Retirement Planning - Lessons Learned

[goeduck]

My costs of wearing nice cloths and eating out every day, and most evenings went down strikingly, fuel and cars probably a wash,

As long as there are 3 points of contact between my "under cloths" and the elastic band I can save money, no need to buy new.

 

[MossRoad]

I was told that you should get rid of your debt before retiring. If you're still making car payments, you may not be ready to quit your job. If an emergency occurs you don't want to deal with payments that should have been taken care of before you quit the job.

If my investments make the same or more than what I was used to making when I was working, and I could easily afford car payments, mortgages, taxes, etc., there's no reason I can't do the same in retirement.

 

[ultrarunner]

Around those of my parents age the emphasis was to be debt free and have the home in good shape...

Remember Dad's best friend working one more year saying he was using the money for a 50 year roof, paint, double pane lifetime windows... etc.

The lifetime window warranty really paid off... Several were replaced under no charge including a huge floor to ceiling picture window...

He retired in the 1980's and lived in the home almost 25 years after retirement only moving to retirement community near daughter after wife died...

Now my 106 year old neighbor outlived all her savings but owned her home outright and at 102 took out a reverse mortgage making her final years free from financial worry... she outlived her children and grandchildren and was widow at age 40...

When her husband died 65 years ago she received 10k life insurance and used that money to pay off her home in full...

Someone asked if this is wise saying what will you do when that money is gone?

 

[California]

I was told that you should get rid of your debt before retiring. If you're still making car payments, you may not be ready to quit your job. If an emergency occurs you don't want to deal with payments that should have been taken care of before you quit the job.

Yeah. I put car payments in that list because some people think perpetual car payments are just part of life. I've always paid cash for cars so I don't have a good perspective on that.

Personally I did put house payments (the only thing I've ever financed) into the modelling software I mentioned. With the final payoff, not very far in the future, as a point where spendable income would step up by the amount of the payments then avoided.

 

[lman]

If my investments make the same or more than what I was used to making when I was working, and I could easily afford car payments, mortgages, taxes, etc., there's no reason I can't do the same in retirement.

Nothing wrong with that if you're comfortable with making payments. We wind up being busy enough that we don't want to deal with it. As we get older there is more chance of a medical emergency and we would rather have access to funds.
I guess my Dad, who was barely able to keep his farm running rubbed off on me. He was tighter than a violin string.
My mother in law can't remember to pay her cell phone bill and she refuses to do auto pay. So we have to help her. Thankfully she doesn't have too many monthly payments.

 

[beowulf]

.... some people think perpetual car payments are just part of life.

We also pay cash for our cars. And keep them a long time. Pilot is a 2008, and my pickup is a 2010 - both taken care of and run great. But about twice a year or so I offer to buy the wife a new car - pointing out the new features and such. She always declines, saying our car is fine. So, the wife is also a keeper. If I ever feel a car is unsafe, or when the new features are too hard to resist, I guess we will get a new car. But not a new pickup - it serves me well.

 

[California]

... my 106 year old neighbor outlived all her savings but owned her home outright and at 102 took out a reverse mortgage making her final years free from financial worry...

At age 95 Mom shifted from normal living within the limits of her pension and SS, to new substantial expenses for a live-in caregiver. I explored a reverse mortgage. The credit union specialist who would have arranged it, counseled me of an alternative that would avoid the ~$15k lost immediately upon signing for setup costs (and investor profit), the high interest rate for unconventional financing, and a fixed monthly payout whether needed or not. I think also some reverse mortgage contracts also forfeit the house upon death of the borrower, a huge loss to heirs. The credit union advised go to her bank for a A Home Improvement Loan.

At the time, preceding the 2008 crash, banks were making crazy irresponsible loans just for the transaction fees with no concern for the credit worthiness of the borrower. As soon as they wrote the loan, they sold them into pools that were bought by investors (we know how that turned out). I was advised that a 'Home Improvement Loan' was what I needed. This creates a line of credit we could randomly draw from as needed. It doesn't need to be spent for improving the house.

We wheeled in Mom in her wheelchair and she signed for a HIL line of credit limited to $50k. With interest at 6% (variable) on whatever we withdrew. The house was worth over $400k so that particular loan wasn't a risk for the bank. We never did draw down the total available $50k limit over the three more years that Mom lived.

This provided all the additional money needed for first rate care, no more concern over money, and very low setup cost. And an unexpected bonus: The variable interest rate worked down to some 2.5% so this was near free use of their money. I was surprised the bank had no concern for payoff immediately after Mom was gone. They said just keep up the payments and pay it off when you settle the Estate.

I recommend this strategy instead of a reverse mortgage. Far lower costs. I think so long as loan-to-value is under say 40% of the house appraisal (and the borrower obviously won't live several more decades) any bank will be glad to write such a loan.

Added: HELOC, Home Equity Line Of Credit, is the modern name for the 'home improvement loan' we used.

 

[goeduck]

Now my 106 year old neighbor outlived all her savings but owned her home outright and at 102 took out a reverse mortgage making her final years free from financial worry... she outlived her children and grandchildren and was widow at age 40...

That is my last ditch safety net if I make it anywhere near 102 and all else goes in the carper. All the modeling says no way I would ever need to, but it is nice to have a backup plan to the backup plan.

 

[ultrarunner]

It was another neighbor a recently retired city manager that made it happen...

She had been helping since the 106 year old son died quicky of pancreatic cancer... healthy, active and with a vigor for life... 6 weeks and gone

Sometimes you don't know what you don't know... at least the last few years she had been able to enjoy her home on her terms with aids as needed...

Its nice to have the option as a backstop...

 

[kenmac]

If buying new, many times they will give you a better deal if you finance. So finance, and it you like, pay it off when the first payment comes.

I may finance if I can get a low interest rate. It may be better than cashing out my investments, paying taxes now, and then paying taxes at the end of the year due to adding to my income from cashing that investment out.
It really comes down to the, what's it really gonna cost me over all game !