many buyers decide to buy their future retirement homes today. This is the ‘one step’ retirement plan and we work with many affluent people who do this, but it is not for everybody. There are several reasons why:

1) A retirement residence that you do not live in can be expensive to carry, even when you rent it to others full or part time.

2) The house that you want for your second home or vacation use today may not be same house that you will want to live in during your retirement or in the same location.

3) The house that you buy today for future retirement may require renovations and upgrades later that will add to your costs of ownership at a time when you will want to reduce and not increase costs.

It’s true that buying your retirement house today will cost less than what it will cost in the future but there are alternative strategies. Many buyers believe that two steps are better than one.

The first step at retirement is:

A) Buy a vacation-rental property today and use it until you are ready to retire. It will probably be less expensive than the home that you will want later.

B) Buy an investment property. This will put your money to work until you retire and maybe longer. You won’t be using this for your vacations because you will have a tenant and it may be a commercial property.

C) Buy a lot and build your retirement house when you retire. You will get exactly what you want and lots on Hilton Head Island have traditionally been great investments with high demand and diminishing supply.

The second step at retirement is:

D) Sell the vacation home or investment property and take your profit. Use it to buy your new retirement house or for something else. If you don’t need the profit at retirement, you may decide to hold the vacation residence longer and possibly make even more money.

E) Move into your vacation property for two years as your primary home. When you sell it, you will not have to pay capital gains on your profit.

F) Sell your vacation property and defer capital gains indefinitely with a 1031 exchange for your retirement house. Rent the house to others for awhile and then move into it as your primary residence. You will not have to pay the capital gains tax on the sale of your vacation home until you sell your retirement home, if at all.

G) If you have a building lot, build and live happily ever after in your new house.

H) If you don’t want to build on your lot, sell it and take the profit. Lots on Hilton Head Island are traditionally good investments with high demand and diminishing supply.