Mar 7, 2025
The median 401(k) balance that 55- to 64-year-olds have in Vanguard's Defined Contribution plans is $87,571. So with a $4.3-million net worth, you are more financially fit than most.
But it's understandable you’re concerned about committing to a second property with all the uncertainty around the Trump administration and policies that could impact taxes, investments, and Social Security.
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It’s definitely worth considering the costs of committing to a second property and whether it would be better to be as conservative as possible with your money to maintain your large financial cushion.
The real cost of vacation-home ownership
Mortgage costs
While $290,000 is a reasonable price to pay for a vacation home, remember that there will be ongoing costs, and if you don’t buy it outright, you will still have mortgage payments.
Mortgage rates remain well above 6% even after recent declines. There's also been discussion about President Trump eliminating the mortgage interest deduction, reducing tax savings.
Property tax
Aside from the mortgage costs, you have property taxes to consider. The Trump Administration capped the property tax deduction during his last term. While there's interest in lifting that cap and it's going to expire, there are no guarantees new limits won't be put in place if the Administration needs the revenue to justify other tax cuts.
Insurance and Home Maintenance
Insurance costs have been rising nationwide, and home maintenance comes at a price, especially if President Trump's policies increase inflation.
Make absolutely sure you can afford all these expenses at a safe withdrawal rate. If you run the numbers and aren’t confident that you can pay for all these expenses long term, you shouldn't move forward with the home purchase.
That’s true regardless of any political considerations.
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Buying a second home reduces your liquidity
If you've done the math and believe you can afford all the costs associated with a vacation home purchase, then it's time to think about whether now is the best time to tie up your money in a property.
President Trump is more likely to lower taxes than raise them, and he's pledged that there won't be any cuts to Social Security or Medicare, so your government benefits may be safe in the near-term.
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However, Social Security's trust fund is expected to run out in 2035 and DOGE is eyeing fraud and waste in these entitlement programs. The administration is also contemplating changes to the tax code that would make owning a property more expensive if either the mortgage or property tax deduction is limited.
Another consideration is health insurance. You may be relying on the Affordable Care Act to help you buy an individual policy until you reach 65 and can qualify for Medicare benefits. President Trump may end enhanced subsidies the Biden Administration put in place, or make sweeping changes to the program.
It may be worth holding off on your vacation-home purchase to see how things shake out. You can always buy a second property later, once the political climate and real-estate market have stabilized.
Ultimately, you may decide you don’t want to wait. Even if you buy a $290,000 property outright with cash, you still have a very healthy financial cushion.
For peace of mind, consider talking to a financial adviser to get advice on this decision. You want to know you won't be dooming yourself to struggles as a senior out of a desire for the perfect vacation place.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
