Owning a second home can offer an escape from your busy life and a place to create lasting memories with your family. However, maintaining two properties during retirement requires careful financial planning.
The Escape Home connected with Saïd Israilov, a fiduciary financial advisor based in San Francisco and owner of Israilov Financial. He offers tips to help second homeowners optimize their retirement plans, ensuring they can continue enjoying both properties long after they have stopped working.
Maximize retirement contributions
It’s important to contribute as much as possible to your retirement accounts like 401(k)s and IRAs. “Taking full advantage of these tax-deferred benefits helps build a solid nest egg to cover the ongoing costs of maintaining both your primary and vacation home,” Israilov says. And if you’re over 50, you can use the catch-up contribution option to boost your savings further.
Currently, employees can put $23,000 into their 401(k)s. In 2025, the contribution limit will increase to $23,500. Workers who are 50 and older can add an additional $7,500 as a catch-up contribution, bringing their total to $31,000
Don’t forget about HSAs
If you are eligible for a Health Savings Account through a high-deductible health plan, it can be a powerful third retirement account. Israilov highlights that HSAs offer triple tax advantages: deposits are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical and dental expenses are tax-free. “Once you turn 65, you can even use your HSA for non-qualified expenses, effectively making it another retirement account,” he says.
Currently, the HSA contribution limit is $4,150, but it is going up to $4,300 in 2025. Similar to 401ks, employees who are 50 and older can contribute an additional $1,000 as a catch-up, bringing the total to $5,300 for 2025.
Plan for Liquidity
Israilov recommends keeping a portion of retirement savings in liquid short-term investments such as money market funds or CDs. “This way, you’ll have funds ready for unexpected expenses, like home repairs, without having to sell investments at a bad time,” he says. Roth IRAs are a good option for this because qualified distributions are tax-free, and you can access your contributions anytime without penalties.
Retirement mistakes to avoid
Israilov says when planning for retirement, homeowners often underestimate expenses and how much they will need to maintain their lifestyle.
Some common mistakes include:
- Not accounting for inflation and overlooking how rising prices affect everyday costs
- Forgetting about healthcare and private insurance costs, especially before Medicare eligibility kicks in
- Assuming spending will decrease in retirement, it’s important to consider that hobbies, travel, and other lifestyle choices might keep your spending at the same pre-retirement rate
- Underestimating how long savings need to last by not planning for the possibility of living well into your 90s
- Not budgeting for home repairs and major maintenance
Repairing retirement savings gap
When interest rates were low, some homeowners dipped into their retirement accounts to buy a second home. If you were one of those buyers, he says there are steps you can take to rebuild savings and fix any financial gaps.
- Find areas where you can cut back and redirect savings back into retirement accounts; this might mean delaying large purchases like a new vehicle or cutting back on vacations
- Max out your contributions, including catch-up contributions
- Refinance if interest rates drop again. This will free up cash flow
- Consider turning your home into a short-term rental. If your family usually uses it during high travel periods like the holidays, instead allow it to be rented. This added income can go into your savings
If you want to learn more, connect with Israilov at www.israilovfinancial.com.
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