Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
You just described what...five percent of the population?
i would say it is much much greater . most could allocate better , they just don't . how you allocate is based on whatever asset amount you have . no matter what , you have to make what you have last decades and keep up with your personal cost of living .
even at 65 there IS ALWAYS LONG TERM MONEY THAT WILL NOT BE USED TO EAT FOR 20 OR 30 YEARS AND THAT SHOULD NOT BE IN FIXED INCOME if inflation is a concern ..
all the amount you have being larger or smaller means is you will have more money in the portfolio but the percentage of draw would still hold the same . 4% of 100k over 30 years requires the same allocation as 4% of a million over 30 years .
of course if you live hand to mouth , nothing applies , just the same as many committed their own financial suicide and there is no bringing them back
Last edited by mathjak107; 12-09-2017 at 12:50 PM..
When I first retired, I volunteered at a golf course and was quite often on the course with a group of men in their seventies who lived in a 55+ community. The running joke was that if you were male, single, upright and still drove, you could bargain your way into never having to cook or buy a meal for the rest of your life!
I used to think they were just harmlessly exaggerating. Turns out they were right.
But remember op said they want to live in an Urban area in a major West coast city.
Yes you are right I could move to a low coast areas but my house with cash. And within 2 months Id be bored crapless and losing money from moving.
The object of me saving, investing and sacrificing during my youth is so to live the life style I love.
Makes NO sense IMO to own a 150k house simply to be a "home owner". Yes I can buy a 150k house in Philly, it most likely be in a non desirable area or I could move to the suburbs whereI would be miserable.
I worked so I would have to make the choice of the "lesser of two evils"
Can't argue a word of this, I was simply using my personal example of moving to a low COL area in the mountains of Tennessee. For you and the OP it's a different situation, or if I had remained here in Maryland where $150,000 gets you a dump.
I was also speaking in general terms. And not everyone lives in the city on either coast. For many the choice to own vs rent is not so clear cut, in may cases financially it makes sense to buy. As Serious Conversation pointed out rents go up typically much faster than property taxes.
Definately a factor. However, I can’t tell you how many times I look at the equity in my home, and think “so much dead money”. I can think of so many other ways to use that million.
I think the whole rent vs own thing, from a financial perspective, usually boils down to risk tolerance. If you are not comfortable with risk, there’s nothing wrong with putting the money into home equity.
I’ve been beaten up here for saying this, but I’ll say it again, hopefully more succinctly....
I’ve never met a rich person who has more net worth in his/her primary residence than the rest of their net worth combined. I’m sure some are out there, but “investing” in your primary residence sure as hell is not the best way to build wealth.
You're talking about a "rich person." "Rich people" are going to have other forms of assets and income streams.
Historically, home equity has probably constituted a majority of the net worth for most middle class Americans for the last fifty years or so. That's going to be even more pronounced in places like California, where a couple retiring today may have bought the house thirty or forty years ago and will have hundreds of thousands of dollars in home equity.
For an average worker, that may be the majority of their assets.
Quote:
Originally Posted by DaveinMtAiry
Can't argue a word of this, I was simply using my personal example of moving to a low COL area in the mountains of Tennessee. For you and the OP it's a different situation, or if I had remained here in Maryland where $150,000 gets you a dump.
I was also speaking in general terms. And not everyone lives in the city on either coast. For many the choice to own vs rent is not so clear cut, in may cases financially it makes sense to buy. As Serious Conversation pointed out rents go up typically much faster than property taxes.
If I were to rent my current condo a couple miles from ETSU, I could probably rent it for $1,000/month. My "all-in" mortgage costs are a little more than half that. Any of the 2 BRs in the nicer JC complexes are going to be pushing $1,000/month, perhaps more. At a nearly $500/month savings vs. renting a similar unit, it doesn't take that long to cover transaction costs both ways should I need to sell in the future. My mortgage is low enough that I could probably pay for a new place in a reasonable area (like Charlotte) and float my current mortgage for awhile until I could sell the place.
It's not an either or scenario. Many a folk lost their homes during the economic meltdown simply because they did not have cash. I think one of the big "falsehoods" home owners like to parade around is that once you own the home your some how "rolling in the dough". sorry my home in NJ had 12K a year property taxes not to mention the 20k I had to drop for a new roof.
what happens when the markets crash 2 years before I retire? the same thing that happened in 2008. I had a diversified portfolio which included a year of emergency funding in cash and I rode out the crash with the cash and did not have to sell a single stock. the next year the market was up over 21% and it's been doing well ever since. now I'm 2 years out from retirement but because I'll still be fairly young when I pull the plug (58) I probably have a higher % in equities than a lot of other retirees but I still need my money to last 30 years. so I need the growth.
now of course everyone is panicking because a correction is coming and it probably will, it's the stock market but when it does, I'll do the same thing I did with the last one, I'll pull funds out of my more conservative holdings (bonds and such) let my equities ride and carry on.
lastly remember, most folks here who are renting could probably purchase a house if they chose to.
The fact remains that someone staying in NJ and being socked over the head with $12,000 in annual property tax bills, plus whatever taxes NJ piles on, is doing so willingly.
NJ is a rich, populous state. People there make a lot of money. It's wealthier than average. The $12,000/year property taxes may not be all that punitive for a dual-income professional couple. Yes, you're going to pay a mint in taxes, but a working professional is probably going to do far better in NJ, even after accounting for cost of living, than here in small town Tennessee, because there are so few decent jobs here.
When people retire, they'll often move to a lower tax state to keep their annual outgo as low as possible.
I know that by the numbers it's better to invest the money but not everyone the spare money to drop 1-2k on rent, and then the equivalent of house expenses and payment to investments.
For a person who doesn't move a lot, I think they are better off spending their money to own their home rather than rent and maybe not invest at all. Not everyone has money bags to drop everywhere.
Another thing to factor in is that stocks and investments can turn worthless in a downturn. Even if a house loses value, it still provides housing, which is worth something. You can feel like a smart investor not buying a house but what happens when the market crashes 2 years before you retire? I'd rather have a house and investments rather than just investments. Personal choice, I know.
In our situation, selling our house and renting freed up a lot of money each month to invest. We spent about $2,800/month for our house (mortgage, taxes, insurance, utilities) not including repairs, and repairs over the course a year ran between $1,000 -$5,000, depending on what broke down (one year it was the heater which was about $5,000). We didn't save a dime when we owned, because every dollar we earned was going to support the money pit. As soon as our saving account would start getting built up, a major repair would need to be done and would drain our savings.
Now, renting, we pay $1,700 all in (rent, insurance, utilities) and it's the same every month. That's a difference of $1,100 a month PLUS an additional $1,000 - $5,000 a year savings for the repairs we aren't paying for.
Owning a home was a bad investment for us. We lost money when we sold and while we lived there we were maxed out financially and stressed all of the time worrying what would break next.
Renting isn't for everyone and I do understand the appeal of owning. Like I said, we did it for 20 years. But now that we're free of homeownership, we feel liberated and much more stable financially.
In our situation, selling our house and renting freed up a lot of money each month to invest. We spent about $2,800/month for our house (mortgage, taxes, insurance, utilities) not including repairs, and repairs over the course a year ran between $1,000 -$5,000, depending on what broke down (one year it was the heater which was about $5,000). We didn't save a dime when we owned, because every dollar we earned was going to support the money pit. As soon as our saving account would start getting built up, a major repair would need to be done and would drain our savings.
Now, renting, we pay $1,700 all in (rent, insurance, utilities) and it's the same every month. That's a difference of $1,100 a month PLUS an additional $1,000 - $5,000 a year savings for the repairs we aren't paying for.
Owning a home was a bad investment for us. We lost money when we sold and while we lived there we were maxed out financially and stressed all of the time worrying what would break next.
Renting isn't for everyone and I do understand the appeal of owning. Like I said, we did it for 20 years. But now that we're free of homeownership, we feel liberated and much more stable financially.
Was that house in NJ or a similar high property tax state?
Location: Stuck on the East Coast, hoping to head West
4,640 posts, read 11,937,291 times
Reputation: 9885
We own a house and we rent for part of the year. We will move to full time renting. The rental feels just as much a home as the house I own.
People typically compare mortgage payments to rent. Sometimes they include maintenance costs. However, people rarely address the down payment.
I have good friends who sold their house and took $150,000 in proceeds (all of their proceeds) and used it as a downpayment for another house so that the monthly mortage would be cheaper than rents in the area. The down payment could have covered at least 8 years of rent in a luxury rental. Obviously, it wouldn't have been been a lump payment so they could have also been earning some kind of return.
So they put $150,000 down, are still paying a monthly mortgage payment, and are paying for the maintenance on the house. But, yeah, their mortgage is a little less than going rents.
Seems like every day I have to ask my husband to do something around the house, fix this squeeky door, the ice maker is messing up, always something.
Makes me realize and confirms that I will not be able to remain in this house if I outlive him.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
?
