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Thread: Preparing for Retirement

  1. #1
    Join Date
    Jun 2011
    Location
    The Free Zone
    Posts
    5,303

    Default Preparing for Retirement

    Well I'm about 5 years out from making that transition.
    Currently renting with zero debt and excellent credit.
    Savings is good, but not spectacular.
    I know living on SS is nearly impossible.
    But would like that as a target with savings as a safety net.
    Don't have enough cash to buy a house outright.
    So I'm thinking with maybe two years of work left - buy a small (no HOA) home with a large down).

    Any sage advise from the board on the Good the Bad and the Ugly of retirement?
    Landmines I don't want to step on?
    Unconventional winning strategies.
    Not self-apparent things to consider?

    Thanks in advance,
    Barth

  2. #2
    Join Date
    Jun 2014
    Location
    Austin, Texas
    Posts
    935

    Default

    Consider acquiring your own home at a price similar to your rent. You are protected somewhat from mortgage increases unlike annual rent changes. A owned home helps with taxes and is yours to change as you like.

  3. #3
    Join Date
    Sep 2009
    Location
    Bowling Green, Virginia
    Posts
    3,067

    Default

    My first thought was that having a new mortgage while living on social security would be quite a challenge. However that really depends on the cost of housing where you live, so that's hard to calculate. When we retired (in 2016), we downsized our dwelling and eliminated the mortgage. We live in a high housing cost area (Washington D.C. suburbs). Without doing that we would be in a much more precarious financial position. A mortgage would be a drain we could not easily afford on our social security and IRA withdrawals. Our early social security benefit only accounts for about 30% of our preretirement income. I'd advise you do the rent versus buy math to see where you stand. I personally would always advise buying but usually predicated on being during ones working years.

    If you don't already have a IRA or Roth IRA I'd say open one and put away as much savings as possible. Five years isn't a long time to save but it's better than nothing. The tax advantages make these better than simple savings. We currently live on about 87% of our preretirement income, which leaves a comfortable buffer against monthly expenses. On social security alone we'd be underwater. I'm assuming you are 62 or 63 years old. This means you'll need to calculate your financial needs out for another twenty years or so. This means factoring in home repairs, new vehicles and other larger purchases.

    Factor in your medical costs. Medicare currently costs $134 per month and that comes directly out of your social security payment. Supplemental plans cost from less than $100 to over $200 per month. You didn't mention any company retirement benefits so I assume medical plans will be a do it yourself endeavor.

    Not knowing more about you makes it hard to give suggestions, only you know your annual expenses, but I'd advise you do some serious and realistic financial planning.
    Judging by today's left wing, looks like Senator Joe McCarthy was right after all.

  4. #4
    Join Date
    Sep 2009
    Location
    Bowling Green, Virginia
    Posts
    3,067

    Default

    Quote Originally Posted by CPTKILLER View Post
    Consider acquiring your own home at a price similar to your rent. You are protected somewhat from mortgage increases unlike annual rent changes. A owned home helps with taxes and is yours to change as you like.
    The new tax laws may make moot any tax advantage. Depends on the amounts involved, but the interest and taxes would have to exceed the new $12,000 (single) or $24,000 (joint) exemption . There are limits on the deductions to consider as well. For most people the new tax laws change these equations... to the good for most people but not for everyone.
    Judging by today's left wing, looks like Senator Joe McCarthy was right after all.

  5. #5
    Join Date
    Jan 2016
    Location
    wisconsin
    Posts
    405

    Default

    Large down payment is not descriptive, but I would suggest no more than a third down and hang on to your investments. The rates are low and you can probably make more on your money than the interest you would pay. My best advise though is to consult a professional financial advisor not a bunch of gun nuts on a web site. Me included.

  6. #6
    Join Date
    Apr 2013
    Location
    Wisconsin
    Posts
    4,310

    Default

    Maybe the unsuggestable......sell some toys and start saving.....housing costs are starting to come back down. Owning versus renting was always a no brainer for me. You'll have lots of time on your hands, time to make purchases. That's the ugly side.

  7. #7
    Join Date
    Jun 2015
    Location
    High Plains Drifter, stuck in a Lowland swamp called California
    Posts
    957

    Default

    Things worked right for me, in a way. My dad passed away from cancer in 1993 and left me a small inheritance. I payed off all my credit cards and purchased a home for 135,000.00...VA, no down.

    I retired in 2003 at age 50 and started a second career at a local gun club. Just recently retired from there after reaching 62 with 12 years. My home is worth almost 400,000.00 now and my mortgage payments are lower than local apartment rentals.

    I owe it all to my dad. When our house was being built, I placed a time capsule in a corner stone with my dads pic, a letter about him and us along with a few other items. We are debt free, the mortgage is almost paid and my savings is there for emergencies.

    That being said, I'd rather have my dad back. He died young, 57, just when he should of been in your shoes, thinking about retirement.

    Money isn't everything and if I could go back and do it again, hopefully I'd get it right the second time around.
    27 years in a Federal Penitentiary
    6x8 double bunked rooms with toilets

  8. #8
    Join Date
    Feb 2010
    Location
    CA
    Posts
    4,035

    Default

    i can tell you a lot about what not to do.
    1. I retired with a buy out and with a lot of "sage advice" invested it with a major broker Smith Barney. The market took several dumps and wiped out most of the balance and it was impossible to recover from that hole. Keep in mind to recover from a 50% loss you need a 100% gain. Had I put it all in long term savings bond which had a very high interest then (1994), I would be fine. So, my advice is to be conservative in investing.
    2. We looked ok for a while then my wife was diagnosed with a long term incurable nero-muscular disease which is slowly winding its way to near total paralysis. You can't plan for that and the meds and medical ould have bankrupted us early except for insurance Rx and Medical (medicare Part F). So make sure you have good medical insurance.
    3. Start adjusting your life style to a slimer model. Less entertainment, trips, etc. Of course this is predicated on a slim income in the future. Do the math on inflation: My medicare has increased a total of about $100/mth in the last 15 years. Food has increased about 300%. Used to fill a couple baskets a month at Costco, now less than one.

    You're starting very very late but you can do it if you plan for it. Good luck!
    "Everything will be okay in the end. If it's not okay, it's not the end." - O. L.
    "America's not at war; her military is. America's at the mall."

  9. #9
    Join Date
    Mar 2010
    Location
    Northwest
    Posts
    1,284

    Default

    Hard to answer not knowing if you live in an area with high cost of living and tax burden, and plan to stay there upon retirement or move to area with lower costs.

    Either way I'd say buy a house now, not for the tax deduction, but as an investment.
    Yes, house values dropped in 2008 but have rebounded... just like any other investment, it's the timing.
    If you're forced to sell in a down market, you will buying in the same down market, unless you buy in a different area, same goes for an UP market, so any gain/loss is just funny money...
    jmo
    I apologize if my post contains the same or similar information as someone who has posted before me.


  10. #10
    Join Date
    Jan 2016
    Location
    wisconsin
    Posts
    405

    Default

    SS does not keep up with inflation. Several times the SS increase was equal to the medicare increase. If you like what you are doing and are well paid you might want to consider working longer. Sitting home on the porch waiting to die will not be much of a retirement. My retirement would suck if I had to live on ss.

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