Best Option
BACK IN 2005, my employer was in merger talks. If the deal had gone through, I would have lost my job. I���d already received an offer of promotion to vice president. That made me eligible for an officer���s severance package that included, among other things, two years��� pay plus my full pension.
I was almost hoping the deal would go through, but it didn���t. Still, I was made a VP and worked another five years. In the middle of the merger talks, some stock options I���d previously received became exercisable. The prudent thing to do was to set aside the cash in case I lost my job.
Nah. Instead, my wife and I decided to exercise the options and put an addition on our vacation home on Cape Cod. We added a dining room, family room, a bedroom and a full bath. The budget was $150,000, but the reality was somewhat more.
When I exercised those options, the stock was $31.21 a share. Now, it���s $66.69, and a few months ago it hit $75. With accumulated and reinvested dividends, I estimate those exercised options would be worth more than $400,000 today. Instead, I���m sitting in the family room we added, writing for HumbleDollar.
Did we make a wise move? It all depends on your point of view. With all the improvements we���ve made to the house���which we bought new in 1987 for $159,000���we���ve recently been told it would sell for nearly $1 million. No, it���s not large and, no, it���s not on the water.
Lest you think that buying a house for $159,000 and selling it 35 years later for nearly $1 million would be a good investment, that���s not necessarily so. Over the 35 years we���ve:
Spent more than $400,000 on additions and on remodeling the kitchen and two bathrooms.
Paid $80,000 in property taxes.
Replaced a roof at a cost of $9,000.
Painted the house inside and out���twice���for $25,000.
Replaced gutters at a cost of $2,000.
Installed new windows, setting us back $7,000.
Replaced the deck���and we���re about to do that again���for $10,000 each time.
Installed central air and converted to gas heat from electric. We then had to replace both systems when the addition was built, for a total cost of $35,000.
Paid a service to check on the house when we aren���t here. That���s $35 a week.
Paid insurance and utility bills of about $300 a month.
Paid the landscaping service about $3,000 a year.
Still want a vacation home?
Back in 2005, we had one grandchild. Today, we have 13. We purchased the house for our family���first for our four children, and now for their children as well. The house is big enough to sleep 13 individuals��� worth of mass confusion.
One of the grandchildren has already expressed her hope that we���ll never sell the house. Only over my dead body, as the saying goes. The memories are truly priceless. There���s still a basket of toys in the family room from when the grandkids were toddlers. We can���t bring ourselves to remove it. We���ve gone from pushing the grandchildren on the swing set to playing a round of golf with them.
Meanwhile, I���ve gone from age 62 when I exercised those stock options to age 79, but it all feels like yesterday. There���s no chance we���d be happier with that $400,000 in the bank. Our accumulated memories have more value than any amount of additional assets I could imagine.
I did, however, exercise subsequent stock options, taking the shares instead of cash, and I���ve reinvested the dividends ever since. That will help fulfill my granddaughter���s wish that we keep the house in the family.
What���s on my mind these days? I���m hoping I can continue to drive the 300 miles to get here from our principal residence for many more years���or, at least, reasonably more.
Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive.��Follow him on Twitter��@QuinnsComments��and check out his earlier��articles.
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