Retirees: Maine One of Ten Tax Unfriendly States (house, to buy)

[Zarathu]

Originally Posted by maine4.us

Well, I guess I was in the wrong job, I didn't bust 10K a year until 1982.....hum...at the rate of interest paid, and 10% of after tax for savings, .....ran it through a spreadsheet, and nope, sorry Z, those number just don't work....didn't bust 45K until 1995....and with the loss of the market tech boom bust......pie in the sky data. Most investers were just getting over the 1999 tech boom bust in 2007 , and then, kablooey again....If I live another 20 years, I would have to have 600K in the bank (today at 1.8%) to make 60K a year retirement. I would have to be drawing $2800 a month on investments.

BTW, it ain't what it ain't.....

Sorry to be so far off topic, but my Maine baloney meter is pegged.

I'm sorry that you didn't do that. Do you remember that during 1983-83 the interest rates were about 17 % and tht you could get 30 year CD's from banks for 15% INTEREST? My aunt did that with everything she'd save up to that point, and her investments jumped hugely. She started with about 40K in 1983 at the 15% rates and by the time she died in 1995, the bank was so very happy, and by then compounding, she was only up to about 10 times what she started with. If she'd lived through the whole 30 years, she would have taken the 40K to unknown masses. You have to remember the times.

Also that is what Money Magazine said, that these numbers were never available to those who did not have a masters or a doctorate. But if you have one of those and you were getting dirt wages in Maine or some other place, they might have considered moving to a place where you would have had a more secure retirement when you got old.

But when we are young we never believe that we are ever going to get old, and that when we do get older that we won't have the energy, stamina, or health to do what we want. I remember that when I waS 33 I WAS GOING TO RETIRE AND THEN GO BACK TO SCHOOL FOR A Naturpathic doctorate. Yeah right! I don't have enough space in my memories to putin al that info.

Its diligence in saving that makes it happen. That's how it works.

[PAhippo]

correction: that's how it should work.

[brava4]

Originally Posted by maine4.us

Another interesting note. For those of you who pre-tax your 4XX-B or K accounts, if you are eligible for SSI benefits, you lower your benefit by doing this. Your last years of employment you need to so the maximum amount of income. All the pre-tax cafeteria deductions to lower your income become a moot point after a few years of retirement. Maine opting out of SS for its employees did not do them a service. I have retired friends in Maine and they wish they had been able to participate in the SS program. There really isn't a way to "beat" the tax game. You can pay them now or you will pay them later.

I've tried to find where it actually says this. Are you saying this is true prior to taking SS, if you are contributing to a k plan?

[Zarathu]

Originally Posted by PAhippo

correction: that's how it should work.

Well.....you hAVE TO BE PRUDENT TOO. You have to realize that when you get close to retirement and you have all your stuff in the stock market that its time to start moving it out of stocks and into stable principle safe investments, because the market does fall. You may lose some to inflation but you won't lose your nest egg.

You can't have all your eggs in one basket, whether its stocks or cds or property or gold or foreign currencies or treasuries or bonds or duck stmp prints. Truth be told, I never bought any duck stamp prints.

You can believe any one money manager.

[maine4.us]

I researched retiring before I took the plunge, but with state governments being in the shape they were in, I decided to take the plunge before the state lowered my retirement by about $900 a month. Yes, I remember the Carter/Reagan years. While banks were paying large amounts of interest, they were also charging even higher amounts of interest. I had bought a house and was paying 17% interest on it. So the net gain there is basically zero.

Most people, including myself lost money in the tech bust in the late 90's. Just about the time we finally recovered from this, along comes 2008-. So once again many took a hit. I certainly agree that the older you get, the less you play the market. You have less years to recover if there is a downward spike or flush as it happened as of late. I moved my money (what little of it I had) out of the market 10 years ago, forgoing all those double digit gains that later turned into double digit losses. I took a measly guaranteed 3% gain, with a no lost clause, the worst I could do was to make zero on my money, but the initial investment was completely safe.

One thing of concern to me as a Maine retiree are the taxes here in Maine. When you add up city, county, and state income tax, the percentage of your retirement income approaches 25%. For those of us not 65 yet, add almost another 15% for health insurance, and you see that 40% of your retirement income can vanish. I had figured about 25% as the maximum.

SSI rules are very convoluted. Those who paid both state retirement and FICA will not have SSI benefits reduced, but if you didn't pay both, your SSI is decreased by a 10/12 of 1% per year before your retirement age. For me, full retirement is 66. If you are married, it even gets more murky (is murkier a word?).

I guess the largest single determination of your retirement income is the state in which you worked. Some states had generous retirement plans and SSI, and some didn't. They were paying teachers 60K a year 20 years ago in CA. We didn't make near that until after 2000 where I lived, Florida.

[OutDoorNut]

Originally Posted by maine4.us

I had bought a house and was paying 17% interest on it. So the net gain there is basically zero.

Nope.

You couldn't have been luckier.

The higher the mortgage rates, the lower the purchase price.

Probably the single biggest reason home prices have risen so much is because mortgage rates have been so freakishly low.

Because the more money people can borrow to throw at housing, the more money homeowners can ask people to pay for their homes.

Best thing is to buy a house when mortgage rates are high, which forces home prices down.

Then when interest rates fall, you re-mortgage the home at a lower interest rate and make out like a bandit.

That's why I'm leary of buying a house in the current market, because mortgage rates are being kept freakishly low by the government buying 60% of treasuries.

If I bought a house now, I'd be up the creek if I had to or wanted to sell it when the government stops buying treasuries.

Because when that happend, they'd have to rasise the interest on treasureies to get people to buy them,

Which will raise the cost of long-term borrowing, raising mortgage interest ratets.

People won't be able to afford to borrow enough money to pay what you paid for the house today.

So you'll be upside down on your mortgage--what you owe will be more than your house is worth.

Only way you might think it isn't, is if inlfation also takes off, then your house might nominaly be worth more when interest rates rise, but in terms of what dollars will then be worth, your house will be worth less than you originally paid for it.

[maine4.us]

That is already happening. Banks have more cash in their coffers than before the meltdown. Most have repaid the feds the money they "borrowed" from taxpayers. The housing market just didn't work the way you said it did where I lived. Home prices actually rose during the 17% years. Why, because most people back then (in the 80's) had more sense than to borrow what they couldn't pay back. Therefore less people built houses, and the supply followed. There wasn't a glut in home building back then, in fact most sales of homes that were already built. Construction prices had begun to rise.

Today you are 100% correct, you can't borrow enough money to buy a home without 15-20% down. That, along with the rate of foreclosures has artificially depressed home prices. They continue to fall almost 5% per year. A very good friend of mine who is a real estate broker said that anyone who bought a house after 2001 is most likely underwater, unless they put a huge amount of cash down. Even those people find that was not a great thing to do as a depressed market has already taken their 20K plus mortgage interest. Granted it is low (interest), but if you don't have the down payment, you are out of luck. It is a bad situation for all involved, except for the banks.

[Zymer]

Originally Posted by maine4.us

That is already happening. Banks have more cash in their coffers than before the meltdown. Most have repaid the feds the money they "borrowed" from taxpayers. The housing market just didn't work the way you said it did where I lived. Home prices actually rose during the 17% years. Why, because most people back then (in the 80's) had more sense than to borrow what they couldn't pay back. Therefore less people built houses, and the supply followed. There wasn't a glut in home building back then, in fact most sales of homes that were already built. Construction prices had begun to rise.

Today you are 100% correct, you can't borrow enough money to buy a home without 15-20% down. That, along with the rate of foreclosures has artificially depressed home prices. They continue to fall almost 5% per year. A very good friend of mine who is a real estate broker said that anyone who bought a house after 2001 is most likely underwater, unless they put a huge amount of cash down. Even those people find that was not a great thing to do as a depressed market has already taken their 20K plus mortgage interest. Granted it is low (interest), but if you don't have the down payment, you are out of luck. It is a bad situation for all involved, except for the banks.

Artificially depressed prices combined with low interest rates can be a good situation for those who are in a good cash position and looking to buy now, and assuming that they intend to stay in the residence for a relatively long period of time. For them, a short-term decline in value is irrelevant.

'Flippers' trying to time the bottom of the market may not make out so well. Like 'market-timers' trying to cash in on declines in the stock market to 'buy low', this can be a risky proposition known as "trying to catch the falling knife". It is difficult to predict the 'bottom' of the decline and further losses may follow. Those who are not in a position to wait out further [short-term] losses find themselves in a difficult position.

[animalcrazy]

Originally Posted by Zymer

Artificially depressed prices combined with low interest rates can be a good situation for those who are in a good cash position and looking to buy now, and assuming that they intend to stay in the residence for a relatively long period of time. For them, a short-term decline in value is irrelevant.

'Flippers' trying to time the bottom of the market may not make out so well. Like 'market-timers' trying to cash in on declines in the stock market to 'buy low', this can be a risky proposition known as "trying to catch the falling knife". It is difficult to predict the 'bottom' of the decline and further losses may follow. Those who are not in a position to wait out further [short-term] losses find themselves in a difficult position.

You're right about that. I watch different areas daily and according to our realtor the market has dropped 20% since last year. One of our tenants is interested in purchasing our property but we can't sell it until we do an exchange. That property has lost 100k and we don't want to pay the capital gains. It has been a cash cow for 20 years but we just don't want to be landlords anymore, however, we may not have a choice for now. Your market is unstable and I think we will have to watch it a while longer before we purchase there.

[Jellybean50]

OK... pretend i'm slow...

If i get Social Security (not taxed in Maine) and a small pension (is that taxed?) and i'm not going to buy a house there - or work, what are they going to tax me so much on? Why is it so bad for me to retire there - because of the sales tax?

I'm in Jersey... Maine looks like paradise to me