Thinking...thinking...
Aug. 24th, 2006 05:50 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
ksmithNext week, I'll be attending an in-house retirement workshop. I'll bring all my statements and a monthly budget and calculate how long the money will last before Under the Bridge becomes more than a cool song by the Red Hot Chili Peppers.
I have purchased a couple of retirement books that claim to support the concept that you don't need to have saved enough to supply 120%+ of your current income, that 70-80% may be sufficient. The problem is, the scenario they discuss to death and beyond is one that doesn't apply to me. They assume that you're part of a couple who at some point bought a Very Big House on one of the Coasts, and that as the kids have flown and retirement nears, you will sell that house, recoup appreciation sufficient to provide almost half your retirement income, then move to a less expensive part of the country, buy a smaller, much less expensive house, and invest the money leftover.
Well. I don't live in a particularly inexpensive part of the country, but I live in one of the cheaper areas in the county. I bought the home I could afford 19 years ago, a late 60s shoebox ranch with tiny everything, but with a decent sized lot and lots of mature trees. My mortgage payment including escrow account is now 12% of my gross. IOW, I've already scaled back the living quarters. I missed the MacMansion housing boom.
But it may not have hurt me as much as I feared. Now retirement advisors like this guy (WSJ article--may require registration) are suggesting that buying smaller right off the bat and investing what you would have otherwise thrown at the mortgage may be the better option.
The bottom line: Unless you lose nearly half your investment portfolio to taxes, the small-house strategy wins hands down. And, of course, the margin of victory would be even larger if we use more realistic assumptions.
So, I feel better. For now. Until some genius comes along and starts telling people that you need 300% of current income because of the economic downturn that is going to occur Any Minute Now.
I just wish I lived in a prettier part of the country. I would like to take the house I have and make it the smallest house on the block in Portland Oregon or Madison Wisconsin or Tacoma (couldn't afford Seattle) Washington.
I have purchased a couple of retirement books that claim to support the concept that you don't need to have saved enough to supply 120%+ of your current income, that 70-80% may be sufficient. The problem is, the scenario they discuss to death and beyond is one that doesn't apply to me. They assume that you're part of a couple who at some point bought a Very Big House on one of the Coasts, and that as the kids have flown and retirement nears, you will sell that house, recoup appreciation sufficient to provide almost half your retirement income, then move to a less expensive part of the country, buy a smaller, much less expensive house, and invest the money leftover.
Well. I don't live in a particularly inexpensive part of the country, but I live in one of the cheaper areas in the county. I bought the home I could afford 19 years ago, a late 60s shoebox ranch with tiny everything, but with a decent sized lot and lots of mature trees. My mortgage payment including escrow account is now 12% of my gross. IOW, I've already scaled back the living quarters. I missed the MacMansion housing boom.
But it may not have hurt me as much as I feared. Now retirement advisors like this guy (WSJ article--may require registration) are suggesting that buying smaller right off the bat and investing what you would have otherwise thrown at the mortgage may be the better option.
The bottom line: Unless you lose nearly half your investment portfolio to taxes, the small-house strategy wins hands down. And, of course, the margin of victory would be even larger if we use more realistic assumptions.
So, I feel better. For now. Until some genius comes along and starts telling people that you need 300% of current income because of the economic downturn that is going to occur Any Minute Now.
I just wish I lived in a prettier part of the country. I would like to take the house I have and make it the smallest house on the block in Portland Oregon or Madison Wisconsin or Tacoma (couldn't afford Seattle) Washington.
no subject
Date: 2006-08-25 01:39 pm (UTC)no subject
Date: 2006-08-25 01:46 pm (UTC)I *think* the guy's name was Jonathan Clemons. Please let me know if that's not right. I saved the article on the home desktop, so I'd be able to get you the info later today.
no subject
Date: 2006-08-25 03:07 pm (UTC)For non-subscribers, I often have pretty good luck searching on the title and then finding a non-subscription place that reprinted it (or that Google cached).
no subject
Date: 2006-08-25 03:18 pm (UTC)no subject
Date: 2006-08-25 08:05 pm (UTC)no subject
Date: 2006-08-25 08:12 pm (UTC)