How Much Do You think You Need to Retire/What Age Will You/Spouse Retire: General Retirement Issues (Part 2)

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6071

The summary included the principle and expenses over the 20 year period, rather than only considering the initial leveraged down payment. If you eliminate principle and expenses and only compare the $1.4M gain to $200k down, it is indeed a ($1.4M/$0.2M)^1/20 = 10.4% return. However, if you instead make the denominator include the additional principle you are required to pay over 20 years rather than just the downpayment, the return is far smaller.

Your calculation also seems to assume no mortgage interest (free leveraging). Or maybe you are assuming instead rent savings = mortgage interest + property tax + home expenses + capital gains tax + realtor expenses + 
 . Either way it is not an accurate assumption, which also contributes to why you are getting a different result.

6072

I am specifically talking about rental units, not primary residence. Rent should cover the monthly costs (mortgage + interest + taxes + expenses + misc cost).

6073

This tangent was about whether its better for a kid in their 20s to save for a downpayment or better to invest in their 401k. I assume this is a downpayment for their primary home, rather than a rental property. A primary home would be the far more common scenario for a kid in their 20s.

6077

Some people might think that is a good thing, if they do not want to worry about a real estate downturn resulting in negative equity that can be constraining if there is need or desire to sell. They may also not want to deal with the work of being landlords that comes with investing in rental real estate.

6078

I should clarify that the leverage is gone at 30Y. You still have leverage while you’re paying down the mortgage.

6079

Home ownership depends on a lot of things for young people. If they know they are going to remain in the particular place, the goal of achieving home ownership more quickly is important. It also depends on the young people. SIL has some qualities that made him DD1’s choice, but he has immaturity (in some areas) despite being 4 years older than DD1 (and age 33 now). They met in 2015 during DD1’s college time, and now are just moving out of state to the city of his new career (which is a good career, cyber security; he had his 9 month training out of state while DD1 held up the home front, with occasional visits/help from me) . DD1 who has been the primary breadwinner their entire marriage (marriage 2017, baby 1 in 2018, and baby 4 just born 3 weeks ago - yes DD1 got pg just before SIL left for training), will continue to be the primary breadwinner for some future years as well, so - she thankfully won a new job in TX city – which will be a job transfer for her, her exact job was open at the right time! with 25% pay increase as well! DD1 now is transferring her maternity leave to TX organization for the higher benefit pay. DD1 will continue to be the backbone of that family, but DD1/SIL are managing in their own ways. My hope is that at the conclusion of SIL’s work commitment (another 2 years, Army) he will continue with gov’t or gov’t contractor in their TX city so DD1 and kids continue with stability there, and they purchase a home at that time. SIL turned down DH’s help on Friday to getting the packed bins into travel U Haul (necessities for the family while majority of home was being transported by moving company); some good friends of DD1/SIL (very close friend of DD1 and her husband have continued to be close with them/kids, and until recently lived 6 townhouses over from DD1/SIL; her husband is in Vascular Surgery training/Residency/Fellowship at this point and they have no kids yet) came over and helped them on Saturday to get completed moved out in time (SIL got overwhelmed/behind and DD2 did what she could with breastfeeding a 3 week old baby
; also the 3 older Gkids age 22 months - 5 years were home with them Saturday as their last day of daycare was Friday).

In many ways, purchasing a home - one tries to be smart about it. Right size purchasing (so money can at some point start or continue to be put into investments as well as retirement account). Sometimes one does not have control over work relocations, and a home sale can at the time be a tough thing - maybe not selling right away or at the desired price.

Owning a home (primary residence) for many has value beyond the dollars and cents gains as an ‘investment’.

@StrongAndSmartMan DD2 has a double major in civil and architectural engineering, graduating in 2018. Had she gone into construction, her beginning salary out of college would have been higher than it was (she had two civil engineering internships with the 2nd with an international company/construction) - she instead worked for the state DOT rating and inspecting bridges for almost 3 years – she liked the job location (staying close to lots of friends, including some who continued with 5th years’ masters degree). Meeting her BF (they have been a couple now for 4 years), she was able to get into a job which is an excellent fit for her in a city they love and will be ‘home’ for them. BF is in sports management, and after COVID shut down, is now building his career in a meaningful way. BF has student debt, credit card debt, and needs to replace his car – but things looked up as he can now save money as a great opportunity opened up for him where we live and we gladly have him with us. BF is no trouble, and it is great to be getting more time with him.

Back to the thread topic, DH just told me today “I don’t want to move because it takes too much energy to move” - but at the ‘right time’ (DH is 67 and I will soon turn 67) he will think differently. We see us having ‘enough money’ in retirement; DDs are doing well with their careers, and SIL and BF are moving in the right direction on that aspect (BF is 26, and DD2 is 27). DD2 is being patient with BF, and we now know BF is as committed to DD2 and she is to him.

Life is definitely a paradigm shift over the years - and the technology, global influences, local - state - federal gov’t, etc. will continue to influence our decisions on maintaining QOL and having ‘enough funds’, the right insurance coverage, etc. A big part of my QOL is involvement with kids/grandkids. So far things are going well with healthy/happy/smart Gkids. I have a change in that instead of more frequent/sporadic visits with DD1/Gkids, it will probably be semi-annual plane trips for stays with DD1/SIL/Gkids - enough time but not wearing out my welcome.

6081

Yes, not black and white issue. Also if a married couple in their 20’s has children, even with rising incomes - big expenses with 2 or more children. Buying a home/townhome/apt is good for keeping living costs (and living) more stable. Also, a single person may end up marrying a person with a career elsewhere - so that couple then has to decide where they will live. SIL, DD2, and future SIL will probably start making more significant moneys in a few years. DD2 and future SIL do spend on certain trips (he is taking about snowboarding this coming winter for example). We can offer advice or guidance if asked, but they ultimately had to pave their way. DD1 (with concurrence from her spouse) has things figured out but may check on advice down the road. She told me long ago that she wants to raise her kids the way we raised her sister and her. She is embracing being a career woman to have the finances to not be living on beans and rice (as they say in the south).

6082

Maybe those who want to discuss young people buying houses can start another thread.

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6083

Agreed. Sounds like this thread got off on a tangent completely unrelated to retirement.

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6084

Do you get cost of living adjustments on the pension?

6085

No, I don’t think so. You mean after I starting drawing it?

6086

Yes. If you got COLAs the 8% wouldn’t look as good. I think I would wait at 8% per year, but it would also depend on my age and best guess on how long I’m going to live.

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6087

Not totally unrelated to retirement – some offspring and grandkids might actually be fund expenditure considerations in some people’s retirement plans, and a source of thoughts and QOL concerns for retirees as well. I don’t worry about my long term health per se, but more about grandkids now that there is more surety on future SIL for DD2 and the careers for SIL and BF. As a stage III aggressive cancer survivor, I am in ‘bonus years’. Some of the people on this thread are happily on the grandparent thread, and others wish to be on the grandparent thread (after the wedding thread).

6088

Except the conversation does not appear to be about helping fund children during retirement. Long, detailed posts about specifics that are not remotely related to retirement are pretty far off track. I go off track here and there for sure, but it is good when someone reminds me of what thread I’m actually in. Sometimes it’s better to start a new thread if one is going to have a long, detailed conversation about things unrelated to the current thread.

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6089

There is definitely something to be said about not retiring too early. My sister and BIL retired at around age 62 because he had an opportunity for a buyout, and he really didn’t like his job anymore. The problem is, the company froze his pension many years ago, so their monthly income is quite low and they don’t want to access the 401K’s any more than they have to. Besides the downside of depleting the 401K when they’re still relatively young, more annual income gives them less of an Obamacare subsidy.

So now they can’t do many of the things that they’d like. I don’t know how they can move to where they want to live (much higher COL), and they just had to cancel on a family vacation because they realized it would cost too much, in fact they never travel anywhere. Their lifestyle is far below what it used to be, but neither of them wants to go back to work. It seems that either of them could get some part time remote work, but they’re not interested. They seem too young to not be able to live the life they would like.

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6090

But perhaps they are okay with the life they currently live.

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6091

I think they are, for the most part. But they really want to move, and I don’t know that they’ll be able to. And having to make a choice between treating their dog’s medical problems or go on vacation (easy choice, the dog wins), but they really wanted to go on this trip. The problem is, when larger expenses come up, they’re in a bind.