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.
Have been away from the forum for a bit and know their are some bright folks and good ideas in this forum. Not sure how to get this started but I think that the creation of and management of debt in retirement is one that needs to be discussed. I hear and read stories some horror stories yet find myself and others not to be experiencing them. I think there are some tidbits of good information to be shared as well as some caution but wise people in the forum. I am still struck by the difficulty Mad Man had in buying a house because his pension was an estimate etc etc. That was a good lesson for people and gave many food for thought in their planning. One area for possible discussion is debt to income ratio and will having a mortgage be harmful or have no impact for the individual is food for thought. Leveraging is an issue and may be even greater in retirement. Will how you elect pension distributions impact credit worthiness at some point. Is there an advantage for credit purposes in each spouses pension being guaranteed to the other etc etc etc. Any food for thought on anything related to the topic would be welcomed and appropriate.
I'm not a believer that running up debt is a good practice in retirement. I have none except what I use my credit card for each month, then I pay it off in full every month. Paying interest is not a wealth building strategy - it is money gone with no return on it. Plus, by having no debt when I retired, my need for income is greatly reduced. I just got my first month's credit card bill and was surprised by how little it was. I'm not sure it will stay that way, but last month was very cheap despite several eating out days.
I'm not a believer that running up debt is a good practice in retirement. I have none except what I use my credit card for each month, then I pay it off in full every month. Paying interest is not a wealth building strategy - it is money gone with no return on it. Plus, by having no debt when I retired, my need for income is greatly reduced. I just got my first month's credit card bill and was surprised by how little it was. I'm not sure it will stay that way, but last month was very cheap despite several eating out days.
One of the things that made me start this thread was I applied for a car loan today. It was for a fairly expensive car 40K and before I finalized the sale I wanted to talk to my credit union (still use them) to make sure in my retirement situation I would be ok, I was pretty sure I would be. However with all the changes in credit wanted to be certain. I told the lady who knew me our debt situation when she mentioned debt/income ratio. I told her our debt and credit score and she started laughing. She assured me I was more than ok etc etc and thought it funny I would even wonder. I Than began to think and wonder how many folks go into retirement with lowering debt as the priority a number of us have.
This may be an issue to address in your complete retirement plan. Credit can allow you to make some large expenditure that you cannot make otherwise, but on the downside there is the cost of funding and a commitment of your future income.
Like any financial decision the cost / benefit must be evaluated and the impact on cash flow as well as budget flexibility anticipated. When living on income from savings or fixed sources it can be more difficult to respond to unexpected events or expenses.
I lived without using credit (other than maintaining monthly accounts) until I made a decision to relocate and buy a larger home. The plan would have had me selling other properties and using investments to pay off the home in the first year. A rapid drop in both real estate and securities kept the plan from working, so I now have a (somewhat manageable) mortgage that will probably be with me until death.
So the bottom line it there is no pat answer… it depends upon each individual situation and results can vary with situations out of our control.
except for my new car which is financed at .9% we have no debt and dont want to take any on... we even payed cash for our house 2-1/2 years ago.
That is a plus for the buying and paying cash for your house argument. You present a credit picture with a great debt/income ration not everyone does. From what I have read it would appear that even with a great credit score and paying your bills on time you are not a great credit risk today with a high debt/income ratio and that is one of the reasons some folks get their credit card rates increased and others don't. Seniors moving into retirement need to be especially savvy when it comes to credit/debt management.
debt management is not part of retirement strategy. you are not supposed to have any.
stop thinking "leveraging" start thinking ----
debt = ball and chain on my neck and i am headed for bottom of the river.
This may be an issue to address in your complete retirement plan. Credit can allow you to make some large expenditure that you cannot make otherwise, but on the downside there is the cost of funding and a commitment of your future income.
Like any financial decision the cost / benefit must be evaluated and the impact on cash flow as well as budget flexibility anticipated. When living on income from savings or fixed sources it can be more difficult to respond to unexpected events or expenses.
I lived without using credit (other than maintaining monthly accounts) until I made a decision to relocate and buy a larger home. The plan would have had me selling other properties and using investments to pay off the home in the first year. A rapid drop in both real estate and securities kept the plan from working, so I now have a (somewhat manageable) mortgage that will probably be with me until death.
So the bottom line it there is no pat answer… it depends upon each individual situation and results can vary with situations out of our control.
I took the liberty of high-lighting your above comment because it is both profound and often overlooked. By blindly following conventional wisdom without individualizing it, we may miss opportunities.
For example, most of my financial decisions have been to pay off debts early. However, I am contemplating building a really nice house that my wife and I can enjoy for the last 10 to 15 years. We have no children or relatives to leave it to, so why not put the minimum down, and try to get a 40 year mortgage with low monthly payments? I don't see the downside of living in a $1,000,000 house with a big mortgage that the bank can have when we are gone.
PS I know some of you are going to beat me up on this, because its' antithetical to our non-leveraged, frugal approach in the past.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,705 posts, read 58,022,681 times
Reputation: 46172
Quote:
Originally Posted by GLS
... I am contemplating building a really nice house that my wife and I can enjoy for the last 10 to 15 years. We have no children or relatives to leave it to, so why not put the minimum down, and try to get a 40 year mortgage with low monthly payments? I don't see the downside of living in a $1,000,000 house with a big mortgage that the bank can have when we are gone.
PS I know some of you are going to beat me up on this, because its' antithetical to our non-leveraged, frugal approach in the past.
I'm not throwing stones, but have kicked myself for not buying a friend's $1.2m joint with the most superb view around. (I thought I couldn't afford it... BUT a non-profit bought it, torn the place down, and dedicated (sold) the land to the Forest Service). http://news.opb.org/article/2687-tro...rge-viewpoint/
IMHO (and limited exposure), There are few views equal, except the few homes within Teton National Park.
As I sit in my own beautiful place that is much too large (capital costs and size), I understand. The views are drop dead gorgeous and constantly changing many times a day. It is a pastoral setting that memorizes many who visit. That is tough to put a price tag on, BUT it is also is expensive to keep (taxes). I have considered financing it (to get some equity working) and then donating any remaining equity to a charity (rather than donating proceeds from estate). It's all being given away anyway, should there be any left. The Charity would then pay my taxes (while it is being used as a residence and I would enjoy the view.) When I'm gone, they can turn it into a retreat center or sell it, I don't care.
Quote:
Originally Posted by cdelena
...
Like any financial decision the cost / benefit must be evaluated and the impact on cash flow as well as budget flexibility anticipated. ...
So the bottom line it there is no pat answer… it depends upon each individual situation and results can vary with situations out of our control.
So very true, as each of us have an equally different view of retirement. One size does not fit all, and looking at 40 yrs in 'retirement' myself, I would be crazy to drive a stake in the ground, till I myself am planted.
I have a friend 10 yrs older than myself that bought a Kubota Excavator and Tractor on 0% financing. He does a few odd jobs to keep busy and enough $$ generated to cover the asset. Other friends doing similar with their hobbies (woodworking, quilting, sculptor, pottery, construction, farming, gardening, winemaking). I'm from a farming culture, so many just die on the farm (while farming), tho they have been 'retired' for 20-30 yrs.
That is 'leveraging' life AND money. Go for it, just don't speculate. I keep 'plan B' paid off (crummy rental property next door with same view).
Last edited by StealthRabbit; 02-17-2010 at 09:39 PM..
I'm not throwing stones, but have kicked myself for not buying a friend's $1.2m joint with the most superb view around. (I thought I couldn't afford it... BUT a non-profit bought it, torn the place down, and dedicated (sold) the land to the Forest Service). OPB News · Trophy House Removed To Create Columbia Gorge Viewpoint
IMHO (and limited exposure), There are few views equal, except the few homes within Teton National Park.
As I sit in my own beautiful place that is much too large (capital costs and size), I understand. The views are drop dead gorgeous and constantly changing many times a day. It is a pastoral setting that memorizes many who visit. That is tough to put a price tag on, BUT it is also is expensive to keep (taxes). I have considered financing it (to get some equity working) and then donating any remaining equity to a charity (rather than donating proceeds from estate). It's all being given away anyway, should there be any left. The Charity would then pay my taxes (while it is being used as a residence and I would enjoy the view.) When I'm gone, they can turn it into a retreat center or sell it, I don't care.
So very true, as each of us have an equally different view of retirement. One size does not fit all, and looking at 40 yrs in 'retirement' myself, I would be crazy to drive a stake in the ground, till I myself am planted.
I have a friend 10 yrs older than myself that bought a Kubota Excavator and Tractor on 0% financing. He does a few odd jobs to keep busy and enough $$ generated to cover the asset. Other friends doing similar with their hobbies (woodworking, quilting, sculptor, pottery, construction, farming, gardening, winemaking). I'm from a farming culture, so many just die on the farm (while farming), tho they have been 'retired' for 20-30 yrs.
That is 'leveraging' life AND money. Go for it, just don't speculate. I keep 'plan B' paid off (crummy rental property next door with same view).
Thanks for the reply. I lived near Hood River in The Dalles in 1969 so I can empathize with your surroundings.
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.
