Q I'm 71 and my wife is 67. We own a home. We are debt-free. We are thinking about buying a home in the $200,000 to $250,000 range in an active adult community in a sun state where we may spend up to six months each year. We have close to $375,000 in investments managed by a professional broker. Our pensions/Social Security give us a monthly income of $5,000 after taxes. We have no health issues. Our monthly budget right now is about $2,500.

My question is, if we buy a home, should we take a large loan -- $100,000 to $150,000 -- or should we use our investments to pay for the bulk of the price of this home? For the past 12 years, we've rented a home in a sun state, paying about $2,000 per month for three months, and we plan to continue to do that -- unless, of course, we purchase a home.


A Normally, I'm against folks taking on debt during their retirement years. It became conventional wisdom during the great credit boom of the 2000s that carrying a mortgage into retirement was just fine, maybe even smart. The tactic badly backfired on far too many elderly homeowners when the bubble burst. So my bottom line advice is to say no to a mortgage.

That said, it seems to me that there are a number of mitigating factors in your case. For one thing, you've been going down to Florida for 12 years and renting. You know the market. You know what you like. It's a lifestyle you enjoy. For another, your finances are healthy. You have a nice monthly cash cushion. You plan on a large down payment.

I'm sure you've already done this, but before doing anything I would run the numbers to make sure ownership in the active adult community is financially sensible vs. renting in the same area. There are several good calculators on the Web, including www.dinkytown.net and www.hsh.com. Once you have a sense of the financials, you can weigh the value to you of the intangible factors, such as neighbors and lifestyle. You should be able to drive a hard bargain for either a home or a rental property, considering Florida's depressed economy.

Last, and most importantly, I hope your health holds up. But what if it doesn't? What if one or both of you starts showing signs of ill health over the next couple of years? How vulnerable will you be at that point?

Let's assume for the moment that the answers point toward owning. If that's the case, I would consider using OPM -- other people's money. You maintain your financial flexibility. You could lock in today's relatively low fixed rates. You would want to make sure that there isn't a prepayment penalty with the mortgage. You can then pay off the loan whenever you want.

Chris Farrell is economics editor for American Public Media's "Marketplace Money." Send questions to cfarrell@mpr.org.