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Building a retirement home

By Jennie L. Phipps · Bankrate.com
Monday, August 15, 2011
Posted: 12 pm ET

After a couple of years of agonizing over the state of the housing market, my husband and I are about to break ground on a retirement home on Lake Erie, south of Detroit.

I bought the vacant lakefront property with money in my self-directed IRA from a bankrupt developer three years ago when real estate in Michigan took a huge nose dive. It seemed like a risky retirement planning decision at that point because all three Detroit automakers were in free fall and there were those who thought the state's property values might never recover.

Today, we're feeling a lot better about the investment. Property values still aren't where they were in 2005 or 2006, but things have improved. We accepted a full-price offer this spring on our home in suburban Detroit, two days after we put the house on the market.

The house we're building isn't going to be the Taj Mahal. In fact, we're building less house than we would have if we had retired five years ago when I was 55 and my husband was 60. Not only has the market changed, but we've changed, too. We don't see ourselves needing or wanting as much space because we don't entertain as much as we once did. And it appears less and less likely that we're going to be grandparents to many -- maybe not any -- grandchildren.

We're building the house all on one floor with handicap-friendly accommodations like extra-wide halls and doorways, and we're using bonus space above the garage for a separate apartment, in case we reach the point where we need live-in help. We're also constructing the plumbing and heating systems so we can easily drain the pipes and keep heat at a minimum during the winters, which we hope to spend in someplace warmer than Michigan.

The cost of building is less than it would have been five years ago. While the cost of materials isn't much different, our builder thinks labor costs are going to be lower because the construction industry in Michigan still hasn't recovered. Taxes are down a because the assessment is significantly lower than it was when we bought the property. A lower assessment also means that we're paying less than we might have in income taxes to pull the vacant land out of my IRA.

It's an exciting step, but a little unsettling, too. I'm a woman who has relocated at least a dozen times and remodeled almost that many houses, mostly because of job transfers. It feels odd to make these design decisions knowing that this could be the last time I ever make them and, maybe, the last time that I ever move.

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