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C) A 60-year old who has never owned a home and has $1,000,000 in investments.
Yes, but what I was getting at was the question asked in the OP about "whether $500k was a good amount to aim for" - and how you can't just look at the amount in your retirement account without considering other assets, especially since real estate can be significant.
So if someone asked me, for instance, if $500,000 is enough, I'd also need to know how much in real estate they have (and also if they have a pension). You can't just look at a number on your Fidelity Investment report and make a judgment based in that alone.
and the owner has no liquidity and 700k buried in a house they have no access to without loans and costs .. they can't spend the living room , and yes reverse mortgages are costly balloon payment loans . you just pledge the house to satisfy the loan .
housing costs exist whether you rent or own and either can potentially be more or less since we rarely rent what we would buy . investment wise both are separate issues .
on the other hand a renter can invest elsewhere , potentially may have lower housing costs , since in urban areas like we have here ,most rentals are in apartment style buildings not single family homes .. it cost a fraction to rent vs buying a single family home in many decent areas . plus a renter with resources can have investments that are growing 2 to 3x the typical resi appreciation .
those which no resources to buy or invest else where , will always be poor..
not every renter has no money or is in a situation where they are starting out and if they rent they have no money to invest .
as life goes on many have substantial assets and choices . 30-40% of all resi sales involve no mortgage and are all cash so there are lots of people with money to invest and rent as an option .
we could never have ended up with what we have if we did not rent and invest the monwey not tied up in a house in much greater growing assets . today we can subtract out years of rent and buy 2 homes with the difference , so blanket statements like the above are false and skewed
I never said every renter is poor. Many wealthy people choose to rent and avoid the costs and headaches associated with home ownership, investing the difference. Similarly, many multi-millionaires don't own a vacation home, preferring to just rent out a place when they need to.
As I said to the poster above, you need to factor in whether you own real estate - especially if it's significant - in determining whether your savings balance is adequate, all things considered. I would worry if I had $300,000 in savings at the cusp of retirement, with no pension and no real estate. But if I owned a $700,000 house free-and-clear in addition, I'd feel quite comfortable. Add in a pension, and better yet.
The amount you need in your retirement fund is just one piece of the puzzle.
I never said every renter is poor. Many wealthy people choose to rent and avoid the costs and headaches associated with home ownership, investing the difference. Similarly, many multi-millionaires don't own a vacation home, preferring to just rent out a place when they need to.
As I said to the poster above, you need to factor in whether you own real estate - especially if it's significant - in determining whether your savings balance is adequate, all things considered. I would worry if I had $300,000 in savings at the cusp of retirement, with no pension and no real estate. But if I owned a $700,000 house free-and-clear in addition, I'd feel quite comfortable. Add in a pension, and better yet.
The amount you need in your retirement fund is just one piece of the puzzle.
It is the total package including location .... there really is no magic number for what is good ... we all back in to what we have and make it work ...whether it is living golden girl style or being snow birds and owning two places, or even no places what we have is what we work with ..
The more in assets you have the more the choices you have .. here in nyc which is one of the most expensive places to live we have everyone from poor to rich and retirees on just ss finding a way .
I laugh at all these how much do I need articles ... what you had to live on with possibly two pay checks coming in no longer exists once those checks stop .
Any projections you had are in the hands of mr markets and mister inflation..
Heck , we had almost 14% gains from 1987 to 2000 ... what do you think you would have projected you would have had looking at your balance back then 15 years later ? Well it took 13 years adjusted for inflation to just get even ... how many counted on selling their homes in 2008 and retiring only to find they were worth a fraction of what they thought if they were even lucky enough to sell ..
So we all back in to what works and buildi a lifestyle around it
Last edited by mathjak107; 02-19-2019 at 04:56 PM..
...you need to factor in whether you own real estate - especially if it's significant -
in determining whether your savings balance is adequate, all things considered.
Said another way... don't own too much house. And I agree wholeheartedly.
Limit it's value to X% of your total net worth.
Quote:
But if I owned a $700,000 house free-and-clear in addition, I'd feel quite comfortable.
While I agree on the point of having value in owning it's not unqualified.
That house in your example would represent 70% of net worth and I'd never want to see more than 25% tied up.
So... how about up to a $250,000 home and $750,000 or more in the portfolio?
Quote:
The amount you need in your retirement fund is just one piece of the puzzle.
They're all just one piece.
But deliberately having too much locked in RE vs growing/earning weakens the value of it all.
That depends on how much cash is that RE giving you each month.
it is still not good to have to much worth wrapped up in any one asset . every asset has it's day in the sun and days of eventual pain , trouble and negative returns for one reason or another.
2008 taught a lot of lessons as far as counting on anything that pertains to loans to gain access to your money . most were cut off .
remember , when taking loans against a property you are just using the property as collateral . you can never really gain access to your money without loans or selling , it is a one way street , money goes in to a house but it can't easily come out .. in fact if the lender likes your face owning the house is irrelevant , a loan is a loan and can be done regardless of a house if you have other acceptable collateral . so a loan is a loan is a loan .
Here in my town $20,000/year is enough to support a family in a house.
okay ya it is a huge factor....you are most certainly right about that.I live in a high COL area as far as Texas goes but i may move to a lower COL area at some point.
Said another way... don't own too much house. And I agree wholeheartedly.
Limit it's value to X% of your total net worth.
While I agree on the point of having value in owning it's not unqualified.
That house in your example would represent 70% of net worth and I'd never want to see more than 25% tied up.
So... how about up to a $250,000 home and $750,000 or more in the portfolio?
They're all just one piece.
But deliberately having too much locked in RE vs growing/earning weakens the value of it all.
for all purpose when we owned all that real estate in effect we owned a business so the real estate actually was a huge portion of our worth . but we owned no house and rented .
today most of that real estate is sold and what is left is about 25% of our net worth , it just worked out that way since what is left can't be sold at this stage unless the stabilized tenants take a lease buy out offer or buy them themselves . so we are kind of stuck with 2 apartments whether we want them anymore or not . income on it is break even so basically it is something we don't even carry on our net worth statement anymore which we track just for personal information .
we made our money on this real estate package already so what is left is really just the residue .... we offered these co-ops over looking central park to our tenants at 50 cents on the dollar , no money down and we will finance but they are still not sure they can afford them .
we do not want to be landlords in retirement so everything was sold off the last decade . we want only liquid ,passive investments that can be sold or turned to living cash with a click of a mouse .
and the owner has no liquidity and 700k buried in a house they have no access to without loans and costs .. they can't spend the living room , and yes reverse mortgages are costly balloon payment loans . you just pledge the house to satisfy the loan .
housing costs exist whether you rent or own and either can potentially be more or less since we rarely rent what we would buy . investment wise both are separate issues.
Yes, well said. The bolded comments are totally spot on.
Quote:
Originally Posted by mathjak107
on the other hand a renter can invest elsewhere , potentially may have lower housing costs , since in urban areas like we have here ,most rentals are in apartment style buildings not single family homes .. it cost a fraction to rent vs buying a single family home in many decent areas . plus a renter with resources can have investments that are growing 2 to 3x the typical resi appreciation.
This is what I've done. As I've said like a broken record, one of the major keys to financial security / success is keeping your housing costs low as a % of your income. 1/3 of your income to housing costs, whether renting or owning, is too high in most cases. It doesn't give you enough financial breathing room for saving and investing, or even extra $$ to pay down your mortgage. If you can't consistently save and invest a double digit percentage of your income over a long period of time (typically at least 10 years on the low end), you won't have financial security.
Quote:
Originally Posted by mathjak107
Those with no resources to buy or invest elsewhere will always be poor.
Not every renter has no money or is in a situation where they are starting out and if they rent they have no money to invest .
it rarely makes sense to accelerate the mortgage , it may feel good but that extra money is likely better elsewhere .
time is your friend and the more time you give equity investing the easier it is to pretty much guarantee decent results .. when someone waits until after they pump the extra money in to the mortgage before investing , they put lots of pressure on the shorter time frame to do well ...
what may feel good mentally usually is not the best financial choice.
my vote is always just keep the mortgage and max out the investing elsewhere .
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