Retirement planning

[ultrarunner]

The Dow Jones Industrial average is up about 32,300% for the same period...

And that would be great if you invested in the entire market... can't say home many stocks certificates are not worth the paper they are printed on during that same time...

I'm a peasant and come from a long line of subsistence farmers on one side of the family... the need for something tangible and real is ingrained.

When my Grandparents signed over the farm to my Uncle and his wife... the contract was not based on money.... it was based on the value of so many head of cattle... just like the contract they had with his parents...

Grandpa never trusted the bankers and didn't think much of men in suits... by the same token he was able to keep the farm through the world depression because he didn't borrow against it like most of his neighbors.

 

[ultrarunner]

I say that because a person can buy a livable house around here in a safe neighborhood, (everyone attends the same schools) for $70K-$80K, monthly mortgage payment under $400. If people can't afford that, how can they afford the $600/month minimum (guessing, probably low) I would have to rent it for? $80K @ 4.5% interest is $3,600/year with no tenants or midnight calls.

I see used doublewides setup and rented on the outskirts of town by landlords, they don't attract the sort of people I would like to rent to.

4.5% is a great return... the only way I know is to carry a Real Estate Note...

Median home around here is 600k +/- for the region of some 6 million... there simply is little room to expand and as long as the SF Bay Area remains desirable... people have to live somewhere.

Double and Singles are not allowed unless they are in a Mobile Home Park and most are limited to seniors.

I paid 12k for my then home in 1984... it was scheduled for a condemnation hearing because it was that bad... In the 3 weeks from when I closed escrow to the hearing date... I had the little 700 square foot cottage transformed... from new roof, floors, windows... spent about 10k on materials... it has been rented for the last 30 years with one two week break and the last 15 the rent has been fixed at $750 per month... with property tax at $700 annually.

It was not all that long ago when the guy projecting retirement plans were using 6 or even 8% annual returns...

Just don't think I have the smarts and stomach to see an investment tank... even when Real Estate Tanked around here... rents remained constant and even increased.

 

[dave1949]

Median home around here is 600k +/- for the region of some 6 million... there simply is little room to expand and as long as the SF Bay Area remains desirable... people have to live somewhere.

Double and Singles are not allowed unless they are in a Mobile Home Park and most are limited to seniors.

I paid 12k for my home in 1984... it was scheduled for a condemnation hearing because it was that bad... In the 3 weeks from when I closed escrow to the hearing date... I had the little 700 square foot cottage transformed... from new roof, floors, windows... spent about 10k on materials... it has been rented for the last 30 years with one two week break and the last 15 the rent has been fixed at $750 per month... with property tax at $700 annually.

Our respective housing markets may as well be on different planets. There is way more space than money around here.

 

[buckeyefarmer]

try to get as much as you can into your 401k as early as you can, and get used to not seeing that money.
avoid as much debt as you can. I can afford a bmw, but will never own one. I drive economical cars.
Don't live next door to the Jones, and if you do, don't try to keep up with them.

 

[ultrarunner]

Our respective housing markets may as well be on different planets. There is way more space than money around here.

A friend moved to Maine and says he is never leaving... asked him if he misses California and said he misses the California he knew when he was growing up here... not the California that it has become...

Several of the Docs at work are thinking about making home purchases... it really does boggle the mind to see 15 year old nice homes on half acre lots with asking prices all around 2 million +/- just 20 minutes away...

Just the 24k annual property tax would be enough of a deterrent to stop me cold.

Only time will tell...

 

[ztrjim]

Just sharing my situation and plans. I'm 29, my wife 28, we have 3 daughters 6yr, 4 1/2yr ,6wks. We bought our first house when I was 22 and we're on pace to pay it off by age 42(mortgage is our only debt). We bought our first rental property last year and we intend to buy several more. Based on our saving we should be able to do so about every 3 years depending on variables of course. Once our house is paid for we intend to stop buying rentals and focus on paying them off. We hope to end up with about 5 or 6. Again just planning here things could change. Around 50 We're aiming to to start selling them off with an average value of 50-75k each, lets say we have 250k from those. My wife puts away 5% of her income into a Roth 401k and 100/mo into roth IRA. I put 10% into a traditional 401k and 100/mo into roth IRA. With market averages she should have around 500k at age 55 and I 1.1millon. We plan to retire around that time(55-59). Unfortunately we don't have pensions, I missed it by 6 months with my first "career" job before getting fired. But you live and learn and besides it was a blessing in disguise because it gave me my current job that I make twice as at and more free time.

With those variables we should have 1.850M to live off interest at a low ball of around 3% = about 60K/ year to live off and we fully intend on having no debt when we retire..... Very comfortable in my book, but we will see where this takes us. But the key here is.............. We are "planning" and most Americans do not plan for retirement. For example my parents whom my dad is 61 and a has ZERO retirement and my mother whom is 57 with a 113/mo pension and 19k in a 401k.

Oh and By the way I don't have any fancy degree.... I just have my parents who were my perfect role models on what NOT to do!!!!

Good Luck Everyone!

 

[ultrarunner]

try to get as much as you can into your 401k as early as you can, and get used to not seeing that money.
avoid as much debt as you can. I can afford a bmw, but will never own one. I drive economical cars.
Don't live next door to the Jones, and if you do, don't try to keep up with them.

Similar for me... except my goal right after college was to buy one fixer home every 18 to 24 months, live in it, make the repairs, get a reasonable first mortgage to use the money to buy the next fixer and have the rent cover my costs... there was never any money to get used to since it was all working...

For 22 years I drove the same 1972 Plymouth Valiant I paid $800 for in school and still have it... even caused a problem at work when the CEO called me into the office and wanted to know what I was trying to prove driving it... told her we had been through a lot together and I wanted see just how far we could go... mind you the paint/body was perfect and I kept it up down to washing the whitewalls each weekend.

Did get the BMW... I was working in Germany and had the chance to get a great deal on one to drive there and bring back home 12 years ago... extravagant??? yes for me... on the other hand I loved picking it up at the factory and it still looks like new!

 

[buckeyefarmer]

I have to admit, the house I built is really too big. Before I built, I had a 3/4 acre lot with a 1800sf or so (don't recall exactly) split level house. When we bought it it was about 15 yrs old, and we were the 2nd owners. I wanted to update and enlarge the kitchen (70's yellow counters and appliances), but adding onto the back would also require me to move the septic tank. My neighbor had build onto theirs, cost them more than the house cost them originally. I told my wife, I can build a larger house on a larger lot, for the same money that we can sell our house for. She was skeptical, but let me do it. I ended up building a 2400sf (plus full basement) house on 5 acres, for around the same amount. I did most of the work myself, and it appraised new for about 100K more than I had in it. Since then I added a 2 car garage with more rooms above, and a pole barn. I think the house now has around 3200 sf. Part of my retirement plan is to build a smaller retirement house in a lower cost of living area. Right now I'm thinking southern VA or East TN, but that will probably be decided on where the children end up when they move out. I just started paying for college for my oldest, but my first mortgage will be paid off this summer. I do have some 2nd mortgage that went into the garage and barn.

 

[ultrarunner]

^^^ Sounds like an ideal set up... 5 acres is just about perfect... not isolated, yet you've got some elbow room... also, at least here... up to 5 acres with a home meets most conventional underwriting... over 5 and the field becomes very limited.

I find older folks with a similar owner built spreads tend to stay put in California... tax increases are limited to 2% annually... so the guy building the mansion next door has zero affect on your property tax situation...

 

[TnAndy]

Let me see...

My 1913 Model T cost $500 when new... today it is worth about 10k on a good day...

So it is worth about 20x more in today's dollars.... or 2000 percent more?

Looks like my old Model T turned out to be an OK investment.

Now a 1913 $20 gold piece is $1200 +/- today and has my old Model T beat by a longshot...

An important point, in my opinion.

You can use 401k, Roth's, etc....as Robbie Burns, the farmer poet once penned..."The best laid plans of mice and men go oft astray"....and you must also understand the politicians are working overtime to destroy the value of your savings via inflation over time. It the only way they are going to outrun the debt we've racked up, short of a complete collapse.

Any retirement planning for someone in their middle years that doesn't include a significant provision for setting aside some REAL money (gold/silver) is short sighted.

 

[doxford jim]

In spite of what a lot of "financial advisers" say, one still has to take an active interest in what is happening with your investments.
I had a bad investment adviser that lost about 1/3 of the money I had saved - he blew it off as normal when investing. I moved and changed advisers and found the second one to be much better and we worked together. I had a gut feeling some years a go, that the market was going to tank and it did for a couple of years. I had instructed the adviser to put money into GIC's and CD's. Well we didn't make a lot but we didn't lose anything. I have done the same thing again - insisting that my input is just as important. The current adviser is not so swift and seems to think he dictates what I do with my money !!! Had to enlighten him to what my plans were and it wasn't to lock away my money to make someone else rich - he wasn't so happy afterwards.
There will be ups and downs along the way but I think they key is to be proactive.
I retired at 60 years of age 10 years ago - money isn't plentiful but we manage.

 

[HeLa]

great thread. i've been doing a good bit of research on these topics lately as well.

i haven't seen it posted here yet, but this has been a great resource in my internet research: Reddit Personal Finance

 

[wmonroe]

Being able to work on your own terms doing the things you want to do when you want to do them is my dream. I think that's what you're saying? It could also mean not working for someone else a day longer than necessary?

Yes to both, if that's possible. I don't want to HAVE to go to work any longer than necessary if I can retire, but I plan to work (on my own projects/for the wife) up till I can't physically do anything anymore.

My advice is to live below your means and save 10-15% of your gross income. Most pension plans (that I know of) max out at 70% of average of your last 5 years (and sometimes best 5 years) wages. I think your pension plan should be included in that 10-15% figure. But then again, I don't know the details of your pension plan. It sounds like you're on the right path. P.S. Be ware of depreciating assets (my cryptonite) for they will consume your money faster than a divorce! lol :2cents:

Depreciating assets are a tough one for me too. My truck is 7 years old and I would really love to get a new one and could pay cash but mine is in great shape so I'll keep fighting that urge.

There are also ways to use your 401k saving to start your own business if that is something that interests you. PM me and I can connect you with some folks that can set that up. https://www.guidantfinancial.com/financing-solutions/401k-business-financing/

Not interested right now in starting my own business. After a year out of college I started my own small business and did ok for about five years but got tired of the state requirements, insurance, trying to get reliable help, etc and moved on. I appreciate the offer though.

 

[wmonroe]

That is a great point. I work 8 to 9 months, hard core, then play around the rest. Let's me make the money I want and still enjoy life. Hopefully can do that another 10 years, then only work 5 to six months a year. The thought of retiring isn't a priority, I really enjoy my career.

That is a benefit of my current job, we use a lot of contractors. So I could semi retire but come back as a contractor and work anywhere from 1 to probably 6+ months a year. That's always an option if I still have this job and need to supplement some extra money at the beginning of retirement.

 

[JimRB]

I am so far behind on everything financial that I should be in freak out mode. When we built our house I did a lot of the work, electrical, paint, finish carpentry, tile, hardwood floors. I did not fancy a 30 year note as I would be paying when I was of retirement age so I always paid a bit extra. I refinanced twice doing 15 year notes. In a year the house will be paid off. 19 years of payments which is better than 30.

I do have an affinity to gadgets. I spend too much on things my uncles and Dad never wasted money on. But I do fix my own vehicles and buildings as they did when possible which means almost always. Some of those gadgets may be car repair tools, sometimes bicycle related,.

A lifestyle/retirement strategy website I like is Mr. Money Mustache — Early Retirement through Badassity I also like the Dave Ramsey statement about the new status symbol is the paid off mortgage. 100% of the foreclosed properties had mortgages. For me I have less stress knowing that I do not have to make that $1,600 a month mortgage. I just need to save for the $300 a month house insurance and taxes escrow. Plus the new roof and any other house repairs.

I also am hoping to get some rental property after I get the house paid off. German friends, naturalized years ago I know have done well in retirement with income from saving plus rental income. The stock market seems like a house of cards and the national debt is frightening.

 

[Parkanzky]

Any retirement planning for someone in their middle years that doesn't include a significant provision for setting aside some REAL money (gold/silver) is short sighted.

I'd counter that by asking what exactly makes gold or silver valuable nowadays?

 

[Citydude]

I am so far behind on everything financial that I should be in freak out mode. When we built our house I did a lot of the work, electrical, paint, finish carpentry, tile, hardwood floors. I did not fancy a 30 year note as I would be paying when I was of retirement age so I always paid a bit extra. I refinanced twice doing 15 year notes. In a year the house will be paid off. 19 years of payments which is better than 30. I do have an affinity to gadgets. I spend too much on things my uncles and Dad never wasted money on. But I do fix my own vehicles and buildings as they did when possible which means almost always. Some of those gadgets may be car repair tools, sometimes bicycle related,. A lifestyle/retirement strategy website I like is Mr. Money Mustache — Early Retirement through Badassity I also like the Dave Ramsey statement about the new status symbol is the paid off mortgage. 100% of the foreclosed properties had mortgages. For me I have less stress knowing that I do not have to make that $1,600 a month mortgage. I just need to save for the $300 a month house insurance and taxes escrow. Plus the new roof and any other house repairs. I also am hoping to get some rental property after I get the house paid off. German friends, naturalized years ago I know have done well in retirement with income from saving plus rental income. The stock market seems like a house of cards and the national debt is frightening.

I was concerned when I decided to retire because lots of stuff I read on the Internet ( has to be true) said I needed double what I had saved. I went to a financial planner and found out I'm in good shape. Setting down and developing a strategy with someone face to face to me is invaluable. Retirement for me, is a lifestyle change in spending habits. I just can't buy the sports cars like I used to or travel on exotic fly fishing trips once a year. Besides, I would have eventually killed myself in my 575 horse powered Mustang anyway. So the wife says....

 

[xtn]

I say that because a person can buy a livable house around here in a safe neighborhood, (everyone attends the same schools) for $70K-$80K, monthly mortgage payment under $400. If people can't afford that, how can they afford the $600/month minimum (guessing, probably low) I would have to rent it for? $80K @ 4.5% interest is $3,600/year with no tenants or midnight calls.

I see used doublewides setup and rented on the outskirts of town by landlords, they don't attract the sort of people I would like to rent to.

1. Some (not all of course but some) people can afford the higher rental price and just don't want to buy for a variety of reasons.

2. Depends on the area of course, but I'm going to buy a couple of rent houses in the next few years and will be looking for upper middle class neighborhoods. I figure the tenants will likely be more stable, generally older and more responsible, etc. I hope I'm right.

 

[NY_Yankees_Fan]

I'd counter that by asking what exactly makes gold or silver valuable nowadays?

Looks like gold WAS a good investment about 5 years ago, buying now not so much.

Gold Price Chart

 

[xtn]

I want to comment on the idea that, "I don't really want to be the rich guy in the grave yard."

I've heard people say they plan to run out of money on the day they die. My immediate thought is always, "Gosh, I hope you don't live any longer than you thought, or you're going to be a broke, miserable son-of-a-gun!"

xtn