Dear MarketWatch,

I’m 64 and a retired cardiologist — I now do volunteer work — with a $9 million net worth, which includes a paid condo (worth about $1 million), $3 million in Treasuries and the rest in a Vanguard index fund.

I’m not a big fan of living in a condo and would like to own a ‘forever’ home. Good idea? What is the maximum should I safely spend assuming I live into my 80s?

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Cardiologist in a Condo

See: My spouse and I are 60 and receive $145,000 a year in pensions. Do we need to worry about inflation killing our retirement plans? 

Dear Cardiologist,

Based on your net worth, it’s fair to say that you are in a prime position to buy your forever home, but just as with anyone looking to make a home purchase, there’s much for you to consider before signing the papers.

If you’re not happy with a condo and you can afford to buy a “forever home” that fits your dreams, then that’s what you should do. You’re only 64, and could have decades left in retirement — find the right house and neighborhood where you can thrive in your retirement.

Be mindful of your money though. Even with such an impressive portfolio, you don’t want to put a significant portion of your net worth into the home, because you do need to live off of your money into your older age and many expenses can pop up during that time.

When there’s so much money available to use, it is easy to get wrapped up in infinite possibilities. Unfortunately, people in these scenarios sometimes overextend themselves, and when an emergency strikes they haven’t any money to fall back on. They too quickly spend down their assets, and find themselves in an uncomfortable situation.

I can’t tell you for sure what is the maximum you should safely spend for this house, but you can figure it out with some calculations on your own. (Of course, a financial planner can help you with this sort of purchase, too, but you can at least start on your own to get an idea of what you need).

First, look around at the type of house you want, the amenities it would have, and the neighborhood you’d live in. Perhaps pick a few houses you like right now on the market — some on the cheaper side, some on the higher-end side — and price them out.

Estimate the mortgage payments based on various levels of down payment (if you chose to go that route), plus the property taxes and utilities. I always err on the side of more than less when making estimates like this because you don’t want to get too many surprise bills, even if you have the cash flow.

Factor in HOA fees for the neighborhood. If there are any clubs or other sources of entertainment you’d regularly frequent, like a golf course or a country club or some sort of arts center, add that to the mock budget. And incorporate all of your other monthly expenses, including groceries, auto payments, nights out, healthcare and whatever else that is important to you. Get extremely granular when you run the numbers: even the amount you would pay for gas to drive to your volunteer job, plus magazine and television subscriptions.

Compare that mock budget to what you expect to spend in retirement. That’s a number no one could really know for sure, but you can work around it. Some people use the 4% rule, which is where you draw down 4% on the initial amount of your retirement savings to fund your annual expenses. Doing so gives you a rough idea of how not to run out of your money within 30 years. Of course, that rule of thumb isn’t for everyone — some people are much more comfortable on less, while others would need more. Ask yourself where you fit in.

Also consider inflation rates, and what, if anything, you’d get from Social Security to offset your monthly outflow. You can get more specific estimates for your Social Security benefits by making an online account with the Social Security Administration, where you can review your earnings history.

If you have no major debts and you live a reasonable lifestyle, you are in good financial standing to buy a forever home. And after working so hard, there’s little argument why you shouldn’t be able to do so. Just make sure that you don’t overdo it and put your older self is in jeopardy.

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