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Old 10-15-2009, 09:19 AM
 
29,777 posts, read 34,863,854 times
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Quote:
Originally Posted by NewToCA View Post
My response was in light of the OP. My statement had to do with how some could optimize the use of their equity. In one case, you use it to lower your monthly expenses, yet still retain it for any future contingent expenditures, or to pass it on to your heirs.

In the other case, it is to capture it as a means to make your monthly living easier.

Both perspectives have to do with potentially using your equity to make retirement easier.
Yup, I was just hoping to keep responses to you on track.
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Old 10-15-2009, 11:17 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,561 posts, read 39,944,045 times
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Quote:
Originally Posted by Boompa View Post
OK then how are you paying it now, if you have no income?
Reverse mortgage?
Currently, I can use my assets (and small current returns) to pay a very small mortgage, but... a lender can no longer consider my assets in a new mortgage qualification, only my EXCESS income over and above expenses.

Income is currently fleeting image with more than 10 yrs to SS age / Reverse Mortgage Minimum age.
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Old 10-15-2009, 03:32 PM
 
Location: Alaska
5,356 posts, read 16,345,810 times
Reputation: 4023
Quote:
Originally Posted by NewToCA View Post
Just saw this thread, and I'd like to comment too.

I favor paying off the home and lessening monthly outlay, if possible for the homeowner. To me, having the monthly expense significantly reduced is the best way to go.
That's my plan, to pay it off early, about 3 years into retirement. Earlier, depending on the tax situation, since we'll have to take in more income to do so.

My options then become to stay put, sell and buy a similar priced house, or it funds are needed, sell and downsize to a lesser priced house, determined by the need. I guess I should add one more option to get a reverse mortgage should there be a need for more funds. I'm thinking the reduction in housing expense with a paid off mortgage will make downsizing and reverse mortgage options unnecessary.
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Old 10-15-2009, 06:39 PM
 
29,777 posts, read 34,863,854 times
Reputation: 11705
Quote:
Originally Posted by akck View Post
That's my plan, to pay it off early, about 3 years into retirement. Earlier, depending on the tax situation, since we'll have to take in more income to do so.

My options then become to stay put, sell and buy a similar priced house, or it funds are needed, sell and downsize to a lesser priced house, determined by the need. I guess I should add one more option to get a reverse mortgage should there be a need for more funds. I'm thinking the reduction in housing expense with a paid off mortgage will make downsizing and reverse mortgage options unnecessary.
You are in a situation exactly like the link is referring to. Are you finding much information and online retirement planning information/calculators to help you?
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Old 10-16-2009, 12:15 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,561 posts, read 39,944,045 times
Reputation: 23699
Quote:
Originally Posted by akck View Post
That's my plan, to pay it off early, about 3 years into retirement. Earlier, depending on the tax situation, since we'll have to take in more income to do so.

My options then become to stay put, sell and buy a similar priced house, or it funds are needed, sell and downsize to a lesser priced house, determined by the need. I guess I should add one more option to get a reverse mortgage should there be a need for more funds. I'm thinking the reduction in housing expense with a paid off mortgage will make downsizing and reverse mortgage options unnecessary.
I see a problem with 3 of your 4 options being dependent on selling or being able to refinance your home, something that is not happening at the moment. Thus leaving you a single option (staying put), which is fine unless you or your dependents have a medical / financial / family crisis that does not allow you to stay. Unfortunately, life comes with lots of surprises. Many are pleasant, some are not... One of my parents became disabled the yr I turned 18, so I got to become a caregiver for the next 30 yrs. While I thought this was rare, not so... I can count more than a few handfuls of similar situations. I have not seen any planning calculators that include a 'Reality - Pill'.
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Old 10-16-2009, 01:59 AM
 
71,538 posts, read 71,712,424 times
Reputation: 49125
most good calculators do have a reality pill, its the amount of savings and the investment return it tells you that you may need to have your money last thru 35 years or so in retirement and inflation.

the problem is most people dont believe those numbers and think they are way overstated. then for them lifes little twists and turns and lurking expenses strikes and shows them why these calculators suggest that to take that amount of money you need x amount of savings and return.

the retirement graveyard is full of failed miserable retirements because people had no idea how much life was really gong to cost them long term. they thought they can just put everything in risk free investments , they forgot if could live on 30,000.00 today that in 25 years or so they need to pull 60,000 from their savings to buy the same things.

those calcultors are conervative most of the time because they plan for the worst and hope for the best. whether you believe those are the amounts you need is another thing.
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Old 10-16-2009, 10:33 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,561 posts, read 39,944,045 times
Reputation: 23699
Quote:
Originally Posted by mathjak107 View Post
most good calculators do have a reality pill, its the amount of savings and the investment return it tells you that you may need to have your money last thru 35 years or so in retirement and inflation.
OK, then be sure and 'plug-in' a catastrophe.

Stuff I've seen: (some are avoidable, some not, but each can nab $500k > $2m+ in a heartbeat)

1) Unexpected Medical issues demand $500k to $1m of you nest egg, while you were depending on your high deductible policy with 70% payment and low cap.
2) You loan your kids $500k to help them avoid bankruptcy. They loose that and more.
3) You get hit with a liability claim from accident or tenant claim in a NON-LLC held property. (Keep those umbrella policies paid up, AND realize they often do not cover your business ventures.
4) Your trusted financial adviser makes a wrong move, you go elsewhere with much less, and they do the same. (Very likely for those who use these guys / gals)
5) You own financial management has a snafu, and you make a poor response.
6) You or your spouse fall into a bad relationship (more likely than you think).
7) You or your spouse or a kid ends up needing significant therapy for substance abuse, medical recovery, accident from uninsured motorist (40% of the drivers in my state)
8) A great business idea strikes your fancy.
  • You choose a bad partner
  • You are wooed by false numbers
  • The temptation is overwhelming (frequent with B&B folks in resort destinations)
9) Natural disaster strikes your 'paid-off' home, and insurance weasels out of covering it. (Volcanoes are possible in my area & I have to carry Flood insurance even tho I'm 1000' higher than the city my insurance guy is in, and he doesn't have to carry it)
10) Hyper inflation (any risk of that ) (DC says )... don't ask me that
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Old 10-16-2009, 01:10 PM
 
Location: Alaska
5,356 posts, read 16,345,810 times
Reputation: 4023
Quote:
Originally Posted by TuborgP View Post
You are in a situation exactly like the link is referring to. Are you finding much information and online retirement planning information/calculators to help you?
I've hit most of the retire early websites. I've used a couple of calculators too, including this one:

FIRECalc: A different kind of retirement calculator

But what I mainly use is a spreadsheet I created to project our may income and expenses in retirement. When I first started it, my numbers were mostly estimates and I didn't include SS in the numbers. Now that I'm closer to retirement, my numbers are more refined and I now include SS as an income stream.

Each year, I update both expense and income numbers with my current income, expenses and SS projection. Sometimes it's adjusting my projection up/down or it's plugging in the current expense number. For instance, I dropped our electricity number because we've had our lowest bill ever now that our youngest is off to college.

The spreadsheet then inflates the numbers each year. I do err on the conservative side in that my income projections use a smaller inflation rate and I assume my expenses include a mortgage expense through the whole projection (definitely won't be the case). I figure age 95 is the end of my planning (35 retirement years), although the spreadsheet goes out to age 100.

Part of the purpose of the spreadsheet is to determine what type of return I need in order for my IRA to last to age 95 under the perpetual mortgage scenario. So far, it's looking like 5-6% annual return. Earlier in the planning, it was more like 8-9%, which would require a different investment strategy in retirement.

BTW, I really don't think I'll live to age 95, so that's another factor making it on the conservative side.
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Old 10-16-2009, 01:21 PM
 
Location: Alaska
5,356 posts, read 16,345,810 times
Reputation: 4023
Quote:
Originally Posted by StealthRabbit View Post
I see a problem with 3 of your 4 options being dependent on selling or being able to refinance your home, something that is not happening at the moment. Thus leaving you a single option (staying put), which is fine unless you or your dependents have a medical / financial / family crisis that does not allow you to stay. Unfortunately, life comes with lots of surprises. Many are pleasant, some are not... One of my parents became disabled the yr I turned 18, so I got to become a caregiver for the next 30 yrs. While I thought this was rare, not so... I can count more than a few handfuls of similar situations. I have not seen any planning calculators that include a 'Reality - Pill'.
For our area, selling is still an option. We just won't make as much as say 2 years ago. We just refinanced into a 15 year mortgage because it made sense to do so and we'll pay it off in 8 years if it doesn't cost us tax-wise. In any case, we are a minimum 5 years from needing to make that decision, so the housing market can change in that period. Besides, at this point, the house is not part of our retirement assets. It's a safety valve if something major changes.
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Old 10-16-2009, 01:47 PM
 
Location: Alaska
5,356 posts, read 16,345,810 times
Reputation: 4023
Quote:
Originally Posted by StealthRabbit View Post
OK, then be sure and 'plug-in' a catastrophe.

Stuff I've seen: (some are avoidable, some not, but each can nab $500k > $2m+ in a heartbeat)

1) Unexpected Medical issues demand $500k to $1m of you nest egg, while you were depending on your high deductible policy with 70% payment and low cap.
2) You loan your kids $500k to help them avoid bankruptcy. They loose that and more.
3) You get hit with a liability claim from accident or tenant claim in a NON-LLC held property. (Keep those umbrella policies paid up, AND realize they often do not cover your business ventures.
4) Your trusted financial adviser makes a wrong move, you go elsewhere with much less, and they do the same. (Very likely for those who use these guys / gals)
5) You own financial management has a snafu, and you make a poor response.
6) You or your spouse fall into a bad relationship (more likely than you think).
7) You or your spouse or a kid ends up needing significant therapy for substance abuse, medical recovery, accident from uninsured motorist (40% of the drivers in my state)

8) A great business idea strikes your fancy.
  • You choose a bad partner
  • You are wooed by false numbers
  • The temptation is overwhelming (frequent with B&B folks in resort destinations)
9) Natural disaster strikes your 'paid-off' home, and insurance weasels out of covering it. (Volcanoes are possible in my area & I have to carry Flood insurance even tho I'm 1000' higher than the city my insurance guy is in, and he doesn't have to carry it)
10) Hyper inflation (any risk of that ) (DC says )... don't ask me that
Of all of your catastrophes, 6) is the only one likely to be a problem for me. Even under it, I would be okay because I know I can live below my means and live on half the income streams. I don't know if my spouse can, but under that scenario, I really wouldn't care.

For your other scenarios:
  1. We have good coverage. In fact, it's double coverage. Will have same coverage in retirement.
  2. My spouse might, but I'd put my foot down and stop it. Kids need to learn that mom and dad can't always bail them out.
  3. Have extra liability coverage. No businesses so none needed.
  4. I'm my own adviser.
  5. Done it and recovered.
  6. Addressed above.
  7. See 1.
  8. Won't be doing this at this stage.
  9. Always a possibility, but you could die too.
  10. I plan for averages. While it may hurt you for a period, it will eventually average out.
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