Yes. That is what I said.
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I have mentioned this on CC before. Over your lifetime you donāt have consistent spending. When your kids are in college and you are paying tuition, your spending those years will be higher. Same might be true right after retirement, you might spend a lot on traveling the first few years. During the past couple of years, many people have spent less than in normal years, because of lack of travel, entertainment, and dining expenses. Once your kids are fully independent, your spending could also go down (not covering them on your insurance as an example).
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Joint accounts for taxable brokerage accounts and your home risks missing out on the stepped-up basis upon death.
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DH (age 65) has been on cholesterol lowering meds for a few years now. He either had the genetic predisposition with A Fib or Covid brought it on (perhaps earlier) - after the 2nd Covid shot he had pronounced palpitations. DH just had a cardiac ablation procedure this past week - and he still needs to be on blood thinner through the next 2 months ā then we will see. His momās side of the family had the cardiac issues, but many of those affected lived to 92 - 96, including his mother.
I (also age 65) have fatty liver disease as a result of medications/chemo from aggressive cancer treatment 2009 - 2011 and 10 years of estrogen blocking Tamoxifen 20 mg daily for 10 years (WebMD lists it as a cause) but one has to do what one has to do to survive. I now only take a swig of wine to taste; wasnāt a drinker anyway just wine at book club once a month or on social occasions. No need to tax my liver.
We both are regularly exercising - I do really well with a ādailyā routine; it helps also with watching what I eat ā too much effort to work those calories and carbs off! Weight was much easier to come off when I was healthy/before cancer. Thankful that all the dramatic treatments did save me from not going into stage IV with the cancer. Now looking forward to seeing the grandkids āraisedā and hope to live to see them through college and into adulthood (they are almost 4, almost 3, and 7 months old).
I hear yāall about money tied up in real estate. And figuring how to help DDs get into their own homes over the next few years.
Interested to see what happens with the RMD age of 72 maybe getting changed to 75. Will determine what we do with funds this year.
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My dad was a builder, and he built really quality apartment buildings - so maintenance was very low issue. For many, it can really be a āhassleā - and it takes just one lousy renter to really sour one not only on profitability but also on the hassle index. DH who is handy, never wanted to deal with rental property. However some investments in our area would have paid off handsomely - smaller houses in a really good school district. The sale/profit could have gone to DDs for their own home purchasing in their area.
REITs - I had a hard time really deciding on those investments.
Yes, we had opportunities to buy that would have made a fortune in real estate. My spouse didnāt want the hassle and weāve done well in the market so no regrets. Whatās changed is inflation. Weāre going to end up retiring well before 65 ( maybe 55) so the money will have to last and weāll need more variety outside of stocks and bonds.
The question is, what to buy as real estate investments. One can purchase a condo, something for Airbnb or just some place thatās likely to increase in value due to location. All are very different paths.
I have a SIL who owns several houses. They were going to be a retirement investment. Turns out, with high property taxes in her area sheās making very little. Sheās crazy, IMO, to keep them. Iād sell them and buy in a vacation area but sheās older and inertia seems to keep her from making better financial moves.
Think weāre going to move slowly on the real estate front. Buying a fixer upper might work best as we can set it up as a business and write off the expenditures. Then when we retire the income will be there. Still thinking it through.
In my experiences with rental properties single family homes donāt bring in as much income as multi family properties. A 1 million dollar house versus a 1 million dollar apartment building, the apartment is usually a better investment. On the other hand managing rentals isnāt easy. If you are considering a condo or vacation rental as an investment make sure you read the laws for the area. Many communities are limiting short term rentals. Some condo complexes donāt allow you to rent out the unit. Plus HOA fees will cut into your profit. Depreciation is a pro of rental properties.
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True. But I was focusing on the ādeath of 1st spouseā situation. When the 1st of the 2 of us dies, there wonāt be much to probate.
Donāt own any individual stocks in taxable accounts, so have been paying capital gains every year.
Yes, agree the cash flow can be better with apartment/multifamily property. More to manage and more to maintain (4 or 6 kitchens - or more - and multiple bathrooms, water heaters, etc). Single family homes appreciate in value - and something on the lower end can always be improved when going to sell.
If one of DDs is not getting a home in the next year or so, I may look into a low end home in our area to rent out and slowly fix up. Can sell when one of DDs is ready to purchase.
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My folks (who were immigrants) had several rental properties (3-family apartment buildings). They always seemed to get the renters from hellāpeople who were horders or didnāt take care of the apartment. Plus, something would always need immediate repair on a holiday. My Dad did almost all of the maintenance himself. Based on that experience, Iād eat nails before trying to make money on rental property,
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Yes, putting someone else on the deed prior to death means loss of step up basis. My in laws have H on the deed so itās his outside of the will or trust - but his momās trust stipulates that itās an advance on his inheritance. His share of the inheritance is reduced by the value of the home. I told H that he needs to insist that the value be adjusted to reflect an expected capital gains tax amount to be fair to him. I donāt know the tax implications of doing a transfer on death deed, though - maybe that allows the new owner to get the step up basis, but I honestly have no clue.
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This is how it apparently works in my state:
understand that assets passing to a spouse can be simple, particularly in community property states, but what happens with teh second spouse dies? If kids are beneficiaries, you are back to the same issue: put them on title to your home and lose stepped-up basis when the second spouse dies.
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yes, ToD, in states where its available for real property, does earn stepped-up basis.
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Posting here because this thread seems to be a good forum for the message:
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No, would never put house in name of children for the reason you stated. Depending on the value of the estate, one may want to give up āstepped up basisā in order to avoid estate tax - so give a highly appreciated asset like a property to a child or grandchild (zero gift value) and pay rent, which is taxed. There is also the concept of āgifting upā - if a middle aged child has an asset with large appreciation and is over the estate tax limit (with other assets) but expects (morbid) elderly parent to die before them to give the parent the asset, and then get the stepped up basis (parent would will to grandchild).
Many, many games to play depending on the type of asset held, value of estate, etc.
There is also the consideration of maybe giving away property during lifetime (so losing the step-up) but then not having assets used to pay for care.
I would get that checked out with an estate attorney. In our area of the country no house sells for less than 500K so you are talking about a lot of money ( step up or estate taxes).
In any case, weāve talked to a lawyer and set things up per their expert advice in conjunction with the CPA. Things change so we revisit estates every 5 years or so. The last thing I want to do is pay the taxman more or have my kids get stuck with a huge bill that forces their hand.
The best advice Iād give a millennial is save anything at all in your 20ās and you will retire early and far better off than if you wait.
And the other piece of advice Iād give is, work during the Summer and school year to reduce the amount of student loans youāll need. A part-time job can go a long way towards this. Not to mention two part time jobs.
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@Twoin18, yes. Thatās why it is a little hard to answer the posterās question. He/she was also asking about retiring at age 50 or something like that.
I would think $10 MM net worth excluding oneās primary house probably works even for someone retiring early (depends of course on spending) That was always my bogey though I never planned to retire early. But, I know that we have a very nice lifestyle. Relative to our peers, we are relatively frugal, but quite a few of our peers tend to be very high-income folks.
We talk a lot about how the Dream Amount retirement savings answer can vary by lifestyle/spending, local cost of living, pension/SS income etc.
Iāll add a humorous suggestion ā¦ the ideal answer is 50% more than your projections. That used to be my observation about house hunting. It seemed true with friends too, but Iāll use our own example. When we were shopping for $60k house in upstate NY in 1985, it was the $90k ones that looked REALLY good and unreachable. Next it was $120k vs $180k (and actually we never made that move-up, took starter home off the market). Then to CO in 1993, it was $200k vs $300. Said house is now worth over $600k, but I bet the $900k options are what Iād really love.
Soā¦. if you have $xx saved, youād really feel much more comfortable if it was $1.5xx 
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