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Old 03-04-2019, 01:59 PM
 
Location: Olympus Mons, Mars
5,328 posts, read 8,312,626 times
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This is for those that are in HCOL areas and can't afford to buy due to astronomical prices and wanting to stay within conservative affordability metrics.

Do you intend to retire in the same HCOL area or move to a LCOL area ultimately? Since I see some LCOL areas rapidly rising in price as well (Atlanta, parts of Florida etc. - this may be temporary I don't know, a similar rise occurred prior to 2008 and then these areas crashed spectacularly but that is another issue)... are you pursuing any sort of strategy to lock in fixed housing costs in retirement just in case housing inflation does not abate?

The big issue about retiring without housing is that this cost can be a huge wildcard. On the positive side a lot of people in HCOL areas have just overbought by such a factor that they will most likely have huge housing costs in retirement and probably have not even paid off their mortgage by then so not having a mortgage or a housing asset beats that situation definitely.
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Old 03-04-2019, 02:08 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
29,023 posts, read 52,568,922 times
Reputation: 29924
Quote:
Originally Posted by k374 View Post
This is for those that are in HCOL areas and can't afford to buy due to astronomical prices and wanting to stay within conservative affordability metrics.

Do you intend to retire in the same HCOL area or move to a LCOL area ultimately? Since I see some LCOL areas rapidly rising in price as well (Atlanta, parts of Florida etc. - this may be temporary I don't know, a similar rise occurred prior to 2008 and then these areas crashed spectacularly but that is another issue)... are you pursuing any sort of strategy to lock in fixed housing costs in retirement just in case housing inflation does not abate?

The big issue about retiring without housing is that this cost can be a huge wildcard. On the positive side a lot of people in HCOL areas have just overbought by such a factor that they will most likely have huge housing costs in retirement and probably have not even paid off their mortgage by then so not having a mortgage or a housing asset beats that situation definitely.
For us having stayed in the same house for 25 years means a low mortgage payoff and lots of equity. Our house cost $190,000 in 1993, now Zillow shows it at close to $900,000. We plan to retire in 3-4 years and sell, move within 1-2 hours away to a less expensive area. Yes, prices farther out have gone up too, but not nearly as much. We should still be able to pay cash for what we want (less house, more land) and have leftover cash. Take for example my parents' home about 3 hours away which they will be selling soon to go into assisted living. The house is 3/2 with a great 3 car garage/shop, barn and 4 acres. They paid $70,000 in 1998, and it's now valued per Zillow at $222,000.
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Old 03-04-2019, 02:34 PM
Status: "No saccharine. No treacle." (set 17 days ago)
 
Location: The Triad (NC)
27,780 posts, read 60,066,614 times
Reputation: 30957
Quote:
Originally Posted by k374 View Post
This is for those that are in HCOL areas and can't afford to buy due to astronomical prices ...
I don't think anyone in this group has gotten to the retirement question yet.

If you can earn more by living in a HCOL area, call that an extra $2X per year?,
how much of that extra $2X are you willing to use SOLELY for housing?
Will that extra $2X be enough to actually buy or rent what you need (or want) there?

If you can answer yes to these questions... then you'll probably be okay.
Okay in the immediate but also at retirement time.
Well, so long as you ALSO save the first 15% of that high gross and every other disposable penny you have.

But if you can't answer yes... and I suspect that rather few in those HCOL towns can...
including the lions share of those pushing 40 who HAVE swallowed the pill...
I suspect that you won't be able to also afford have much of a retirement at all.

Quote:
The big issue about retiring without housing is that this cost can be a huge wildcard.
Without the fixed asset and/or adequate annual income needed to afford housing costs.

Quote:
...just in case housing inflation does not abate?
Housing inflation is about population expansion.
The raw number of warm bodies that will want a bedroom all their own and a toilet too.

It started when the first wave of baby boomers started to make the problem wave.
If we can manage to get a handle on that set of errors... well, all sorts of things will begin to look better.

Last edited by MrRational; 03-04-2019 at 02:58 PM..
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Old 03-04-2019, 02:37 PM
 
68,220 posts, read 69,051,832 times
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We have no problem retiring in New York City .. renting and investing easily pays the bills
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Old 03-04-2019, 03:07 PM
 
Location: Olympus Mons, Mars
5,328 posts, read 8,312,626 times
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Quote:
Originally Posted by MrRational View Post
If you can earn more by living in a HCOL area, call that an extra $2X per year?,
I do earn more but most definitely not 2X more more like 10-20% more. However, in some places this is offset by no or much lower income taxes than my current state of CA which has astronomically high state taxes both on regular and investment income.

My plan to retire is somewhere without taxes or low income taxes and somewhere in the SouthEast, TX, GA, NC or FL are candidates.

The question is whether it's prudent to buy something now, 10 years prior to retirement, to lock in housing costs or to just take a wait and see approach and deal with it when the time comes.

The concern is that housing is inflating at a rate of 4-10% depending on the market and stocks are not returning that much currently. I feel this type of inflation in housing is temporary and unsustainable but who knows.

I visited Atlanta in Jan 2015 just to check it out and was looking just outside the perimeter, found several townhouses that were very affordable... fast forward to today those same townhomes have doubled in price or in some cases even tripled!!!

Of course there is always the option of moving to Thailand but I heard costs are rising there too!
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Old 03-04-2019, 03:12 PM
 
2,069 posts, read 757,434 times
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"Do you intend to retire in the same HCOL area or move to a LCOL area ultimately?"
both.
retire in place (HCOL) for a few years,
and later move to a retirement "community".
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Old 03-04-2019, 03:20 PM
Status: "No saccharine. No treacle." (set 17 days ago)
 
Location: The Triad (NC)
27,780 posts, read 60,066,614 times
Reputation: 30957
Quote:
Originally Posted by k374 View Post
I do earn more but most definitely not 2X more...
Read it again: an extra $2X per year.

Whatever it is you do... the pay scale for it is LESS in a lower COL area. Right?
Well, we'll assume so for this exercise.

But we'll also assume that the lower number is still ADEQUATE in that location.
Adequate to fund the retirement, and raise the kids and all the rest... and to buy the house
enough so that 30some years later you can actually afford to make some choices.

How much more income would the HCOL area require to do similarly? I'll call that $2X more.
What would $2X have to be in order to afford the house (or just pay rent) in the HCOL town?

If you're one of the few who is getting enough extra... you're golden.
The other 90% you see around town? Not so much.
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Old 03-04-2019, 03:47 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,823 posts, read 3,747,412 times
Reputation: 6486
Quote:
Originally Posted by k374 View Post
I do earn more but most definitely not 2X more more like 10-20% more. However, in some places this is offset by no or much lower income taxes than my current state of CA which has astronomically high state taxes both on regular and investment income.

My plan to retire is somewhere without taxes or low income taxes and somewhere in the SouthEast, TX, GA, NC or FL are candidates.

The question is whether it's prudent to buy something now, 10 years prior to retirement, to lock in housing costs or to just take a wait and see approach and deal with it when the time comes.

The concern is that housing is inflating at a rate of 4-10% depending on the market and stocks are not returning that much currently. I feel this type of inflation in housing is temporary and unsustainable but who knows.

I visited Atlanta in Jan 2015 just to check it out and was looking just outside the perimeter, found several townhouses that were very affordable... fast forward to today those same townhomes have doubled in price or in some cases even tripled!!!

Of course there is always the option of moving to Thailand but I heard costs are rising there too!
I live just outside the perimeter.
My opinion is to wait till you are ready. Too many things can change between now and when you retire.
Your life may demand different circumstances. Real estate can fluctuate. Maybe that area goes downhill over the next ten years and you won't want to live there.
I can tell you I made multiple trips and wound up renting in an area I hadn't expected. I bought a home settling farther north then I expected.
Whatever the case, rent for your first year and learn the area. I was going to buy when I first moved and am so happy I didn't.
One of the things I learned was my county that I bought in lowers your property taxes at age 62. My tax bill will drop from $5k to $2k. Nice to have an extra $3K. I did not know this fact until after I moved here.
If you live 20 years after age 62 that's $60K in your pocket.
The only way I would buy is to get a toehold with a rental if the numbers will work. But for many people rentals are a PITA. For me they are not.
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Old 03-04-2019, 04:52 PM
 
24,966 posts, read 32,034,074 times
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The COL factor where I live is 116. Not awful, not what I would call really high. Still I could find many places that have a lower COL...I just have no desire to move. I HATE moving and have done it many times when I was younger. No more. When I bought this house I said that was it. I love my house, love my neighborhood. Lots of family here as well. My house will be paid off 4 years after I retire. I’m staying put.
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Old Yesterday, 04:31 AM
 
12,750 posts, read 6,655,794 times
Reputation: 23490
Quote:
Originally Posted by k374 View Post
This is for those that are in HCOL areas and can't afford to buy due to astronomical prices and wanting to stay within conservative affordability metrics.

Do you intend to retire in the same HCOL area or move to a LCOL area ultimately? Since I see some LCOL areas rapidly rising in price as well (Atlanta, parts of Florida etc. - this may be temporary I don't know, a similar rise occurred prior to 2008 and then these areas crashed spectacularly but that is another issue)... are you pursuing any sort of strategy to lock in fixed housing costs in retirement just in case housing inflation does not abate?
My strategy was to buy a low home ownership cost house in a high COL region. Iím outside reasonable commuting distance to the high wage jobs so home prices reflect that. I picked a town with a regionally low property tax rate and bought a small house on a small lot. I can get to the NFL stadium and the MLB ballpark and the world class airport and the world class hospitals and the museums in an hour when itís not rush hour traffic. My sailboat floats on the mooring in the summer and I can walk or bicycle to the beach. It served as a summer house for the last decade and will be my retirement home.

The advantage of living in a high COL place is huge. I have the 35 high income years so I will be getting a near-max Social Security check. It was easy to keep my 401(k) contribution maxed all those years with a huge tax incentive to do so back when tax brackets were much higher.
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