For many people, buying a second home for vacationing or to live a portion of the year is one of the retirement goals. Maybe you’ll be fortunate enough to pay for that house in cash, but if not, what’s the best way to finance the purchase?

We had a question come into the podcast asking about this exact thing so we wanted to spend some time on the show discussing different options. Joel has been through this process and had to make the same decision, so he will also share his experiences.

If you’re in retirement or approaching that next chapter, you’ll probably find that you have these potential choices: take out a mortgage on the home, tap into a line of credit on your primary home, or sell some investments and pay cash. Everyone’s situation is going to be different but there are a few things to think about in our current environment.

If you’re comfortable borrowing money, now is a great time to do it. Interest rates on a mortgage are still very low. As we’ve talked about before, having a mortgage in retirement isn’t necessarily a bad thing for many people as long as you have a plan for that expense each month.

The same is true for taking out a home equity loan because the rates are also low right now. And keep in mind, if they ever go up you can sell investments at that time and pay off that line of credit. If you’re invested properly, we’d likely suggest not selling those investments right now because you can generate a better return on your money with rates so low as long as you’re building your portfolio properly.

All of these options are on the table though so make sure you work with an advisor to make the decision that makes the most financial sense for you and your family.

Our next question came in from a listener that makes too much to contribute to a Roth IRA. As you probably know, there are income limits on this retirement account so you’ll have to find alternate ways to invest. The good news is we work with clients quite a bit to find options outside of the Roth.

Annuities could be a possible option for you but be careful here. They are good for many people but also bad for many others. Very wealthy people will often buy institutionally designed life insurance. It’s not the typical insurance you buy just for the death benefit. There are certain tax benefits with the way it’s designed. We also like buying ETFs or individual stocks where you can turn your gains into capital gains, which are taxed more favorable than ordinary income.

Again, you’ll want to work with someone that can see your entire portfolio before determining the investment for you.

The final question we have for this show is from a person that has managed their own finances throughout their career but is that still the best course of action as they get older? This isn’t necessarily something we can answer but what we will say is consider how wealthy individuals and families usually proceed.

Feel free to take advantage of our free Money Map Retirement Review to see if we’d be a good fit for what you need. That goes for everyone that reads this.

0:20 – Vaccine news

1:40 – Mailbag Question: We’ve always dreamed of a vacation home in retirement. I think we can afford it but aren’t sure where to pull it from?

[5:51] – Mailbag Question: I make too much to contribute to a Roth IRA. Is there anywhere else I can invest to give myself some tax advantages in the future?

7:52 – Mailbag Question: I’ve always handled my investments on my own but is that a bad idea as I get older?

9:23 – Money Map Retirement Review

Thanks for listening to this episode. We’ll be back again next week for another show.