<p>@hayden, it’s not a retirement calculator per se, but ESPlanner.com is very flexible software that helps plan consumption smoothing (which helps plan pre-retirement and post-retirement behavior). I use the paid version (and have for years), but there’s a free online version also. It handles pensions, SS, variable asset allocations, changing homes; I’ve used it extensively and I think I’ve just scratched the surface. </p>
<p>My suggestion is to try the free one, and if you really want the additional paid features (Monte Carlo is the big one, I think), go for it. It’s pricy, but having a good roadmap is priceless. </p>
<p>A house is a pretty illiquid “investment” as many found out the hard way during the bubble. And the $250/500k exemptions? How many homes sell for more than that? Or how many homeowners with a typical 5% mortgage get that much from the sale of their house after 10 years? The picture is not as rosy.</p>
<p>And many non-investors grossly underestimate their house-related expenses. That bigger SUV we buy to be able to bring plants from the nursery? Yup, count it in. Patio furniture? Yup. And so on. </p>
<p>Speaking of Monte Carlo simulations, you can download a free 30-day trial of Crystal Ball for Excel. If you are handy with Excel, learning to use Crystal Ball is a piece of cake. </p>
<p>Homes around me have not appreciated at all in the last decade–far worse actually. I sold my first house for $292K in 2000. It sold for $211K in 2012. I sold my next house for $735K in 2004. It sold for $475K in 2011. Add in taxes(RE taxes here near 3%), maintenance, etc. and it is an awful “investment”. There is no safety. It’s an expensive place to live and nothing more. </p>
<p>Real estate is location, location, and location. During the housing bubble burst, the stock market crash, the run on the banks, I was pretty calm because my rentals income brought me positive cash flow that beat the CD market and the house never went lower than the original price ever. In fact, one of the house double right away after purchasing, but we never touch the HELOC, the other house went up 40% within a year. And now with the tech boom, I feel more secure than ever, if worst comes worst I can sell the house.</p>
<p>You can make a strong case that we’re in a deflationary era. Things are different now. The attitude towards housing has historically been influenced by the fact that from about 1975 to 2006, people who were owners essentially got to live for “free” because of the steady upward inflation. Despite the fed’s money printing, I don’t think that is coming back any time soon. </p>
<p>^What I notice is that a lot of young people do not like to purchase house. My renters have very good paycheck from big name companies but have been renting for years. They might have purchased a small house somewhere at some location they don’t care for and when they find a house that has a location they like, they prefer renting.</p>
<p>Renting makes sense for young people who need/want to remain flexible in terms of career-related relocations. I have enjoyed my home, but I told my wife years ago that financially, we’d be better off renting. </p>
Absolutely true with one big if. You have to invest and not spend all the money that would have gone towards paying the mortgage down. I don’t know but I’d guess 95+% of US families don’t have the discipline to do that.</p>
<p>For me there is another reason to pay it off early. I want my life to be as simple as possible and require as little maintenance as possible. I also want to retire, or at least semi-retire, as soon as I can. We managed our money so that at this point we have no debts to pay. The only thing hanging out there is the remaining kid college/grad school expenses … most of which are in 529s. So we can live off the cash flow of our social security, IRA, 401k, etc … if had made all the best “net present value investment” decisions we’d have more assets and a lot more required monthly expenses. That would involve either retiring later or managing our assets much more actively and in a more complicated way (managing a portion to throw income to pay the mortgage. etc). </p>
<p>A lot people we know have bought a retirement home in FLorida as soon as they retired to take advantage of the warmer weather, amenities and tax structure. That so many in our circles and area have done so does provide a community of sorts there which promulgate the migration there ever the more. That we live in an area where I do not want retire is a problem because to move randomly somewhere without family and friends when one is older is quite risky. That is an issue we face. What we have in our favor is that we are living in a very expensive part of the country, like one of the most pricey, so we are not likely to be moving “up” in terms of COL. I just wish DH could have managed a job elsewhere so our kids would be clustered with that as a start point, and we could have made that our home. </p>
<p>Right now, I not only have resources at my finger tips, but I know a lot of people here. I have my car in the shop today, for instance, and it’s not a problem to me in that I have a long list of folks that can drive me to pick it up (and the shop owner would likely drive home to me and I take him back). I’ve gotten so that I take these things for granted living here, but it’s not the case a lot of the times when you move away. With kids grown, it’s more difficult to make inroads into a community. One of my friends who bought in Florida is finding this out. her kids all lived near her and I don’t think she quite understood how much help she just naturally had because it was so effortless. Not so when one is away from family and the area tends to be made up of older transplants. Things that she dismissed as non issues have become quite expensive, large ones. </p>
<p>The thing is, you may not be able to do as much as you age, and having people you know, and trust who are willing to give you a hand become important resources. All the money in the world is not going to be useful if you don’t have that, as you can be relieved of that money very quickly and not get services in kind from those that don’t care. </p>
<p>Rather than taking some average figure, one should look at the list of things that Mom2 has and add your own things, including help and that can give you a better idea as to what you need to live comfortably for retirement and then go from there. As to nursing homes, or what contingency to have set in case you get to the point where you do need nearly full care, I’m not there yet in how to do those numbers. Around here we are talking more than a half million dollars, up front payment at the nicer homes and then you can stay for the rest of your life whatever you get as pension, soc sec or whatever. So that means over a million dollars has to be stashed that will increase with COL as those residences so charge. Gah. </p>
<p>I wanted to stick my MIL into one of those places 5 years ago, and she’d be living there just on SS had we done so, but she couldn’t stand it. Was in them for rehab for hip and knee surgeries and she was just adament about it. Now she’s not mentally able to make such determinations, and when she becomes so helpless to need full time care, that’s where she will go. </p>
<p>parent,
looks like you lucked out-- wherever the house is located. You probably sold at the top of the market in 2004, and the next sale in 2011 was at the bottom. I sold my dads house in 2011 (closed in early 2012) at the market low :(</p>
<p>jym, thanks for posting the calculator–very cool. </p>
<p>We were lucky: bought our current place near a market low. That makes it very difficult for us to rent a similar home for less than $X, as the calculator suggests. We don’t include home equity in our retirement funding calculations, because it’s our home and we’d love to be able to stay in it until the end of our lives (assuming no horrible health complications). </p>
<p>My parents and inlaws never assumed that their (long paid-for) houses would be an investment. They have pensions, so I suppose they never had to think of such things. The spouse will have a pension, but most of our retirement funds are in formal retirement accounts–again, we were lucky enough to realize very early on that we could and should put money in IRAs and the like. </p>
<p>Thanks, slithy. My DS and his fiancee looked into what they would qualify for for a loan in their area ( VERY pricey area). The price of a starter house has a LOT of zeros after it, Boggles the mind.</p>
<p>The reason that many retirees dont want to have a mortgage is that for many that represents an expense that is 20-30% of income. Since most people will be retiring on an income that is less (sometimes substantially less) than their regular income, eliminating that expense can make the difference.</p>
<p>“The reason that many retirees dont want to have a mortgage is that for many that represents an expense that is 20-30% of income. Since most people will be retiring on an income that is less (sometimes substantially less) than their regular income, eliminating that expense can make the difference.”</p>
<p>Totally agree with that! Our mortgage is only at 2.875% (for right now), and our investments have done way better than that over the long term. Plus the mortgage is one of our only tax breaks. Yet, when we retire, do we want the burden of having that big expense to pay, with an income that will be about 40% of what we’re making now? Even if it ends up being affordable, it seems like such a load off one’s shoulders.</p>
<p>That is a selective comparison; mortgage interest only x% compared with the stock earnings of y%. If you compare x% mortgage interest to 0% bond interest, the conclusion is quite different.</p>
<p>“That is a selective comparison; mortgage interest only x% compared with the stock earnings of y%. If you compare x% mortgage interest to 0% bond interest, the conclusion is quite different.”</p>
<p>True. Of course I am comparing my mortgage interest to MY investments, which only include a tiny bit of investment grade bonds. What other people invest in is irrelevant to our personal portfolios, everyone’s situation is different. My 401K has returned maybe 7% over about 19 years, my Roth has returned 18% over about 17 years, and this year I started a backdoor Roth that has returned 35% (ha, ha, like that one will continue).</p>