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Living expenses are all a part of planning for retirement. About 10 years before we retired I did a complete energy audit of the house and did a huge insulation, door and window upgrade. Low flush toilets, efficient shower heads and a front loading washer cut our water usage by 2/3. Paying off the mortgage let me switch to a high deductible policy that costs less than 50% of a full policy. Sewer is my problem since we're on a septic, but I removed the old rusty steel septic tank and installed a modern 2-chamber concrete tank that will last for decades. Winter heat is a wood burning fireplace insert with our own wood, but buying enough wood to heat a well insulated house is not very expensive. This year a 30 year roof goes on the house. My wife and I will be dead before it has to be replaced. The deck has been rebuilt with Trex and treated framing.
I feel sorry for people who rent older homes. Some of them pay 3x as much for heat as we pay for all of our utilities together.
The big expense is property taxes, and my state lets people over 65 defer their taxes, which become a lien against the property.
You will have many of the expenses you mention no matter where you live. If you roll your house, cell phone, internet, cable, taxes, utilities and insurance together and it only costs you $850/month you are doing pretty good.
Your first sentence says it all and uses the key retirement word called planning.
Median renter income is 50% of median homeowner income. Renters are disproportionately in the bottom two income quintiles. Median homeowner wealth ranges from 31 to 46 times that of renters. Don't believe me, believe the National Association of REALTORS (R).
Good luck making a rental energy-efficient...or better yet, paying off the rent instead of just paying more and more year after year.
Ummm how do you rent and pay off the rent and still continue to be a renter? Is that a form of renting to own? What is your game plan bro, beyond this forum? How long can you sustain your lifestyle where you are?
In many places property tax is rising much more than the expected and reasonable yearly hike. All it takes is a town like mine where the high-haves decide to build a 15-mil-dollar library instead of adding on to the existing one or joining forces with the adjacent town, build a multi-mil middle school instead of same, maintain town amenities that are annually losing money, and you can get a real surprise in the mail from one quarter to the next.
Not only that, but parts of the state where I live received a 29% increase (you read that right( in their electric bill, yes, suddenly. The outcry was significant enough for a moderation, but just like car gas that dips for short periods, it continues to rise overnight. Homeowner insurance costs too. Anyone trying to live by the COL rate hike of 3% or so is living in a former world.
NEgirl. You're exactly right on. It used to be that people thought that once you paid off the house, you were set for life for a place to live. But the cost of keeping the lights on etc. has gone through the roof over the years. Our house is paid for, but it still costs us with internet, phone, elec. nat. gas, sewer, garbage, wastewater, taxes, cable and insurance about $10,000 a year. We looked at that for our retirement years and decided we had to cut that down a ton. And that doesn't include any money for repairs and upkeep. We've figured out a way to do, and live the way we want, but subdivision, suburban living is no longer in the plans. Too expensive for folks on a fixed income in retirement.
Thus the need for a long term retirement plan and perhaps one that includes delaying SS so you can stay ahead of inflation and housing cost in your later years. The heck with beating the game getting the max back what about the highest sustainable income after 75? I get my last raise that isn't generated by me when I hit 70. After that it is all COLA and investment income.
Here's the one key statement from your link TuborgP:
"Foolishly, like so many Americans, we used the house as a bank,"
Yep, it is amazing how comfortable most couples can live on $2,000 to $2,800/month as long as their home is fully paid for and they have absolutely no debt whatsoever. No, they won't being going to Bali, signing up for an expensive cell phone service or take a bunch of Hawaii cruises but they can live comfortably enough on that in 90% of the country.
I can't believe people that are retired think it is wise to live in a house and still continue to make payments on it. IMHO, if you haven't payed it off by the time you retire, its time to downsize. Honestly, you should have probably paid it off a long time ago. Maybe you bought too much house?
If I had stayed married, I would not have fretted about keeping our mortgage into retirement. The PITI was under $800 per month. My now ex-husband's pension started at approximately 80k per year, with annual COLA's. Additionally, we had our own retirement savings and expected SS benefits to kick in later (ex-h eligible to draw pension at 50). The mortgage payment simply did not represent a problem.
Now, as a divorced woman with no pension, I feel differently about carrying a mortgage into my retirement years.
Old people who die insolvent, someone has to pay for their funeral. Being buried in debt can be a pragmatic solution, as an alternative way to be buried.
Or maybe you were a late-in-life buyer? Not one size profile fits all. And, a lot of retirees fairly well-off CHOOSE to carry a mortgage and invest elsewhere.
Perhaps not mentioned here is that it may not be a mortgage that throws retirees overboard, but the associated costs of home-owning which in and of themselves can equal or exceed the cost of a rental. Even those with paid-off mortgages lose their homes due to these associated costs they cannot meet. Namely property tax, which in many states is growing out of sight, and house insurance, which depending on where you live can be expensive. These wild cards may find many more retiree homeowners in straits in coming years, and in many if not most cases they cannot be blamed (though there are those who will want to...blame).
Yes with taxes constantly rising I've heard of many elderly with paid off homes struggle to pay their taxes. These are not big homes, just your average homes. My mother is one of them, and now they want more money for the schools, i.e... even higher taxes. People who are able to pay them are trying like hell to sell to get out of the county.
Yep, it is amazing how comfortable most couples can live on $2,000 to $2,800/month as long as their home is fully paid for and they have absolutely no debt whatsoever. No, they won't being going to Bali, signing up for an expensive cell phone service or take a bunch of Hawaii cruises but they can live comfortably enough on that in 90% of the country.
Unfortunately many Americans entire retirement debt free with minimal or no liquid assets. When the inevitable major housing cost like roof/Hvac etc replacement hit their only source of funds is debt either credit, reverse mortgage or home equity. The same happens to many who hit their fifties debt free or paying off their mortgage and kids college etc. A lack of a cash cushion is a debt to later be created. Especially when there are no more raises or promotions.
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Don't believe me, believe the National Association of REALTORS (R).
