I have to admit to the fact that I have been making an assumption about you that could easily be wrong. I’ve been assuming from your arguments that you are younger than some of the rest of us, and as such farther from the age where this becomes an event that you’re considering right now as opposed to way off in the future.
I’m 62 - the age where you’re telling your kids “you’ll never drag me off to a nursing home!” as you’re dragging your own mom off to a nursing home. :smack:
I’m not as old as you, but not so young any more.
When I was little I was moved from town to town, school to school, like a pawn between my parents. I spent 2nd-7th grade at a different school, every grade. That movement had a profoundly negative impact on me. It made me want to put down roots. I’m not saying don’t buy a time share or vacation home, don’t travel every month of the year, etc. but I need a place that is fixed to come home to at the end of the metaphorical “day.”
Within the context of the thread, my overarching position is that I think that looking to a future house sale and downsizing can have significant negative effects to your quality of life which one may not fully realize until it is much too late. It’s obviously a personal decision for everyone. But just as people argue for selling the house and downsizing, I argue against such.
I moved to where the work is. I like this house and the neighborhood but it’s expensive to live here. It’s worth it because the work pays well. But after I’m retired I’m moving closer to my family and to a cheaper place.
It’s not stupid to value those things, but it’s a bit silly to think you can’t have that anywhere else than where you are now. I’ve had that in every place I’ve ever lived as an adult. Which since college, includes Ann Arbor, Michigan (small city), Culpeper, VA (rural farm country), and New York City. Each very wonderful in their own way. They all contained parks, friends, favorite shops, and storekeepers that were genuinely happy to see me over a period of years.
Then I envy your good fortune. But still, why change?
I second this post.
No one is saying that you have to move half way across the country, or even half way across town. Surely there is something smaller within, say, a mile of your house where you could still go to the same restaurants and parks.
IMHO if you had a house big enough for a family and now it’s full of stuff, well, then you have too much stuff. Some people are packrats and would have trouble parting with stuff, but really that’s more of a mental problem with them than a reflection on reality. Obviously that’s not a 100% thing, but most people simply don’t have a use for the space formerly occupied by their kids.
Forgive me if I am mistaken, but I believe you are European. Things are a little bit different in the States. We have subdivisions that are built specifically for raising kids, and that’s typically who lives there. People move out from the city to raise kids, and then go back once the kids are grown. Yes, that’s a long time, but it’s staggered so there is a great deal of turnover in a neighborhood. Few people in America have a significant bond to their neighborhood.
Although I’ve spent a lot of time in the UK and we had a house there, I am actually in Kansas City. And perhaps some of the bond of the neighbourhood is an important thing missing from America.
A few reasons I could think of why you would move from one spot to another in retirement:
[ul]
[li]better weather[/li][li]better cost of living[/li][li]to be closer to family[/li][li]to have a different lifestyle (ex: move to a more rural location where you can have lots of animals/move to a more urban location where you don’t need a car)[/li][li]to be closer to places where you can engage in your hobbies or favorite cultural activities (closer to the water if hobby is sailing, closer to the museums, theater, etc)[/li][li]to be closer to particular medical specialists if you have that need[/li][li]your friends moved to [new place] and you want to join them [/li][li]you always hated [old place] but the jobs were there so you stayed, now you can GTFO like you always wanted to.[/li][/ul]
[QUOTE=treis;]
People move out from the city to raise kids, and then go back once the kids are grown.
[/QUOTE]
Guess it depends on where you live, but this is not my experience at all. My parent’s families both originated in NYC. Not a single family member lives (or died) in a truly urban area at this point.
I agree that given the greater mobility (or perhaps more properly, less stability) that most familes experience these days, setting up lifelong roots in a particular location is less common than it was in the past.
Please critique my retirement plan.
I am self-employed, meaning no matching 401k or pension.
Social security will be defunct.
Interest levels are crap, CDs are crap, stocks are a risk.
I am 47, I own my $200,000 home (worth $50,000 24 years ago)
I cannot retire and “move south”, I live there already.
I bought the house next door. I owe 55,000 on it, paying it off hard.
It rents for $1000-1200 a month, repairs are nil, plus I am in construction anyway.
Pay it off, save the rent plus the extra money I have been paying on it.
Buy another, cash.
Until I have 3, maybe 4 by the time I am 60-65.
I get about 40,000/year income from then on.
If I get in trouble, I sell one/reverse mortgage, whatever.
The details are a bit flexible, but you get the idea.
It seemed like the most secure way to get income.
Rent will rise with cost of living.
Worth of houses will go up over time.
What say you to that plan? It isn’t stellar, but it seems safe.
I think 100% in one investment isn’t terribly diversified. What’s the plan if home values drop in that area (for whatever reason) and/or you can’t rent them?
Yeah. Although home prices here haven’t take much of a hit at all. It’s not like I’m doing the get rich thing of stacking properties, so an empty house is lost income, but not a real risk in a Donald Trump way.
Insurance and repairs take some money out of the flow, which is a down side, but the figures I gave account for that. When I’m old I might not keep up with it too well.
When you’re 70, you’re not going to have many options other than to live with the results of decisions you made in your 30s, 40s, 50s and 60s. It is possible to delay saving until you’re in your high-earning years, but if you do that, you are then required to be as invincible at 50 and at 60 as you are in your 20s, and you will be working hard. Of course, everyone lives a different life, and everything is really a continuum. It’s more likely that as you get older, you’ll get more concerned about it and save at a higher rate. The problem is if you don’t get your act together in time, you rapidly run out of options other than “I hope the government becomes sane and figures out Social Security.”
At one point in my life, I had 75K in debt, and I felt I had no options. My employer owned my soul, and I stayed awake nights worrying that I might have one more bad thing happen that would push me over the edge. Then I turned things around and started making sane financial decisions, which is good, because now, at 48, I find myself aging faster than I’d thought and living longer than I’d expected. But it’s okay – I have margin.
You say stocks are risky, but over decades, they do increase in value. What are the risks to your rental homes over decades?
Not knowing the area, I can’t say - but you should ask yourself 'What about the risk of floods, fire, tornadoes, hurricanes etc. ?". Insurance is fine, but it probably won’t pay for the income lost while repairing or rebuilding.
As SmartAlecCat implied, a bit of diversification probably wouldn’t hurt.
While you don’t get a match, there are tax delayed plans for the self-employed which might help your taxes today, and probably save you some money. My wife puts in the maximum to her SEP every year, and it is great to see our taxes go down.
Not long ago we had very high vacancy rates here, so your plan is hardly a sure thing. I agree that you need to diversify a bit more, but some real estate investment makes sense. Oh, and at your age especially Social Security will be there for you - but there is not a lot you can do about it, so if you want to plan that it won’t be, you’ll end up with more money than you thought you would have, which ain’t bad.
Google “United States housing bubble”. I know several people who had similar plans but were hit hard by the recent economic dowturn.
Like any investment, yours has some degree of risk. Primarily, you are always on the hook for the mortgage payments but you have no control over the rental market or whether you will be able to sell your houses if you can’t rent them.
Hear is a recent NYT article, it starts with:
*
Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.
More than likely, that era is gone for good.*
It is better than having nothing.
However, you are not diversified.
YOu have too much of your assets in real estate.
YOu have too much of your real estate in 1 locality.
YOu have to much of your real estate in single family housing
YOu dont have any gold or silver.
YOu dont have enough/any cash as an emergency fund. Do not count on reverse mortgages always being there and always being available.
IF your local rental market dries up and if local property taxes increase a lot, you will be in trouble.
Are these the same experts who said a few years ago that home prices would never go down?