We want to retire in 2-4 years and spend $150K a year – can we afford a $1.5 million house in a pricey housing market?

If you have reached a point where you can retire sometime before your 50s, you should feel great about hitting such a major milestone. This is exactly what those in the FIRE world aim for as the goal of early retirement is far more than just a dream, it’s a reality that can sometimes lend itself to dramatically saving every month to achieve. 

In the case of one Redditor posting in r/ChubbyFIRE, there is an opportunity here for this individual and his spouse to say goodbye to the workforce forever in the next two to four years. As part of their retirement planning, they hope to buy a new home but are unsure if they can afford it. 

Buying A New Home

The Redditor and his wife, both 45, have around $3.5 million in assets, including $1.2 million in a brokerage account. Their current household income is around $325,000, but they spend only $65,000 annually, giving them enough flexibility to save around $200,000 annually. 

The goal is to retire from the workforce sometime in the next two to four years. As a result, the original poster indicates they are likely to increase their “non-housing” spending by more than 100%, bringing their total spending annually to around $150,000. 

As they live in an expensive real estate market, their current thinking is to buy a home now while they can show a sizable income, but they aren’t sure how much of a home they can afford. This concern stems from the reality that it’s not uncommon for houses in their area to regularly sell for $1.5 million or above. As they live in a rental tied to the original poster’s work, there is no current mortgage that they need to consider. 

Lastly, there are no children and no plans to have any, so there is no need to worry about 529 account planning or anything related to increased spending that comes with having children. 

How Much Can They Afford? 

To put it all out there, buying a home will undoubtedly change the level of expenses for this couple, so aside from their “non-housing expenses,” their home costs will increase exponentially. Aside from mortgage and taxes, there is also the consideration of maintenance, like a roof needing repair or an air conditioner breaking, so there needs to be plenty of buffer to handle any additional costs that almost certainly will happen. 

One immediate concern with the Redditor’s plan is that they say they live in a VHCOL area, but that taxes are only around $5,000. This tells us that homestead exemptions are probably taking place and that after they buy their new house and the taxes are re-assessed for the new home value, they are way underestimating what taxes will cost. 

While it’s fair to want housing security before retiring, this leads us directly to what this security could cost monthly. Currently, a $1.5 million home with 20% down on a 30-year loan at a May 2025 interest rate of 6.81% could cost as much as $8,000 or $9,000 monthly, depending on where this Redditor lives. 

This dollar amount alone would account for almost all of their estimated yearly spending increase, so there is no reasonable scenario in which they should buy a home at this value. If we update the down payment to 50% or $750,000 down, that means the monthly payment comes to just under $6,000, including taxes. 

You now have a scenario in which almost half of your pre-tax estimated monthly expenses are used up by a house, which isn’t recommended either. The only really good scenario here is for them to either purchase the home outright, which they can afford to do, or adjust their monthly spending accordingly so the mortgage only accounts for 30% or less of their total monthly budget. 

Alternatively, they should consider moving away from a VHCOL area where they can get more home for less. Without children, they don’t need to worry about schools, so they might have more flexibility about where to move. 

The moral of this story is that while the Redditor can afford the home outright, they should only do so if they purchase it with cash and don’t have to worry about a mortgage. The only other good option is to put at least 50% down, which would leave them in a much better financial position for retirement while maintaining the level of home security they want. 

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