How the hell are we supposed to retire?

Mahnken said:
100 years ago there also wasn't tons of shit to spend your money on with advertising that aims to rip your money away and phone bills and cable bills and internet and bikes that cost a months salary. There was just saving money, lol.

I completely agree with not living on credit. Spending money you don't have spirals out of control really fast. I just feel people should be making more money. If you're busting your ass for 40+ hours a week, you should have a decent life, and retirement. And I love high taxes for people that make a lot of money. And I want socialized healthcare.
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Most of those dumb expenses are easier to control now. Food, travel etc was such a huge part of a person's budget 100 years ago, now it's so much smaller.

All those things that you mention that now fill in people's budgets like phone bills, cable bills, bikes are easily managed. Do more with less.

You don't have to buy what's advertised. Surround yourself with good people and stay healthy.

And maybe buy an index fund. 🙂
 
roc said:
This part, I don’t get so much. Honestly, I think most people are living their lives, rich or poor, without a lot of thought on how to keep anybody down. Maybe I’m naive, or blissfully ignorant, could be, nobody ever called me the brightest bulb in the drawer.
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In the hospital there are a lot of people that make <$15/hr. And almost every one of the ones I know, who do very good jobs with patient care, scrubbing during surgeries, the EMTs, medical aids, basically people that we trust in our most vulnerable states, were getting offended at the notion of burger flippers making $15/hr for minimum wage. Because they were more trained and doing a much more important job. Instead, they should've been happy for them, and fought for them to get it, because that could only help to increase their wages. The rage is always pointed down, and not at the guy who's giving you crumbs to do a hard job.
 
roc said:
This is no doubt that kids are really expensive, but they bring a shot ton of joy also. And, at least for me, I never worked harder than when my kids were younger to try to afford to be able to do nice things for them. It really motivates you.

But, if you don’t want them, god bless you. Don’t have them. And you will definitely have more disposable income. When my kids hit kindergarten, it was like getting a 30K raise.
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Yeah more kids for you lol, zero interest for a whole slew of reasons. Getting the snip in the next year or two.

I get plenty of joy from my disposable income, ample free time and regular sleep patterns.
 
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Just to follow-up on @thegock's post.

Most of us have asset backed loans. Our homes and cars. The interest rate is low because of it.
Many people just keep refinancing to take equity out of their homes for other stuff (or lower a payment)
It isn't their forever home, so it is used like a rental - i'm never sure if that is a good idea
i didn't take equity out, got a few years left on the mortgage. Almost seemed like a reasonable savings account.
don't really reap the benefits unless you stay without a mortgage tho (i gotta think about this more - guess could go reverse mortgage)

equity market backed loans/lines are great - the interest rate is low, because the loan is from the the place where it is housed - and they lock it up so it can't be sold by the owner,
and they will call the loan or sell the stock if certain ratio of debt to asset isn't maintained. the required ratio is way higher than a home equity loan.
might be able to borrow 60% at sub 2%. Interest is not tax deductible. And as mentioned, the equity can be used to satisfy the loan upon death.

So where might we have unsecured loans? - well credit card debt is not secured. That is why it is 12% -> 30% with huge penalties when late.
Overdraft protection? 10% usually - but you need to be a good bank customer.

My credit card gives me 1% cash back, so I put quite a bit on there, but pay it off monthly.
If i need to spread something out, paypal credit is a nice way to do it. 6 months interest free if paid off, and met monthly minimums.
good deal.
 
Patrick said:
Just to follow-up on @thegock's post.

Most of us have asset backed loans. Our homes and cars. The interest rate is low because of it.
Many people just keep refinancing to take equity out of their homes for other stuff (or lower a payment)
It isn't their forever home, so it is used like a rental - i'm never sure if that is a good idea
i didn't take equity out, got a few years left on the mortgage. Almost seemed like a reasonable savings account.
don't really reap the benefits unless you stay without a mortgage tho (i gotta think about this more - guess could go reverse mortgage)
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We have to discuss this with our CFP - we are approaching a ridiculous level of home equity value. At what point is it too much?
 
rick81721 said:
We have to discuss this with our CFP - we are approaching a ridiculous level of home equity value. At what point is it too much?
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Your homes current value or just having the home paid off?

Genuinely interested in your perspective, we come from renting our whole lives and home equity for us is something you don't tap.
 
Billi On Aires said:
Your homes current value or just having the home paid off?

Genuinely interested in your perspective, we come from renting our whole lives and home equity for us is something you don't tap.
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Renting works if you are a diligent saver. It is cheaper, with the understanding the rent will go up. But so should your salary.

With a fixed mortgage, as salary goes up, the mortgage payment may become relatively small. And also act as a savings account.

One thing Rick might do is takes money out in a way that matches his fixed income stream. Then that money becomes part of his investment stream. Hoping the property + investment appreciates faster than the cost -an interest only loan probably. Mighty be a risk worth taking. One is linear, the other is exponential.
Like the saying goes, it takes money to make money. Even better if it is borrowed

Need to stay cash flow positive.

I dont think I like the idea tho. But he is playing with a safety net
 
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Patrick said:
Renting works if you are a diligent saver. It is cheaper, with the understanding the rent will go up. But so should your salary.
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Renting vs saving always came down to a lifestyle choice for me. The flexibility of renting was nice too...though moving got old after the 3rd time in 3 years.

We're very happy with our home and will probably be here for a long while so the decision was pretty easy financially. Even refinanced last year to a sweet 2.75% APR. According to Zillow we'd net $100k+ after only 3 years here after closing costs/commission/whatever.
 
There are two problems with using home equity as an ATM. First, you extend the life of the mortgage(s). You can turn a 15 year mortgage into a 25 or even 35 year one by refinancing. Some people say "So what? I will always have a mortgage." I think they sell themselves short. Having the mortgage disappear coincide with having your income reduced (retirement) is a good plan.
The second problem is a bit more arcane, but Patrick alluded to it. Home equity is a form of savings. But when you make mortgage payments, the early payments are mostly interest and a bit of principal. The latter payments are the reverse: a bit of interest and mostly principal. The savings happen slow at first and fast towards the end. Refinancing gets you back to paying mostly interest, which means paying less principal, which means less savings. Yes, there may be lower interest rates out there luring you to refinance, but you may have been mostly done paying interest. At some point, you are mostly paying yourself no matter what the interest rate is.

It is important to balance monthly payment, total payments over the loan(s), and timing the paid off mortgage date with the reduced retirement income date.
None of this is hard. None of it is fun.
 
cassinonorth said:
Renting vs saving always came down to a lifestyle choice for me. The flexibility of renting was nice too...though moving got old after the 3rd time in 3 years.

We're very happy with our home and will probably be here for a long while so the decision was pretty easy financially. Even refinanced last year to a sweet 2.75% APR. According to Zillow we'd net $100k+ after only 3 years here after closing costs/commission/whatever.
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I wouldn't rely on Zillow's current numbers. They seemed to have jacked up everyone's numbers after they started buying up real estate.
 
Bike N Gear said:
I wouldn't rely on Zillow's current numbers. They seemed to have jacked up everyone's numbers after they started buying up real estate.
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Based on real world numbers, it's actually super low. Half our neighborhood has sold in the last 2 years...all the 3br/2ba are in the $490k range and Zillow has us at $440k and our home is more updated. Very relevant though:

www.cnn.com

Zillow slams the brakes on home buying as it struggles to manage its backlog of inventory

Zillow will stop buying homes through Zillow Offers for the rest of the year, as the company's iBuying program goes from full speed to full stop.
www.cnn.com www.cnn.com
 
That is actually Zillow's big flaw. They don't know if you put a $750k kitchen/fam/bathroom improvement on the house so they might underprice by 33%.
 
Fire Lord Jim said:
Refinancing gets you back to paying mostly interest, which means paying less principal, which means less savings. Yes, there may be lower interest rates out there luring you to refinance, but you may have been mostly done paying interest. At some point, you are mostly paying yourself no matter what the interest rate is.
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That's a good point but easy to compensate for. I didn't do it the first 2 times but the last time we refinanced, I set up autopay to add a principal payment that got us on the same path to payoff. We've never taken any money out of our house (which always surprised lenders) and our mortgage including taxes is $500mo less than it was 21 years ago when we bought this house.

@rick81721 makes a good point about too much home equity. I have no idea what the right plan is but using a home equity loan as part of your 'income' could be a good way to avoid some taxes on IRA distributions (although my accountant says the IRS is a little more strict these days about what you use that money for). It's the peasant equivalent to billionaires taking big loans against their assets.
 
thegock said:
That is actually Zillow's big flaw. They don't know if you put a $750k kitchen/fam/bathroom improvement on the house so they might underprice by 33%.
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but you would know that and turn down the offer from them. . . . and then explain why and see if they come up.

or are people just in such a hurry to sell that they dont use common sense?
 
Ok, no spreadsheets involved, but I don't consider raising our two kids expensive. Plus, I got to learn Dad skills, like turning lights off all around the house.

Never really considered pulling out equity value either, and now that we are back to dual income, SWMBO has a huge list of "is this our forever home" updates. We'll see how we balance that...
 
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