I’m not terrified, and it’s kind of shitty to characterize what I’ve said that way. What I’m afraid of is I’ll live too long or I’ve not calculated my spend rate accurately or I’ll need end of life care that I can’t really afford. These are pretty normal concerns.
I’m considering moving to Thailand for a few years both because it’s awesome and to save cash – rent out my house in CA and basically live free on the rent money overseas, win win.
You know you can pick any age hooker you want, right?
DC metro area, one of the more expensive places in the country. On the positive side, we tend to be slightly less badly clobbered when there’s a recession, since the government must continue to function. AND, we happened to buy this house during the middle of the bubble in the early 2000s: far enough along that we sold our previous place for enough to get a down payment, not so far that the prices had gone COMPLETELY insane (we were never upside down, unlike some neighbors).
We won’t ever have this house paid off, at least not until we sell it. And since we refinanced a couple years back when the rate was insanely low, we’d be crazy to do so, since we could almost certainly do better elsewhere. Like @squeegee , we could of course sell it and downsize and hopefully have cash - though if we downsized in this area, not a whole lot!
“Enough” depends on numerous factors, of course. Our Social Security, at full retirement age (which we aren’t), would replace a bit over half our take-home pay. I just looked at some retirement accounts from my former employer and that would give us another 10% of our take-home. And we have two special-needs adult kids who are not self-supporting, so we want to be able to have some spare cash for them. There will be no way they could help us, the way we’ve helped the parents.
If we just had a million in the bank, all else being equal (i.e. same SS / pension figures), we could do it by downsizing and cutting back on most discretionary spending. We might have to look a lot harder into moving to a cheaper area of the country, as well.
If we didn’t have the supporting-the-kids concern, that might not be a worry either.
But staying in this area, as I’ve seen from looking at rents recently, wouldn’t save us a whole lot of money. We’d be paying close to (or more than) our mortgage payment for a much smaller place. A 2 bedroom condo would run about 350-400K in a desirable area. Though, as noted, we’d have cash from selling the house, so there WOULD be a savings - but someone else, without 20+ years of equity, would not have that.
Pretty sure the senior hookers charge less, though.
I wouldn’t say “terrified” is the right word. Genuinely concerned, of course - because I worry about what all could happen. My in-laws went into retirement after a lifetime of not-the-best job / financial decisions, when they received a windfall inheritance, and would have been fine… but then some more bad decisions (and genuinely bad luck) wiped them out. The family had to bail them out. So, we have very recent, very painful evidence of how things could go wrong.
We have nobody to bail us out. And we’re in an expensive area - so as noted, one of our contingencies is to consider relocating.
If we live as long as my in-laws did, that gets into the range where we could in theory run out, especially if we didn’t have as much put aside. We hedge our bets there by continuing to work, and having been painfully diligent about saving. There’s also a strong mindset risk: my husband and I have been fortunate enough to never be in the position of worrying too much about paying the rent or buying food - so we have not developed some habits of frugality. Once we quit working, we will have to switch to a different mindset.
Long-term care is also a worry. My husband’s family has tended to live well into their 80s. His parents frankly needed assisted living before his father died but avoided it, barely; when FIL died, it was no longer optional for MIL. Even with insurance (which she did NOT have), assisted living is expensive. My husband’s family also has Alzheimer’s (his mother is early-to-moderate; his grandfather was pretty severe).
So this is a very real concern. No dementia on my side, that I know of, but both my parents died before that had a chance; they both died at 75. So I’ve got a stupid mental image that I’m going at age 75 also (let’s ignore my lack of prostate, and my non-history of smoking…). In that case, I won’t run out of money. But if I go with that assumption, my sorry ass will keep on going until 95, just to be persnickety.
Not retired yet, but I’m in Switzerland and 1 million won’t cut it. Well, it could, if we really wanted to downsize and live in the middle of nowhere.
And according to this site, Switzerland’s COL is 15% more than DC.
If we wanted to rent our home, it would cost us about 2 to 3 times our current mortgage. Mortgage rates are low, so it’s better to have a mortgage than to pay it off. Most people never pay off their mortgage.
We don’t have family nearby and we don’t have kids. Switzerland, even though it’s expensive, may be better for us for retirement than returning to the U.S. It would also mean that we could easily depend on public transportation and do away with having a car, something that’s not easy in the U.S.
We’ve always had plenty of salary to be able to not watch what we spend. We’re not frivolous, but we do pay for quality. But a year I couldn’t have told you how much of our salary went to groceries, restaurants, etc.
So I changed that. In the last 8 months I’ve been tracking our expenses. Now I know for certain that taxes (CH and US), health costs (insurance, meds and doctor visits), and retirement savings are our biggest expenses.
I’m doing the calculations for retirement at 60/65/70 and making sure that I have a better understanding of where we stand. One thing we can do to reduce costs is to get rid of our US citizenship. We’re not willing to do that now.
My vague anxiety despite having a very solid figure in my retirement fund portfolios is in my case less related to where I live (although given we have high real estate taxes in my town) than knowledge that year in year out my should be sufficient income never seems to be enough to keep the comfortable buffer I’d like. Yes we are just done getting our last through college, and her expected graduate education won’t likely be as costly. And spousal medical issues (which don’t have to be catastrophic end of life events to add up to college tuition costs when chosen care is OON) should be better now. BUT more free time will likely mean more spending on experiences not less.
We have put off the choosing a financial planner and really putting numbers to it, in my case probably as a dysfunctional avoidance of anxiety strategy. Soon. We will do it soon.
Tracking how you spend is a huge, eye-opening tool.
We log everything in Quicken and have done for years. I don’t usually spend a lot of time analyzing things, though every now and then I’ll do a year to year comparison of groceries, or dining out, or vacation, or whatever.
I’d say that our biggest individual expenses are health costs (insurance, HSA savings, and out of pocket). housing, retirement savings, and income taxes.
Without moving house, housing and medical costs will remain the biggest costs; I think a lot of people will find, overall, that medical costs will go up as they retire simply because of aging. Even without anything catastrophic, you’re likely to develop chronic conditions that require daily medication and more frequent doctor visits, for example.
Income taxes will certainly go down, simply due to lower income (and some of that income not being taxable). Retirement savings will obviously go down, unless you aren’t saving anything!
Other costs that will change: Transportation will potentially go down, then up; you won’t have commuting expenses, then later on you may be unable to drive, and will need to take transit, taxis etc. (partially offset by the fact that you won’t be going as many places; the in-laws went to medical appointments and pretty much nowhere else). Clothing may drop: no need to have decent-looking stuff to wear to an office (though I’ve been nearly full-time WFH for over 10 years, so I wear ratty jeans all the time; I think little will change there!). Food costs may go up (you may need more convenience / prepared foods, and/or use grocery delivery versus shopping in store).
Don’t know what the figure is in Switzerland, but according to this article, 63% of American homeowners over 65 have paid off their mortgage.
I don’t like debt, but other people are okay with it. If your interest rate is significantly lower than, say, the average stock market return, then it probably makes sense to invest rather than pay down your mortgage. I wouldn’t, but obviously others would.
Yeah - paying off the mortgage is like getting an automatic x% return on your money… but as noted, if it’s that much less than the average stock market return, it may not be the “right” answer.
On the other hand, the cash flow improvement by no longer having a mortgage payment (though you do still have to put aside money for taxes and insurance) can be huge.
Our mortgage is < 3 %, because we refinanced when rates were insanely low. Our car loan is just over 2%. While we’re prepaying a little on each, there are other bills that are more urgent to pay down - during the supporting-the-parents stage, our cash flow was… sub-optimal and we built up some credit card balances, which we’re shaving down as fast as we can.
I could look into a re-cast of the mortgage, which is something I had not even heard of until a year or two ago. Basically you make a one-time large-ish payment, and they recalculate the mortgage payment. e.g. if your monthly bill is 2,000 a month, and you pay 40% of the oustanding balance, your new payment would now be 1200 a month, That would free up some cash flow, but then we’d have to come up with that one-time cash!
I’ve been reading articles online, including “how to retire with 500K” and they make the point that if you look at how much you could take out at the 4% rule of thumb, that 500K would last you 25 years with no growth, longer if it grows. That’s 20K a year. If that, plus whatever you get from Social Security / pensions is enough, then you’re solid.
I also learned the term ALICE today. Asset-Limited, Income Constrained, and Employed. A lot of people approaching retirement age will fall into that category.
According to this article (gift link), only 36% of Swiss own their own homes, rather than renting, because houses are so expensive to buy there. That may explain, in part, why @Die_Capacitrix says many never pay off their mortgages.
You should also take into account that the interest may be tax-deductible, meaning that the effective rate is lower than the nominal rate.
At my age the senior ones are all I could keep up with.
That’s why we kept our mortgage. But when the tax law change made our interest payments not hit the standard deduction, we paid it off. Our mortgage was fairly small, though.
This week I’ll have made 4 doctors visits and a stint in the ER Sunday night/ Monday morning. Thanks to Medicare and good Medigap coverage, my only outlay was $15 for 3 months of a new prescription. We do pay Medicare every month, but that is a controlled expense. In the eight years I’ve been retired our outlays are smaller in general than when I was covered by my very good work insurance. And we’ve had plenty of procedures. I could list them but the board only has so much storage.
I’m glad I retired before I read this thread - I’d be too scared to do it otherwise.
And this is the ongoing debate between me and my husband about paying down our student loans. He favors investments, I favor paying them down. He’s mostly got his way. And I can’t deny our money is growing so maybe he’s right. But that $1,000/month in student loan payments is quite a cash flow problem, plus I just, I hate debt.
We also live in the DC area, with our house paid off. I have a pension coming, which will cut into my SS due to the windfall provision. I get to keep my current insurance, which I’ll do until I qualify for medicare. At that point I’ll switch that insurance to Medigap. There will be the option of selling our house at a huge profit and moving somewhere less expensive (which shouldn’t be that hard considering where we live). I also don’t plan to completely stop working for a while, and my wife (who is self-employed and works part-time) is of the mind she’s never going to retire until she can’t physically do massages any more. Even with selling the house we’d still fall short of a million unless the rail station scheduled to open in 2027 really jacks up what we’re able to ask.
Due to the imputed rental value, it is often beneficial to keep a mortgage in Switzerland.
I think interest-only mortgages are uncommon in the U.S. When we first bought our place, we had two mortgages - one that we paid off, so that we paid ⅔ of the purchase price. The other mortgage is for ⅓ of the purchase price.
We may end up doing that someday. But for now, the mortgage stays, and it’s included in the calculations for retirement.
People will do something similar here - one loan to cover 80% of the purchase price, and another to cover whatever the remaining amount is; this lets people with lower down payments get into a house, without paying PMI (private mortgage insurance) on the whole thing. The idea is, you try to pay off the smaller one sooner, or at a minimum, you’re only paying PMI on that part.
Interest-only is not unheard-of, but it’s not that common either. You’ll hear of people having a balloon payment after 5-10 years of paying just interest, and it can be painful.
Another fun option, that tends to be more popular when housing prices are insane and/or interest rates are high, is negative amortization. As in, your loan payment DOES NOT COVER THE INTEREST. So every month, your balance goes UP. I think typically your payment increases every year for several years until it does cover the whole interest amount. Again, a trick that has been used to get people into houses when there’s an expectation that prices will continue to soar and they expect to sell within a couple of years, or just that they could not afford otherwise.
As far as the tax deduction: It’s only recently where it was not even close to being worth itemizing. Several years back, TurboTax recommended the standard deduction - and indeed, itemizing lowered our refund. But it RAISED our state refund enough to more than make up for it. The past 2 years, the standard deduction was much, much better than itemizing.
It would be nice to have the place paid off - but right now, escrow (taxes and insurance) are 40% of our monthly payment, so it wouldn’t make that much difference - which is shocking; I never looked all that closely at it, but this thread is making me check a lot of things.
The so-called “piggyback mortgage.” I had one myself for my first home purchase. I’m pretty sure that is a financial tool that largely went the way of the dodo for most borrowers in the US after the subprime mortgage crisis. At least how we did it, which was literally as a ‘no money down’ 80/20 split. All we ponied up for was closing costs. We did fine (and later re-financed into a proper consolidated mortgage), but those kind of creative schemes came to be regarded as bad juju by lenders and their government regulators.
It’s interesting. For my wife and I. We started working for a County Gov 32-35 years ago, and instead of putting money into SS, it was invested by an elected board of people that also work for the county . No money was paid into SS. Two counties in Colorado did that. Some special program.
We will get a pittance from SS. But we do have 3 million to do what we please with. House is paid off long time ago. We don’t have to count on SS solvency. Or goofy new rules. It’s our money.