OT : How much $ for retirement

[Smiley]

Seriously , aside from a paid off house, how much do you guys and gals feel you need in savings at age 62 to retire comfortably. I may direct this question to those of you there already ( Dave Thompson ) or those of you close that have this figure in your mind. My accountant vacilates on this amount, years ago he said 1.2 mil for a single guy and 1.6 mil for a couple. Now he says 2.0 mil for a couple at age 62. Looks like I'll be working for awhile longer, much longer.
I don't like to figure my home in this equation since it looks like property is going up everywhere around me. Looking to see if you all ponder this question like I do. Social security , whats that ?

Hors Categorie for sale $ 500 K , serious inquiries only

[Dr. Doofus]

oh man

doof put off the full time paycheck until 34.

so

doof gets 2,800 a month after taxes

splits 1,000 between the mutual fund and the savings

whats left goes to gas and food and bikes and crap

good thing doof has no kids

doof will probably teach until 60

then become and slow but crafty messenger

[SGP]

just bought my first lotto ticket. we are all set. ;)

[Kevan]

held this thread for mid-January so we could really get depressed.

[djg]

Let's see, if all goes well, I'll have the last two kids going into their last years of college when I'm 62. Retirement is likely to wait a bit.

I think that the two million figure sounds about right to me. In this area, it's hard to know what to think about house values. A retiring couple could well cash out and move into smaller and still comfortable lodgings, folding home equity into retirement savings. On the other hand, if the bubble ...

[JohnS]

I think that $2mil is a bit much, but then I don't know your lifestyle. $2mil would allow you to withdraw $100,000 a year and have it last until age 82. That's not accounting for the gains that the unwithdrawn money would be still earning. Also, you have to factor in what you'll be getting from Social Security.

[rePhil]

Great question. I think a lot depends on the lifestyle we choose to live. We have always lived modestly with one eye towards the future, gambling a bit on the fact I get a pension and I am working towards a another smaller pension. Though there are no guarantees these look to be stable.
My personal gold mine / bike funds are from my wife who will get a nicer pension check than me. Luckily for me she is generous, kind, and shares.
No mortgage and the monthly pension incomes will hopefully leave the 401's and other small investments to the kids.

So does a monthly check equal having a lump sum in the bank?
And how flawed is the logic of adding up yearly expenses, figuring some inflation and comparing that against the monthly income? We have talked to a few advisors but keep coming back to our lifes plan: Simple, modest, live within the boundaries of our income.

[Climb01742]

one unknowable variable is a serious illness requiring hospital care. that can wipe out what would have been a nice nestegg. also figure in cost-of-living where you'll be living once retired.

if you have $2mil, and can get 6-10% return (especially in states with no state income tax), you may be able to live off the interest/investment income indefinitely, barring health issues or small expensive german sports cars. ;)

[spiderlake]

I also use the 2 million threshold as my progress indicator. Once I get 2 Mil in the bank (401k, mutual funds and the like) them I'm out. I'll definitely quit my current career track and try out something else at that point. Might not work at all. I have a friend who "retired" at the age of 32 with only 700k in the bank. He and his wife moved to Mexico and seem to be living a great life. They have a house and also bought a condo in Puerto Vallarta (spelling??) that they rent out on a weekly basis.

My only uncertainty is healthcare expenses. I work for a health system and they have a great benefits perk for retirees (discounted health insurance) but I'd have to work there until I'm 62. Frankly, I don't want to work that long!! My wife is a pharmacist and also has a great job with awesome benefits. Same thing applies with her though - gotta retire at 62 or later to get the extended benefits. Hmmmm, I wonder if I can convince her that she should keep working while I bail out early?!?!!? : )

[flydhest]

No mortgage and the monthly pension incomes will hopefully leave the 401's and other small investments to the kids.


Wow. I keep telling my parents over and over, spend my inheritance on yourself. They gave me a good upbringing, instilled respect for hard work and education. I'm all set. I hope when they finally pass away, it is in peace and with $0 in the bank.

That said, a parent's love for their children is often without bounds and "sacrifice" isn't a sacrifice. They're lucky to have such parents as you.

[rePhil]

, I don't want to work that long!! My wife is a pharmacist and also has a great job with awesome benefits. Same thing applies with her though - gotta retire at 62 or later to get the extended benefits. Hmmmm, I wonder if I can convince her that she should keep working while I bail out early?!?!!? : )


My wife says she can't bear the thought of going to work each day while I am home having "fun" So she has inserted a clause into my contract to where I have to work until she retires...2 years and 354 days to go...yippee.

I think we all agree health is a huge factor.

[slowgoing]

[QUOTE=Climb01742]one unknowable variable is a serious illness requiring hospital care. that can wipe out what would have been a nice nestegg. [QUOTE]

Not just hospital care; non-medical custodial care (eating, bathing, etc.) isn't covered by most insurance policies. Right now I'm paying for custodial care for one relative and a home for another - equivalent to a Serotta or two a month.

[spiderlake]

I have a feeling my wife has already inserted similar language into my contract. We both use the quote, "I don't know what I want to be when I grow up" so are both looking forward to digging into a new career/profession in the coming years.

Only two more years?? I just got sick to my stomach!! Add 22 years to that number and that's where I'm sitting.

Maybe we'll have a national healthcare system by then?? Or at the very least, affordable healthcare! ; )

My wife says she can't bear the thought of going to work each day while I am home having "fun" So she has inserted a clause into my contract to where I have to work until she retires...2 years and 354 days to go...yippee.

I think we all agree health is a huge factor.

[davids]

I wish I'd started serious savings earlier, but we put a good bit aside each year now - $7,200 into "mid-term" savings, for cars and big events (the Bat Mitzvah approaches...), $4k into Roth IRA, $8k into deferred comp, and $5,600 into a 529 for our daughter's college. We also use a Fidelity 529 MasterCard that's good for another $1k per year there. All that is in addition to the automatic weekly pension fund contributions both of us make.

We've got just over $335k saved right now. If that doubles every 7 years, we're at $2.7 mill at the age of 66. So, we'd be close to the $2 mill mark at 62.

Also, both my wife and I are public employees and (as I tell prospective staff all the time) MA/Boston's retirement plan is a bonanza if you stick it out. The longer I stay, the more incentive there is to stay. Fully vested, I'd get 80% of my salary!

I'm pretty sure that both my wife and I will have decent inheritances, but we're not counting on a penny in our planning. If we're flush as seniors, I hope to be able to make things easier for my daughter as she struggles with her own financial life. Of course, maybe she'll strike it rich on her own...

Finally, I expect my expenses to drop a lot from where they are now - I'm paying almost $20k/year for my daughter's education, and I don't see that budget number moving to the 'new bike' column! Of course, then there's the potential for a second home, travel, etc. that we couldn't begin to pay for now.

I think that I'm in good shape, but I have to admit that I haven't tried to assemble all the peices lately to be sure!

[SGP]

Actually, our plan involves having our mortgage paid off, being healthy enough to be active and enjoy our selves and not to be dependant on huge amounts of prescription drugs. :beer:

[Dekonick]

I wish I'd started serious savings earlier, but we put a good bit aside each year now - $7,200 into "mid-term" savings, for cars and big events (the Bat Mitzvah approaches...), $4k into Roth IRA, $8k into deferred comp, and $5,600 into a 529 for our daughter's college. We also use a Fidelity 529 MasterCard that's good for another $1k per year there. All that is in addition to the automatic weekly pension fund contributions both of us make.

We've got just over $335k saved right now. If that doubles every 7 years, we're at $2.7 mill at the age of 66. So, we'd be close to the $2 mill mark at 62.

Also, both my wife and I are public employees and (as I tell prospective staff all the time) MA/Boston's retirement plan is a bonanza if you stick it out. The longer I stay, the more incentive there is to stay. Fully vested, I'd get 80% of my salary!

I'm pretty sure that both my wife and I will have decent inheritances, but we're not counting on a penny in our planning. If we're flush as seniors, I hope to be able to make things easier for my daughter as she struggles with her own financial life. Of course, maybe she'll strike it rich on her own...

Finally, I expect my expenses to drop a lot from where they are now - I'm paying almost $20k/year for my daughter's education, and I don't see that budget number moving to the 'new bike' column! Of course, then there's the potential for a second home, travel, etc. that we couldn't begin to pay for now.


I think that I'm in good shape, but I have to admit that I haven't tried to assemble all the peices lately to be sure!

Sounds like you have all of the bases covered!

We decided to take a hit and have my wife stay home to raise the little critter...We still try to save ~8k or so a year between defered comp, and lil buggers college fund...

I hope this investment pays bigger dividends than having her work to sock more away to reach 2M. We shall see...

[SoCalSteve]

With the price of housing in Los Angeles going up and up (my home is worth double what I paid for it 3 years ago) I hope to use the reverse mortgage system to have my house help pay for my retirement while I'm still living in it.

With that, my Teamster pension and hopefully Social Security, I am hoiping to be OK for my twighlight years.

Any comments?

Steve

PS: I have no children, so, no wories about them getting any inheritance.

[Bruce K]

There are long-term health care policies to help with nursing home care, etc.

Dad didn't have one of those, but he had planned well.

I am getting quite the estate planning lesson as I see how well Dad and his advisors planned everything out.

Life insurance policies are taxable under the estate unless they pay into a trust set up to pay estate taxes.

The best advice, get a GOOD estate planner / tax lawyer and figure it out with him.

BK

[JohnS]

WOW! I can live a LOT cheaper than most of you!

[weisan]

Wow. I keep telling my parents over and over, spend my inheritance on yourself. They gave me a good upbringing, instilled respect for hard work and education. I'm all set. I hope when they finally pass away, it is in peace and with $0 in the bank.

I have been preaching the same sermon to my parents since high school. I think they finally got the point. :D

Retirement is not just $$. What one do with their time is far more important.

[davids]

We decided to take a hit and have my wife stay home to raise the little critter...We still try to save ~8k or so a year between defered comp, and lil buggers college fund...

I hope this investment pays bigger dividends than having her work to sock more away to reach 2M. We shall see...
To my wife's credit, she went back to school and changed careers before our daughter was born. Now she's a school nurse (summer and vacations off!) and is done with work in time to pick our daughter up after school every day! Time with kids is invaluable, and irreplaceable down the road.

And speaking of that, it's time to take my daughter to the Museum of Science. She wants to go the the Star Wars exhibit; I want to see "Wired to Win", it IMAX movie on the Tour! :D

[Bruce K]

David;

I'm jealous.

My son turned 18 yesterday. 1.5 years to go until college (I hope). But trips to the MOS are pretty well off the "to do list".

The Star Wars exhibit and IMAX movie both have sounded appealing for some time now, but 18 year old males aren't into that stuff (I guess).

BK

[zap]

Seriously , aside from a paid off house, how much do you guys and gals feel you need in savings at age 62 to retire comfortably. I may direct this question to those of you there already ( Dave Thompson ) or those of you close that have this figure in your mind. My accountant vacilates on this amount, years ago he said 1.2 mil for a single guy and 1.6 mil for a couple. Now he says 2.0 mil for a couple at age 62. Looks like I'll be working for awhile longer, much longer.
I don't like to figure my home in this equation since it looks like property is going up everywhere around me. Looking to see if you all ponder this question like I do. Social security , whats that ?

Hors Categorie for sale $ 500 K , serious inquiries only


If you have no pension, I'd say your accountant has it right. But it's not unreasonable to factor in reverse mortgages.

Moving to Mexico or Canada (warmer 7 months) can also work to lower some expenses.

[93legendti]

The following is all general advice, not knowing tax bracket, age, children, value of home, net worth, and based upon Michigan's real estate climate,
etc...

The best advice for this mortgage rate climate, for most situations and most people is to take out the biggest mortgage you can, for as long as you can, with as few points as possible. The "pay off your mortgage" philosophy stems from Depression era thinking when mortgages were callable for no reason and interest rates were much higher than today's historically low rates. Given today's rates, the historical return of the stock market, the tax rate on investments and the deductibility of mortgage interest, your home equity can be the most powerful tool you have in retirement. I deliberately mortgaged my free and clear home 9 years ago so I could use the money to make money. This allowed me to retire 5 years ago. I (legally and safely) consistently beat the rate of my mortgage by 12-16%. (How I do that is a topic for another long OT thread...)

Your home, in many ways, is your safety nest. What if you need money in the future for an unseen predicament? Since the best mortgage rates and loan amounts are dependent upon ideal real estate conditions and income, waiting to mortgage/sell your home in an emergency is not ideal--because rates and/or the real estate market could be against you when you need money from your home most. And, with no steady work income, you will not be able to get the best rates. Since the money you borrow against a home is also dependent upon the appraised value, even if you do not need to sell your home in a fire sale (with 6% broker fees), you still might be borrowing at
less than 100% of your home's ideal value and at a rate of 8-9%. If you feel today's market conditions and mortgage rates are as good as they will be for a long time, now is the time to borrow.

If you are really close to paying off your mortgage and rightly or wrongly feel uncomfortable with a mortgage, take out the biggest home equity line you can--the type that you only pay interest on when you write a check against the equity line. That way in an emergency you can write a check for (depending upon the value of your home) hundreds of thousands of dollars and have the money within 1-3 days! If your home goes up in value you can generally increase the amount of your equity line for ~$500--representing new app. fees and an appraisal.

[Serotta PETE]

Smiley, come on down and we can discuss over some RED. We might even be able to get Flydhest here....and the Dr. (how about SANDY!!!)

You all have a good holiday!!!

As to retirement - - I have been in it for 4 months now. WE can discuss what is needed BUT the net answer is "what do you plan on spending???".

I know many folks who have saved and now have quite a pile of $$ (No not me) but still can not brake the habit and spend - EVEN thought they can!!!.

The easy formula is take what you think you need to spend to live and play where and how you want. That tells you the amount on an annual/monthly basis is needed.!

you Will need to factor in inflation to some extent over 2o years at least

Figure 6-8% realistically return on your investments on an annual basis at best. (Unless inflation or luck chages drastically)

Mix it all together and that is what you need >> WSJ had a good article on it a week or two ago.

[Ozz]

With the price of housing in Los Angeles going up and up (my home is worth double what I paid for it 3 years ago) I hope to use the reverse mortgage system to have my house help pay for my retirement while I'm still living in it. .
Just don't outlive your reverse mortgatge. "93LegendTi" offers some good info on this....

With that, my Teamster pension and hopefully Social Security, I am hoiping to be OK for my twighlight years.
Teamsters have a great pension plan....my sister works for the teamsters (manages retiree benefits ("Life with Dues"???)) and is retiring in a couple years cuz of the great pension. I don't think she will even be 50 yet after her 25 years.

I figure you want enough in savings, pension, Social Security, etc that will provide income comparable (75% to 100%) to what you currently earn. This is after factoring in inflation.

The number one truism with retirement savings is: You started too late.

Advice to all you young guys out there, just put something away. You think you need the money now, but you really don't. You will adjust your lifestyle to what your paycheck is. If your company offers a 401(k), at least put in enough to max out the company match if it is offered. That is free money. Take it.

Also, be nice to your kids so they put you in a good home. ;)

[Ken Robb]

I don't want to argue with any of my pals so let me just comment that there is certainly a wide disparity of opinions as to how to safely and comfortably manage one's finances. The "experts" whom I have consulted think the very high returns in last 8 or so years won't recur in the forseeable future and that I should figure on no more than 7% return in a portfolio designed to be safe enough for me at 62 years old.

In my 33 years as a real estate broker specializing in expensive homes I have seen quite a few forced sales caused by highly leveraged owners losing jobs or experiencing less-than-hoped-for results in their investments. The good news is that in most cases their homes were worth more than they paid so if they hadn't refinanced to the hilt they had some equity to use to buy a cheaper home and/or start over.

The sad stories are the ones where people kept refinancing based on rising property values and low interst rates and spending it on luxury living only to be hit with some kind of financial and/or medical emergency. They can't pay the mortgage and they have little or no equity in their home.

And we all know that a 30 year-old needs a more agressive growth-oriented investment program than a 60 year-old. At 30 you can ride out the inevitable dips in the markets and you are probably reinvesting not spending any cash flow generated by investments. At 60 you are probably close to needing cash flow from your portfolio to replace the diminished salary or business income as you get into retirement and have little time to recoup investment losses.

[dirtdigger88]

amen Ken-

this is one time that i am glad I am still 30 years away from retirement- :p

Jason

[Climb01742]

as the population continues to age -- and boomers retire in greater numbers -- a good many pensions could vanish. the airline industry could be a precursor to many more. GM is a meltdown waiting to happen. the transit strike in NYC is, in large part, about rewriting the pension rules. sad to say but many pensions could end up being promises not kept.

[Ozz]

...And we all know that a 30 year-old needs a more agressive growth-oriented investment program than a 60 year-old. At 30 you can ride out the inevitable dips in the markets and you are probably reinvesting not spending any cash flow generated by investments. At 60 you are probably close to needing cash flow from your portfolio to replace the diminished salary or business income as you get into retirement and have little time to recoup investment losses.
Good advice Ken, but keep in mind that many of us here live pretty healthy lifestyles, and can probably expect at least another 20 or 30 years of life once we hit 60. Keeping a mix of growth stocks in your investments is still a good idea.

Plan early, review yearly. Sleep well.

[zap]

Reverse mortgages come in different flavors. If you select the correct plan and live in the house a long time, you can make out quite nicely. It's possible total payments can exceed the value of the home.

So if one owns a home with next to no mortgage, needs cash, have no income, are over 62 and plan on living in the house, a reverse mortgage might be a good bet.

As the years go by, fees will be lower as this option becomes more popular.

Check out this site. http://www.reverse.org/

But as with much in life, consult with experts. In this case, financial/tax experts. Even if your in your 20's.

[djg]

With the price of housing in Los Angeles going up and up (my home is worth double what I paid for it 3 years ago) I hope to use the reverse mortgage system to have my house help pay for my retirement while I'm still living in it.

With that, my Teamster pension and hopefully Social Security, I am hoiping to be OK for my twighlight years.

Any comments?

Steve

PS: I have no children, so, no wories about them getting any inheritance.

It makes sense to me. The only question I have about figuring home worth into one's sense of one's retirement resources has to do with the contingency of the worth of one's home. If you have a guaranteed payout from a solid bank, that income stream has a present value that may be substantial. That is, in effect, money in the bank. If you have a house that MIGHT yield a reverse mortgage if you were to negotiate such a thing at some point in the future, you have a house.

My house in suburban Washington is supposed to have appreciated by leaps and bounds over the past 6 or 7 years. On paper, I've done very nicely indeed. If I were to sell it and move to a small town in the midwest (or, cheaper still, a hamlet in Bolivia), I'd be able to buy a nice replacement home and have a pile of dough left over besides. In reality, my taxes have gone up and my house is the same as it was before. If I wish to buy another house in the DC area, or in any big city on either coast, my "profits" will be swallowed by the inflated prices of everything else. What will my house be worth when I retire? I have no idea. I don't really expect the economy or the housing market to collapse, but many in the real estate industry, and many who pay it some attention, believe that my housing market is one in which there is something of a bubble. It's not crazy to think that prices could fall, substantially, at some point or over some period of time. It has happened before--certainly, it has happened in your LA area in my lifetime. I don't think I'll get stuck. It's not crazy to think that I'll make some money. But in the meantime, I have a house and a mortage, not a payday or an annuity.

A pension also has an expected value. I'm in no position to evaluate yours, but in my book, that counts too, whatever it is.

[Ahneida Ride]

Just remember that you are dealing in FRN's, Federal reserve notes, NOT Dollars.
FRN's are nothing more then Shopping Coupons issued not by a US government agency but by a Private Central Bank.

Prices have increased by roughly a factor of 10 since 1970. :confused:

For every 1 Dollar that the Fed creates outa thin air the
banks create 9 (also outa thin air) using fraction reserve banking.
If you or I tried this, it's called counterfeiting. :crap:

It's all spelled out at the below link. .... Written by the FED TOO !!!! :banana:

Modern Money Mechanics written by the Chicago Fed (http://landru.i-link-2.net/monques/mmm2.html) ... See figure at the end of page 11.

Inflation is a tax. It is not higher prices. It is too much phony money in circulation chasing after too few goods.

Make sure you adjust for this hidden tax.

The above link is a excellent introduction to the secret world of money.

[nm87710]

a few thoughts on financial freedom:

1) never use credit - always pay in cash
2) live well below your means - retire early
3) you are the best source of income - not the stock market
4) want to be a millionaire then learn from one - not financial planners
5) time is very valuable - don't squander it working for things that don't matter

[Dekonick]

I am a millionaire! My kid is worth the world! :p

Now - where can I get 500k to buy Smiley's Hors...

Say - smiley - *POOF* here is 500k of federal reserve notes freshly created out of thin air - now fork it over!!!

[Serotta PETE]

I don't want to argue with any of my pals so let me just comment that there is certainly a wide disparity of opinions as to how to safely and comfortably manage one's finances. The "experts" whom I have consulted think the very high returns in last 8 or so years won't recur in the forseeable future and that I should figure on no more than 7% return in a portfolio designed to be safe enough for me at 62 years old.

In my 33 years as a real estate broker specializing in expensive homes I have seen quite a few forced sales caused by highly leveraged owners losing jobs or experiencing less-than-hoped-for results in their investments. The good news is that in most cases their homes were worth more than they paid so if they hadn't refinanced to the hilt they had some equity to use to buy a cheaper home and/or start over.

The sad stories are the ones where people kept refinancing based on rising property values and low interst rates and spending it on luxury living only to be hit with some kind of financial and/or medical emergency. They can't pay the mortgage and they have little or no equity in their home.

And we all know that a 30 year-old needs a more agressive growth-oriented investment program than a 60 year-old. At 30 you can ride out the inevitable dips in the markets and you are probably reinvesting not spending any cash flow generated by investments. At 60 you are probably close to needing cash flow from your portfolio to replace the diminished salary or business income as you get into retirement and have little time to recoup investment losses.

Very well put and I could not agree more....Good advice/

[Ozz]

...The above link is a excellent introduction to the secret world of money.
It's not all that secret....just that some folks don't take the time to understand it.

Deficit spending by our elected officials is what scares me...

[Smiley]

GREAT comments by all so far , I am glad I am not the only one thinking about the issues I face to get to retirement. I have no pension having worked for a small family run business for the last 28 years. I have to rely on my own savings and what ever Social Security has to offer. I started saving young but got an ugly set back during the 2000 market bust. I don't live beyond my means and like my pal Climb eluded to I am NOT a euro car guy so I won't throw my dough on a Beemer or Audi . Boats , well maybe thats another issue. I will keep reading your comments with keen interest, Yours too Anhieda Ride Man .

[Ray]

I'm 46, am temporarily retired now, and wondering how much more I'm going to have to / want to work in the coming years. We don't have quite enough put away to continue to spend at current levels into old age, but current levels include three teenagers in the house. College is paid for if they go to public schools but we'll need more money if anyone goes private. If we can get through the college years, our spending should come down quite a bit AND we can sell this crazy over-valued house, move into something smaller, and lose the house payment and pocket some additional equity as well. At which point, we should be in pretty good shape to live off the income from our investments, pensions, etc, barring total economic collapse.

What I'm dealing with is the question everyone wishes they had the luxury to contemplate - do I really WANT to be retired this early. I've been away from work since April and there are things I freaking LOVE about it, but also things I'm not too crazy about. Setting my own schedule and having total control over my time is such an amazing luxury that I may already be too spoiled to give that up. OTOH, I really miss the sense of creativity, problem solving, collaboration, and work-oriented social life that all come with a good job. I don't have a clue how to reconcile these seemingly incompatible desires. I can't have all of the good stuff about a job without, well, getting a job, which really really cuts into the free time :cool: Working for myself is a possibility, but I've always been better leading and working with a good team than as a lone wolf. Working part-time might be the ticket, but it's tough to find good part-time work that pays enough to make it worthwhile. I'm not complaining, mind you. I realize my situation is a crazy nice luxury to have, but even the best situations come with trade-offs and dilemnas.

But, in short, Smiley, there isn't a given number. It depends on how much you want/need to be able to spend in retirement, how much you expect inflation to eat into that, and how much cushion you feel comfortable with. I expect I'll have a much better picture of our situation in about five years than I do now.

-Ray

[CNY rider]

Just remember that you are dealing in FRN's, Federal reserve notes, NOT Dollars.
FRN's are nothing more then Shopping Coupons issued not by a US government agency but by a Private Central Bank.

Prices have increased by roughly a factor of 10 since 1970. :confused:

For every 1 Dollar that the Fed creates outa thin air the
banks create 9 (also outa thin air) using fraction reserve banking.
If you or I tried this, it's called counterfeiting. :crap:

It's all spelled out at the below link. .... Written by the FED TOO !!!! :banana:

Modern Money Mechanics written by the Chicago Fed (http://landru.i-link-2.net/monques/mmm2.html) ... See figure at the end of page 11.

Inflation is a tax. It is not higher prices. It is too much phony money in circulation chasing after too few goods.

Make sure you adjust for this hidden tax.

The above link is a excellent introduction to the secret world of money.


So...... is there a fellow gold bug on this board? :cool:

[Climb01742]

for the younger forum pals reading this thread, i'd recommend, as soon as you can in your financial life, buy a house. real estate can be a h*ll of an asset. not crazy speculative real estate but a house you want to live in. get in the game. not all of us can spot a good stock, but most of us can spot a good house. over 20, 30, 40 years, a good house can add a lot to your net worth...and you get to live in it. ;)

[andy mac]

"I have enough money to last me the rest of my life, unless I buy something."

Jackie Mason (1934 - )

[bcm119]

for the younger forum pals reading this thread, i'd recommend, as soon as you can in your financial life, buy a house. real estate can be a h*ll of an asset. not crazy speculative real estate but a house you want to live in. get in the game. not all of us can spot a good stock, but most of us can spot a good house. over 20, 30, 40 years, a good house can add a lot to your net worth...and you get to live in it. ;)

I absolutely would if I could figure out where I want to live for 5+ years. I love my current job, but...apologies to the oregonians here...this climate _sucks_. imho, cheers, etc.

[andy mac]

I absolutely would if I could figure out where I want to live for 5+ years. I love my current job, but...apologies to the oregonians here...this climate _sucks_. imho, cheers, etc.


we were just talking about this today at work. i know so many people who have said the same thing and never end up buying. DON'T BE THAT SUCKER!!!!!!! my friends have missed out on hundreds of thousands of dollars over the last decade.

buy something and rent it out if you move. it's easy. i know. my house is in australia and i live in nyc.

OR has some of the cheapest housing prices going and the forecast for the region is for huge growth in the future. 10% down there ain't much more than a meivici or two.

pull the trigger sunshine!!!!!!!!!!!!!!!!!


(and yes, the climate mostly sucks. that said, i'd take it over nyc or amsterdam anytime)

[rphetteplace]

does the doof live with his mom then?

oh man

doof put off the full time paycheck until 34.

so

doof gets 2,800 a month after taxes

splits 1,000 between the mutual fund and the savings

whats left goes to gas and food and bikes and crap

good thing doof has no kids

doof will probably teach until 60

then become and slow but crafty messenger

[bcm119]

we were just talking about this today at work. i know so many people who have said the same thing and never end up buying. DON'T BE THAT SUCKER!!!!!!! my friends have missed out on hundreds of thousands of dollars over the last decade.

buy something and rent it out if you move. it's easy. i know. my house is in australia and i live in nyc.

OR has some of the cheapest housing prices going and the forecast for the region is for huge growth in the future. 10% down there ain't much more than a meivici or two.

pull the trigger sunshine!!!!!!!!!!!!!!!!!


(and yes, the climate mostly sucks. that said, i'd take it over nyc or amsterdam anytime)

I know, and agree. But I just can't do it. I'm indecisive and kind of a drifter, and the thought of being the slightest bit "settled" makes me ill. The idea of renting out a place seems like a lot of work... with peripheral expenses to boot, no?

[Climb01742]

bcm, it doesn't have to be about settling in or putting down roots. it's about getting in the game. taking advantage of the increase in the value of real estate. buy a house now. let it appreciate (and not pay rent you'll never get back and get a deduction for interest payments) then sell it when you're ready to drift again, take your gains and buy something someplace else. real estate...you gotta be in it, to win it.

as a once damp oregonian myself, i know how the rain can mess with your mind. but real estate is a good way to build a nestegg.

[1centaur]

I believe the number one topic for discussion by investment professionals in 2006 will be whether and/or how badly the housing bubble will break and damage the economy. Yes the last decade in housing has been great, but there was not a serious recession in the last decade, tax rates were favorable, and interest rates were generally heading down, plus the demographics were good in various ways.

Today, housing affordability is slipping, the signs of a downturn are evident in the neighborhoods of Massachusetts and, I read, around much of the country, and the populace that endorsed house flipping as an investment strategy is coming to the belief that the bubble will burst, possibly a self-fulfilling prophecy. The number of buyers using no money down and interest-only loans is scary where housing costs have gone up the most.

There's a credible chance the bubble will burst and the Fed will keep raising rates as they focus elsewhere in 2006, leading to recession in 2007. A house is a >=4x leveraged bet on housing prices in the short term, and there are definitely bad times to make that bet (I was nailed by it in LA in the 1990 recession). As long as America is economically free and relatively secure, housing will PROBABLY do okay on average and in the long run, but there are certainly times to pause and wait for a better time to lever up, especially if you are not going to live somewhere for 20 years (and most young people move every 5 years). IMO, this is one of those times, especially where real estate has risen quickly in the last 3 years.

[wasfast]

I'm 46, am temporarily retired now, and wondering how much more I'm going to have to / want to work in the coming years.

What I'm dealing with is the question everyone wishes they had the luxury to contemplate - do I really WANT to be retired this early. I've been away from work since April and there are things I freaking LOVE about it, but also things I'm not too crazy about. -Ray

I "attempted" to be retired 2 years ago (I'm 46 now also). After a year, I was looking for something to do. I think planning what you'll REALLY do when you're retired is as important as having the means. I found that I got much more done at home (projects etc) when I was working than when I had all day because there was some sense of urgency. When you have every day of the week to do something, who cares when it gets done? It was also a bit odd doing errands in the middle of the day. If you went to the grocery store, it was a gray haired obstacle course of Seniors. No, I'm not working but I'm not 75 either!

If you really loved your work, you'll need some sort of parallel, either part time or even volunteer, to keep your mind working. I'd choose something based on what you'd enjoy, not what it pays. If you overconstrain it with money and fun, you'll never find the right thing. It's one or the other for most people.

[Climb01742]

I believe the number one topic for discussion by investment professionals in 2006 will be whether and/or how badly the housing bubble will break and damage the economy. Yes the last decade in housing has been great, but there was not a serious recession in the last decade, tax rates were favorable, and interest rates were generally heading down, plus the demographics were good in various ways.

Today, housing affordability is slipping, the signs of a downturn are evident in the neighborhoods of Massachusetts and, I read, around much of the country, and the populace that endorsed house flipping as an investment strategy is coming to the belief that the bubble will burst, possibly a self-fulfilling prophecy. The number of buyers using no money down and interest-only loans is scary where housing costs have gone up the most.

There's a credible chance the bubble will burst and the Fed will keep raising rates as they focus elsewhere in 2006, leading to recession in 2007. A house is a >=4x leveraged bet on housing prices in the short term, and there are definitely bad times to make that bet (I was nailed by it in LA in the 1990 recession). As long as America is economically free and relatively secure, housing will PROBABLY do okay on average and in the long run, but there are certainly times to pause and wait for a better time to lever up, especially if you are not going to live somewhere for 20 years (and most young people move every 5 years). IMO, this is one of those times, especially where real estate has risen quickly in the last 3 years.

there is much wisdom in what you say. but i might add two caveats: buying a house as, primarily, a place to live, with appreciation as a secondary benefit, is still probably a prudent thing to do. and, the housing bubble varies greatly by region, and should it burst, odds are it won't be a blanket, national event...local or regional economic factors will worsen or mitigate the bubble deflation, should it come. eastern mass is crazy. during the internet bubble, a house i owned here tripled in value in four years...and i sold it one month before the tech bubble burst to someone who overpaid for it with paper profits from stock options from a hi-tech firm. i was smiling. they were crying. timing is everything. but this side of managing a hedge fund, real estate still seems, over the long term, a way that normal folks can reap some big profits. but yes, as you rightly point out, there are risks. :beer:

[Ray]

I "attempted" to be retired 2 years ago (I'm 46 now also). After a year, I was looking for something to do. I think planning what you'll REALLY do when you're retired is as important as having the means. I found that I got much more done at home (projects etc) when I was working than when I had all day because there was some sense of urgency. When you have every day of the week to do something, who cares when it gets done? It was also a bit odd doing errands in the middle of the day. If you went to the grocery store, it was a gray haired obstacle course of Seniors. No, I'm not working but I'm not 75 either!

If you really loved your work, you'll need some sort of parallel, either part time or even volunteer, to keep your mind working. I'd choose something based on what you'd enjoy, not what it pays. If you overconstrain it with money and fun, you'll never find the right thing. It's one or the other for most people.
Well, I'm not even a year in, and I'm looking, but I find that I'm too picky - I seem to want it all and, amazingly, haven't found it yet. I don't have problems getting stuff done around the house - I have trouble finding enough to do now that winter weather is constraining my riding time. There just aren't that many good movies.... I think I should be able to land something part time if I keep at it. But I don't seem to be in a hurry. On one level I'm REALLY enjoying the free time.

Regarding 1Centaur's post on housing values, I'm similarly paranoid. We've been lucky and taken an amazing ride on the housing value rocket ship, first in the Seattle market in the late '80s into the early '90s (made more money in the appreciation on our house one year than our combined salaries) and in the Philly area since '92. But I think as the Baby Boomers move into retirement and sell off their big houses for smaller properties and condos, there's going to be a real glut of larger houses, driving the values down. Also, assuming that gas prices continue to go up (and how can they not?) a lot of big sub and ex-urban developments are going to get a lot harder to sell. We have a place in town, so I think we're good in this regard, but I wouldn't be going out and buying a big suburban house with values as high as they are right now.

-Ray

[Ginger]

On buying a house:

Personally, I bought a house before I could afford it and when I didn't think I'd live in the area more than 5 years. Right now it's increased it's value over three times over the original purchase price. Even if the housing market goes bust, which I agree, it seems like it will soon, my original investement is fairly stable.
1. Research the areas where you're thinking of buying a house. 2. Buy less house than the bank says you can afford.

I've been here 14 years now. My house payment including taxes and insurance is about 2/3 of what most people pay in rent in the area. I think of all the money I would have paid to someone else with no equity to show for it if I had rented all that time...yikes!

bcm: If I *do* move, I have a line on several local property management companies who will take care of: Finding a renter, regular house maintenance, etc. all for a fee. But that's ok, I wouldn't have to deal with it and the mortgage will get paid and I'd still get some money coming in from the home and the equity available for financing a home in my new area.

Lastly, as my dad says:
Buy land, they ain't making any more of it.

[Ken Robb]

your dad was Will Rogers?

[Kevin]

To be safe you should plan on either you or your wife living to 90. So you need to fund 28 years of retirement. If you assume that inflation and investment returns are going to offset one another, all you have to do is multiply what you think you need on an annual basis to survive by 28. If you think its $100k per year its $2.8 mil, if you think its $125K its $3.5 mil, if you think its $150k then its $4.2 mil.

Kevin

[andy mac]

I know, and agree. But I just can't do it. I'm indecisive and kind of a drifter, and the thought of being the slightest bit "settled" makes me ill. The idea of renting out a place seems like a lot of work... with peripheral expenses to boot, no?


hey, i get the moving around thing...

andy mac drifing resume so far:

1968-1995 Melbourne - purchased house
1995-1996 - Tasmania
1996 -1998 - Portland OR - purchased loft
1998 - 2002 - San Francisco
2002 - 2004 - Amsterdam - purchased another house in melbourne
2005 - New York - looking to buy a small apartment here

i would spend as much time on my houses in a year as i would on a slow week at work on the serotta forum. scary thought!

agree that prices in some parts of the country may drop a bit or flatten out but you only lose if you sell. OR is forecast to swell in population. my observation is that a house is a great way to enforce saving. if you don't buy a place, will you really be disciplined enough to put the same amount into a mutual fund, bonds or stocks?? and best of all it's tax free money. we don't get many breaks in our life. this is one of them.

if you have an expensive bike, hbo, a car over 10k, a coke habit or have owned more than 2 ipods you need to listen to the wise climb number and buy ye arse a house.

just think, as i am, more money, actually = more drifting! some yuppy sends you a check every month. you access your account in ibiza, or thailand or waco.

don't be sucked into thinking it's a noose - long term it's the complete opposite.

(and while i am at it cross train, do yoga, buy a dog, get fitted and stretch)

xoxo

andy.

[Frankwurst]

Wow. I keep telling my parents over and over, spend my inheritance on yourself. They gave me a good upbringing, instilled respect for hard work and education. I'm all set. I hope when they finally pass away, it is in peace and with $0 in the bank.

That said, a parent's love for their children is often without bounds and "sacrifice" isn't a sacrifice. They're lucky to have such parents as you.

Nice post Fly,
I have two kids in college and have explained to them that as long as they treat people with respect,work hard and don't lie,cheat or steal, their Mother and I will help them out any way we possibly can as long as we possibly can.
We have everything we need,so as the children get older we'll help them aquire the things they need with the two of them understanding there will be no inheritance and the last check I write will be to the mortician and it will bounce and they'll have to step up and cover dad's arse for a change.

[bcm119]

bcm, it doesn't have to be about settling in or putting down roots. it's about getting in the game. taking advantage of the increase in the value of real estate. buy a house now. let it appreciate (and not pay rent you'll never get back and get a deduction for interest payments) then sell it when you're ready to drift again, take your gains and buy something someplace else. real estate...you gotta be in it, to win it.

as a once damp oregonian myself, i know how the rain can mess with your mind. but real estate is a good way to build a nestegg.

Yeah, I know the game, but its not gauranteed to work here. This is not Portland; its a small college town whose real estate market is mainly driven by a large hewlett packard facility, which has recently laid off a few thousand(?) people... the market is teetering here, and I've got cold feet about it.
Affordablility is at an all time low on the west coast, esp. CA. People in their 20's are leaving the state in droves, or buying up some cookie cutter in Modesto, which I wouldn't consider in a million years. Its not a happy time for 30 year olds out here. I'm just glad to have a job I like and a bike to ride.

[Ken Robb]

ALL of the people I ever met who would not buy a home until they could afford something they REALLY loved are still waiting and really pissed that their rent keeps going up and they have no write-offs to speak of at tax time. In almost every case now they can't afford the home that wasn't good enough as a starter 10 years ago.

I think you should buy that dump in Modesto and rent it to someone who wants to live there.

It is as close to a guarranty as you will ever get in investing that you will be glad that you did it 10 years down the road.

One thing that adversely affects home prices is rising interest cost. So I do think the market will flatten over the next few years but I do not expect a precipitous decline in most markets. A one-employer town would be one exception if that employer dies or moves.

The catch is that if rates rise and interest rates rise your top line (Home price paid) may go down but you bottom line (monthly payment and total cost over time) may stay the same or rise. Therefore,unless you are a cash buyer I doubt that waiting is a wise move. I'm now advising my clients not to buy if they think they will have to move in 2 years and don't want to deal with being a long distance landlord. If they know they will be here for 5 years or more I'm saying BUY NOW! If rates go up renters will be happy to pay you plenty to rent your house because they may not be able buy a place of their own at the higher interest rates in effect.

Building materials are rising dramatically due to demand from China and rebuilding our Southern states. There is a real shortage of qualified craftsman to build anything and they are not going to be working for lower wages any time soon. I'm selling luxury homes for $250-$300 a square foot. If you owned a lot in San Diego and wanted to build a nice home it would cost $300-$350 a square foot. Heck, your permits would be over $40,000!!!

For the first time in years there may be some bargains in foreclosures due to some folks buying more house than they can really afford with no-money-down and/or loans with introductory low teaser rates. With no real equity they won't be afraid to walk away if their fortunes take a turn for the worse and the lenders will have to `sell these properties for what the market will bear.

[Ginger]

Nah, but they've been saying that since way before Will too...

Fly: I tell my dad the same thing. Sell the farm, move somewhere comfortable if you want to. He doesn't listen.

[Grant McLean]

I hear this term "bubble" all the time, and it irks me.

There is not much chance of a "burst" in housing prices, in major north american markets.

It's a balloon. It inflates and deflates as money goes in and out.

_Gee

[CNY rider]

There's a great blog about mortgage lending I just recently started following. Bill Fleckenstein originally pointed it out.

www.anotherfu**edborrower.com

Obviously, you will have to substitute the appropriate letters for the **.

I was doubtful about the bubble. This makes me much more of a believer.

[andy mac]

don't know the answer, just wondering:

1. how many will sell their house should the market go up, or, down?
2. if you do, where will that $$ go?

seems markets where there's lots of speculation and flipping eg. arizona, miami and vegas may be in danger.

but will the people, lets take the forum for instance - varying locations, ages and income levels, really be selling their houses if prices rise or fall?

will people move cities? will they put that $$ under the mattress, into the stock market after so many were burned recently, buy modern art, old campy running gear???

30 isn't old but it ain't young. how's your 401k? are you contributing the max? do that before anything else. all my friends in australia owned houses, however crappy, by that age - nobody was driving a bmw, owned a boat, a serotta, had cable...etc though.


bcm119 what's your plan so you can retire, ride a serotta and not live at your parents?? (hey, we're giving you a hard time but it's just because we care.)

[JohnS]

I hear this term "bubble" all the time, and it irks me.

There is not much chance of a "burst" in housing prices, in major north american markets.

It's a balloon. It inflates and deflates as money goes in and out.

_Gee
Just wait until the auto companies lay off some more people. The Detroit market will burst. Too many have taken "interest only" mortgages to buy more house than they can afford. They have no rainy day fund in the bank.
The same thing if SoCal has a major earthquake. Prices will plummet.

[Ken Robb]

there were some real bargains in coastal California real estate in 1942 and 1943 but prices were way up by mid 1944.

When the big quake comes I'll be buying beachfront property in El Cajon.

[andy mac]

in the marina, the worst hit area in the san fran earthquake (in '88 i believe), prices apparently went up.

go figure???

what happened in new orleans recently, did prices drastically drop?? did people rush to sell?? don't know, just asking.

[nm87710]

From a former retail banker and current venture capitalist. Residential houses are not investments. Just nice places to live. They may go up in value. They may go down. Costs like insurance, taxes, utilities, upkeep and sales commissions when you sell it add up quickly. Plus the "value" of deducting mortgage interest on your Fed taxes doesn't have much real value. Get a copy of TurboTax and play around with it and you'll see. Don't forget mortgages were designed by bankers for bankers. I believe they still use the rule of 78ths to calculate payments. Interest is always paid first then principle. On a 30 year note(15yr recommended) if you make monthly payments for 10 years you'll discover you've only paid down about 18% of your principle balance - not 33% like you'd think. On 165K loan that would leave a balance of 135K - hardly enough to cover all the costs listed above. Add in the fact that the average US home owner only stays in a house ~6 years! If you want to invest in real estate then put money in a REIT. Much better returns across time with lower risk and you can pull you're money out at any time. A house is just a home and a place to hang your helmet. Hopefully yours will skyrocket in value but I wouldn't count on it. :)

[gasman]

93LegendTi-

I don't know how you do it but it is pretty dang amazing to make 12-16% over a say 6% mortgage. How is this possible ?

[93legendti]

93LegendTi-

I don't know how you do it but it is pretty dang amazing to make 12-16% over a say 6% mortgage. How is this possible ?

The short answer is I act as an last chance source of ownership funds for owners of residential homes within a 25 mile radius of where I live--"hard money" lending. The long answer would take pages and pages to explain.

[1centaur]

"A house is just a home and a place to hang your helmet."

A house becomes an investment really quickly when you need to sell it. Prices dropping 5% if you have 10% down means you have lost 50% of your money. All thoughts of buying homes and then renting them out when you buy other homes somewhere else should be tempered by research, and there are plenty of books on the topic. Rents less paying a property manager and insurance do not always cover mortgage payments and taxes; I have frequently heard where they are close but a little short. That can make getting the next mortgage harder and begs for good cash flow on the double owner's part.

Yes I expect there might be some great foreclosure buys in the next couple of years. If there is one year in the last decade not to buy a house, 2006 might be it. Looking at housing price charts over the long run, the current price spike apears to be an aberration. In my town, $400k houses have become $1MM houses in under 10 years. I expect them to be $800k houses in the next downturn/recession, and that's not my downside case. Not what I expect for the country overall, and I'm not selling unless I lose my job and have to move to New York or some other such horrible thought. But my company is pretty stable and I am not 30 with unclear professional ambitions.

[Climb01742]

this is a cool thread, IMO. we have some smart folks here. i find it all thought-provoking. and wonderfully civil.

BTW, can i be a venture capitalist in sante fe, too? (ever notice...venture capitalists live in the funnest places. :D )

[Tom]

Our adviser asked what we wanted out of retirement. I said my plan was to die before the money ran out. I got a strange look, but isn't that the idea?

(1) Record what we spend our money on. We just use Quicken and categorize everything. We can track back what we spend every year and then by category can extrapolate. Know your situation well.
(2) Extrapolation: Medical care is going to kick our asses around the block when we get older. Long term health care insurance is money well spent. What if one of us goes more senile than we are now and can't feed ourselves? Of course, my long term health care plan for myself is one shotgun and one shell. Then Karen gets the life insurance money and she's set. If there's a suicide clause, then I'll just ride my bike in front of an SUV. They're driving an SUV, they're not inclined to feel any guilt. Screw 'em.
(3) Do not count on Social Security. It is likely to be there but don't leave it up to someone else to take care of you financially.
(4) Same with inheritances. You never know when saying the wrong thing in passing will piss somebody off. Don't count on it being there.
(5) Don't put more money on your credit card than you can pay in any one month.
(6) Assume everything's going to go wrong.
(7) Stay ridiculously lucky.

[keno]

1. The best fundamental materials I've repeatedly recommended over the years on investment,

"Winning the Losers Game", by Charles Ellis

http://www.efficientfrontier.com/

Neither is a stock pickers guide, but a source of sound ways of thinking about investing.

2. What happens over a long period of time is what matters. Do not be wowed by short-term results. Investing is an endurance race and avoidance of mistakes is highly rewarded.

3. Taxes and portfolio turnover are critical. Short-term gains are poison as are commisssions.

4. Market timing is next to impossible. Over the period of years that the markets have increased dramatically, it was a relatively small number of days on which you had to be in the market in order to be the beneficiary of those increases. If you can figure out which ones, you will be bronzed on your passing and erected as a monument somewhere important.

5. Compounding is key. Small, steady returns consistently made will generally outpace wildly swinging returns, not forgetting that returns aren't embarrassed about being negative, and large, from time to time.

6. Few guess that bonds are risky long-term investments after you consider inflation and loss of principal from interest rate rises as ever-present possibilities. Additionally, depending upon your tax rate (sometimes a lower one than you would think), municipal bonds typically enjoy a return advantage over taxable bonds.

7. Diversification is critical unless you can take the pressure of the possibility of getting real poor in a hurry.

8. Your personality should govern your investment style. A good night's sleep is worth a lot in this life.

9. Real investing is a full-time job for all but a few gifted investors. Be realistic going in. "Winning the Losers Game" is a good guide for the rest of us.

keno

[Smiley]

Keno , be interested to know what and how you feel about Jim Cramer and his show Mad Money and if you read his book Smart Money . I just read his book for entertainment value and watch his show after PTI on ESPN .

Also , I agree with real estate for investment , I owned a rental property that turned positive cash flow after about 7 years of ownership. My take on renting property is your subsidizing peoples rent and allowing them to beat up your house in the process. Plus the amount of liability insurance we had was silly to protect us against lead paint and the other crap that you can get sued on. NO thanks I'd rather buy stocks that don't talk back at you.

[andy mac]

quick aside, i love the quote:


"if your broker is so smart how come he still has to work?"



diverisfy: 401k, stock market, house, jerk signed apparel.

save early. max out your 401k when you start work not when you hit 40. buy a house.

most of all: DON'T PUT OFF SAVING - do it every month. remember when you where young?? you always had just as much fun and always had enough $$ to get drunk.

ben elton says - "don't spend you life busting your arse buying stuff you don't need".


drift on,

andy.

[nm87710]

VC's can hang their helmet anywhere. NM is quite nice - peaceful, quiet and beautiful with only 2MM people in a state 2.5 times large than NY. Also has a great racing community(road, mountain, cx and soon track). With warm temps in the mid 50's today I'm riding to the top of Sandia Peak - 11,000ft.

Cheers and most of all enjoy!

[flydhest]

the corollary to keno's point 4 is one that I find very insightful, particularly in light of the 2000-2001 stock market and the current discussion folk have about real estate.

"The market can stay irrational longer than you can stay liquid."

[Smiley]

"The market can stay irrational longer than you can stay liquid."


the branch does NOT fall far from the tree ...... Kung Fu

[nm87710]

Hmmmm....

12/23/2005 10:25am ET

WASHINGTON - Sales of new homes plunged in November by the largest amount in nearly 12 years, providing the most dramatic evidence yet that the red hot housing market over the last five years is starting to cool down.

The Commerce Department reported Friday that new single-family homes were sold at a seasonally adjusted annual rate of 1.245 million units last month, a drop of 11.3 percent from October, when sales had surged to an all-time high.

Last month's decline was even bigger than the 8.7 percent drop-off that Wall Street analysts had been expecting. While sales of both new and existing homes are still on track to set records for a fifth straight year in 2005, analysts are forecasting sales will decline in 2006 as the housing boom quiets down

[flydhest]

Right, but keep in mind that 1.245 million (annual rate) is the kind of pace that made people's eyes pop out last year and elicited calls of "this pace is unsustainable." So it slowed from "blistering" to "torrid."

[1centaur]

First, on Jim Cramer, I love listening to him because he is a REAL investing professional and talks to "smart money" all day long - you almost never get to hear those insights in general media. He has earned his instincts and often has thoughts that I find worth follow-up in my job. For retail investors though, I worry that most will leap without most of his understanding on why they're buying, so his longevity in that format will depend on him being right a lot more than 50% of the time. In a market downturn, that will be difficult.

Second, on today's housing numbers, it's right that the annual rate is an historically good one (though it's the biggest drop in California in 10 years, I read), but there are two countervailing factors. Supply of homes is extremely high vs. the non-ownership rate, a pretty scary looking chart. I looked at a bunch of 30-year charts on housing this morning and there's plenty to be wary about. Second, while nimble speculators started bailing six months ago, the psychology of the average buyer was not one of fear as of last month (and many buyers are presumably locking in rates before they rise even more). As soon as the average buyer believes housing prices are flat to down, all the affordability and demand/supply warning flags will bear fruit. Buying a house for most people is the biggest financial gamble they ever expect to take, so their psychology is crucial to keeping the game going. Falling prices breed falling prices. Homebuilder execs have been selling shares lately. The positive views in this thread are by far the most positive data I have encountered on housing in the last 6 months. Greenspan called bubble on Internet stocks well before the peak, and called froth on housing a while back. He's unlikely to be wrong in the long run - has a bubble ever been widely declared and never come to pass?

[keno]

I'll occasionally listen to Jim Cramer on the radio, but in my case, strictly for entertainment. He was an outstanding hedge fund manager in his day according to story, song and legend. My nervous system took about 60 seconds of his tv show to determine it wasn't for me. Don't know his book. My own reading is limited to philosophy and junk these days.

How was the trip, BTW? Hope and I leave for New Zealand tomorrow am for biking and hiking.

keno

[nm87710]

The 1.245 unit number isn't too important today. For the markets it's the % decline that was 30% above forecast. That's more downward momentum.

[andy mac]

where's the 'smart' money going these days?

europe is chasing it's tail. asia's flat. us stocks, maybe large growth aside, seemed pretty fully priced. housing seems fully priced, some would say over priced. what's an investor to do?

yep, i know this ain't the best place to solicit advice but there are plenty of smart people i'd be interested to hear from, and, it's a slow day at work.

[manet]

Hope and I leave for New Zealand tomorrow am for biking and hiking.
keno

http://media02.liquidblue.com/imagedb/tshirts/pop_culture/_Medium/RETCHYSf.jpg

[SoCalSteve]

My parents bought a house in 1960 (in a suburb of Los Angeles)for $32,500.00 and today that house is worth close to a million dollars. My family sold it 20 years ago for $275.00.

Yes, there have been peaks and valleys in the real estate stock market and there will continue to be more. And, there may likely be a bubble bursting soon. So what? Buy a house, hold on to it until you retire and then you can decide what you want to do.

Sell it, move somewhere smaller and put the money in tax free Muni Bonds. Sell it, buy an RV and travel all across North and South America. Pay off the morgage and live in it in your twighlight years and just pay taxes and upkeep. Get a reverse mortgage and live with the house paying you a nice monthly sum....

I guess my point is: Buy a house, it is still the best investment (long term) that our country has to offer.

Bursting bubble? I just read in the LA Times that in my zip code, houses have gone up 38% in the last year and the average price is over a million dollars. If there is a bubble bursting, it sure doesnt seem like its happening in Los Angeles, 90035.

Steve

PS: I really guess the key is to decide what you want your lifestyle to be now and when you retire. For me, I love Los Angeles (hell, its 75 degree's today). I can ride to the beach and mountains from my home quite easily with little traffic. I have great restauarnts, museums, movie house, theaters and malls all within a few miles of me. I am a city boy, born and raised and I hope to live here for the rest of my life, enjoying all that Los Angeles has to offer me...... Lifestyle.....keep that in mind when you think about retiring, investing, etc. Thats all.

[bulliedawg]

Best financial advice I ever got was from my Dad who retired to Sarasota, FL when he was 52 despite putting five kids through college (four of them private schools): "Don't pay interest or borrow money on anything that doesn't make you money." That pretty much narrows it down to mortgage and student loans. I guess you can throw in buying stocks on margin if you're "certain" if the outcome, but how many of us are.

The other thing I learned from my Dad is retire and do what you want to do as soon as possible. He was a healthy man who's parents lived well into their 90s, but he died at 64. Thank God he retired when he did, and had 12 years to live life exactly as he wanted.

[1centaur]

"where's the 'smart' money going these days?"

Talked this morning to a very smart guy who works at a distressed brokerage that caters to hedge funds. He told me the hedgies are all scratching their heads and asking him what others are investing in because there are no ideas. That tells me there's nothing thematic that stand out, so it comes down to individual opportunities balanced by something pretty safe, thus keeping powder dry for better options down the road. When high yield, investment grade corporates, bank loans and global fixed income all are looking at mid-single-digit returns (or less), it's an easy choice to buy short-to-intermediate Treasuries with those kinds of yields (munis if the tax bracket fits). If the Fed stops and housing is not cracking, a lot of those investment categories will do great in 2006 - high yield could do more than 10%, stocks would do better. The market's not making that bet today.

Looking farther afield, yuan revaluation may make Asian currency plays profitable in 2006. China's growth may be slowing but the transformation of the world's largest population from rural to modern urban with no intervening steps will create opportunities and pitfalls of great magnitude for decades (India's on the same path). What will Chinese people buy from the West?

Otherwise I'm left with stock picking, one reason I listen to Cramer (who's much better on satellite radio than he is on TV).

[SoCalSteve]

In my industry (film production, TV too) when a person retires, the average monthly checks a person gets is less than 12! I find that truly amazing....

You work hard all your life (until you are 62-65) thinking about retirement and what you will do with all your free time. And then you dont even live more than 12 months!!!

I have tried over the past few years to kind of semi-retire every year for 2-6 months at a time. I can do this as in my industry, we are all daily employees and can work when and if we choose or not. Lucky that way, I guess.

So, I could work close to 12 months a year and probably have a ton more money than I do now......But, I choose to work much less than that and enjoy my life while I am still relatively young (47) and relatively healthy.

The one caveat of this post is that people in the movie business work a minimum of 12 hours a day....so, if we work a month straight, its kind of like working an extra couple weeks. And, we do get compensated nicely for all this overtime.

Steve

PS: Dont hate me for cost of movies being over $10.00. I would rather work less hours. Oh yeah, actors salaries have a great deal to do with this as well.

[Grant McLean]

Just wait until the auto companies lay off some more people. The Detroit market will burst. Too many have taken "interest only" mortgages to buy more house than they can afford. They have no rainy day fund in the bank.
The same thing if SoCal has a major earthquake. Prices will plummet.

Hi John,

I was merely pointing out the limitation of using the language term "bubble" to describe the real estate market. My intention was not to suggest that a disater couldn't collapse housing prices. A "bubble" can only expand, and keep expanding until it pops. By definition, this means prices can't ever go down unless the bubble bursts. That's just not an accurate analogy of the market. The market prices go up and down all the time. The fear generated by the term "bubble" is also an unfortuante by product of the media constantly harping the idea the market could suddenly "pop" at any moment. As I suggested, I just think the term "balloon" is a much better one.

_gee

[bcm119]

bcm119 what's your plan so you can retire, ride a serotta and not live at your parents?? (hey, we're giving you a hard time but it's just because we care.)

Well, you'll be pleased to know I bought a house last night... its an old apartment complex with a caved in roof, but I set up a living space with some 2x4's and some old insulation... I have a nice REI tent but that houses my serotta. It came with a meth lab in the basement unit, so I'm hoping to get that up and running and put any profits into my Roth IRA, as my 401k is maxed out at my cardboard box assembly job... all my friends say I'm already "makin' it", so I should stop worrying about the future and get my girlfriend the botox she wants now, but I was raised to live within my means, and I know if my girlfriend got that botox, my wife would want it next and before I saw any cash from the meth lab she'd want me to fix her missing teeth too.... I told her look, I'm the one with the job and the high school education here, and a guy on the internet told me that that my IRA needs my money more than your droopy upper lip or your busted tooth, so just deal with it and by the time I'm 50 we'll all move to Vegas and buy a nice piece of dirt with wild creosote bush as far as you can see....

[keno]

That's funny I and don't care who ya are!

[Serotta PETE]

That's funny I and don't care who ya are!


Keno, have a great time in NZ. When you get back share some pictures with us. Happy NEW YEAR!!!! PETE

[nobrakes]

I'm investing in precious metals-it seems all my "extra" disposable income ends up buying something titanium. Carbon fiber is another area of heavy investment. I have 10 titanium plates and 27 ti screws hidden in my face, and 1 titanium plate with 9 screws hidden in my right elbow. Saving for the future. :rolleyes:

[soulspinner]

Im going to invest in a bike museum and charge all you people a fair price to gander at this collection. As with brewery tours, free beer at the end of the tour de bike museum...Mr. Brooks, you in?

[shinomaster]

The thought of ever having 2,000,000 at any point in my life is just laughable.

Doof my dad is a retired school teacher and he does ok in a small towm in New York. Goes to europe every year..has a decent sporty car...WHat more do you need....Once you die the money is meaning less How the hell are you gonna spend two million after age 65? Coke habit?

[Kevin]

Shino,

The experts estimate that each individual is going to have $150,000 in uncovered medical expenses after they retire. Accordingly, a couple is going to go through $300,000 if the experts are correct. The federal taxes on $2,000,000 during the retirement years is going to remove another $300,000, living in New York means another $150,000 is going to be paid in state taxes. The $2,000,000 is now down to $1,250,000. If you retire at age 62, and expect to live to 90, you have to fund 28 years of retirement. 28 years of property taxes wipes out another $425,000. So I am now down to $825,000. Remember that $825,000 has to last 28 years. The annual payments are going to be $29,500 in todays dollars. At $29,500 per year, I would not be worried about a coke habit, I would be worried about a cat food habit.

Kevin

[CNY rider]

Kevin, I don't mean to get obsessive about this, but I disagree with a lot of what you just posted.

What "experts" came up with that $150 K figure? I don't think the average person spends nearly that much, although that may mathematically be the average spent, kapish?

I do know that the vast majority of healthcare dollars are spent on a small segment of the population during the last few months of their lives, doing what is generally futile, aggressive, invasive care when much less expensive but more effective palliative care would be of more benefit in relieving individual suffering. So even if the $150K is spent, it's not spread over a lifetime, just concentrated at the end of life. At that point, well, you can't take it with you anyway.

Also, all those taxes (well not property) flow from investment income, which will be substantial on $2 million in savings, and is completely ignored in your analysis.

Forget the cat food! Step up to canned dog food!

[bostondrunk]

The thought of ever having 2,000,000 at any point in my life is just laughable.

Doof my dad is a retired school teacher and he does ok in a small towm in New York. Goes to europe every year..has a decent sporty car...WHat more do you need....Once you die the money is meaning less How the hell are you gonna spend two million after age 65? Coke habit?

um, yeah, you guys are making me feel poor!!! Man, I hope I inherit a lot of dough or something.
I thought the general rule was that for every 10k of income you want per year during retirement, you need about 100k saved....
I still have about 25 years until retirement.......but even with that amount of time, I'm not sure how I'll ever make it to 1 million, much less 500k....
I recently bought a condo that I hope to keep as an investment, rent it out and keep it long term. Hopefully that, and maybe a couple more purchases like that, will help fund my retirement someday.....

That said, I don't focus all my money on retirement. Could be dead long before that..

[Samster]

A friend of mine (the former CEO of a major corporation) worked like hell, loved it, became non-exec chairman of another major US corporation, bought a vineyard, planned on making great grapes for those wineries that purchase their fruit instead of growing their own... Then had an aneurysm 4 months ago at the age of 64. I'm sure he "planned" on living at least a little longer. But I’m fairly well convinced that he was very happy with his life when he passed on. No savings pile can ever buy that.

As a society, we have such a narrow view of what constitutes an “investment.” Mostly we think of stocks, bonds, etc. But any corporate stock is great only until you realize you have absolutely no control, much less any really clear idea, of how that company actually runs. Bonds are only better in that as a debtor, you're first in line get your money (what’s left, anyway) back in the case of corporate meltdown… but you’re “compensated” for this privilege with a commensurately lower rate of return. Then there’s always real estate. But if you think for a moment about how you pay down your fabulous 5% mortgage, you’ll realize that in the first decade or so, more than 60% of your payment (on average, I think) will be interest. The bank gets its money first, and your real interest rate is tremendously higher than the 30 year 5% figure if you choose to exit the mortgage in less than, say 15 years. So you’re basically counting on the ability to get the principal residual (which will still be considerable) out of a sale. But your “real returns” are at considerably higher risk since, as mentioned earlier, the bank gets its money first. That’s where the risk in real estate truly resides from the homeowner perspective and that’s why many have expressed concern over the “housing bubble,” or whatever the term du jour may be.

Few people view “hard work” as an investment. For that matter, even “good clear thinking” hardly seems to count anymore. But think about it… Through hard work and clear thinking, if you manage to build a business that pays you a “dividend” that sustains a “salary” until you die, that sounds to me like a better investment than any stock you could possibly own.

The idea of building a pile of cash that you can “draw down” is a really tough nut to crack. To address (because there really is no "answer") the question "How much do I need?" you must first address the question "How long do you think you'll live?"

At 62, if you plan on living until 82 and drawing a "salary" of about $150,000 before tax per year in today's dollars, you need an inflation unadjusted base of $3 million (obviously). At historical rates of inflation, if you're, say 52 today and plan on retiring in 10 years from now, that targets you at a savings/investment stash that you can draw down on in the vicinity of about $4.5 to $5 million. Any of you excel nuts can figure out your own figures based on your various predictions of inflation, market returns, betas etc… But I think the reality is that very very very few people can pull these kinds of figures off. And god help you if you live to 83 cause you'll be tapped out. And that’s not taking into account the financial impact of the probable health catastrophes that inevitably occur late in life.

Balance is the most important thing... It’s wise to keep an eye to the future. But as Siddhartha Gautama once suggested, “Live in the present.” You can save like hell, pinch and deprive yourself to extremes to get to that $2 million, or $3 or $5 or what have you, come closer to your goal then simply die without ever having the chance to enjoy it.

So what’s the solution? Do what you love, love what you do, and plan on reinventing yourself as you go along. If you get to “retire” and that’s what you want, then you’ll be one of the fortunate ones. But as another retired (and still living) CEO once said to a group of us: “I’m not sure what you’re expecting me to say at this little gathering, but I will tell you that retirement absolutely sucks.” He wasn’t joking when he said that.

-Sam

[Kevin]

CNY,

We all have different comfort levels when it comes to retirement planning. I have obviously taken the conservative approach and assumed that inflation and investment return will off-set one another. Hopefuly, the investment rate will exceed the inflation rate. But then again, Social Security may go belly up and my conservative approach will save the day.

As far as medical expenses, there are many articles that discuss the estimated costs, I have provided a couple of links below. Estimates range from $200K - $300K per couple. With 28 years of retirement, and assuming the mid-range of $250K, this is only $375 per month per person. This is not a big number considering prescription costs and medical costs.

The only downside to the conservative estimate approach is that my children and grandchildren may get a substantial inheritance.

Kevin



Kevin




http://hffo.cuna.org/story.html?doc_id=953&sub_id=10014

http://www.emeritihealth.org/emeritihealth/participant/1092895254931.htm

[wasfast]

The thought of ever having 2,000,000 at any point in my life is just laughable.

Doof my dad is a retired school teacher and he does ok in a small towm in New York. Goes to europe every year..has a decent sporty car...WHat more do you need....Once you die the money is meaning less How the hell are you gonna spend two million after age 65? Coke habit?

I'm guessing that you're still fairly young, as in your mid 20's or so. $2M does sound like a lot of money but in the same light, so does age 62. With reasonable savings methods (a percentage of your income, not absolute amounts) you'd be amazed how it's feasible to get to that level of savings. The trick is starting as early as you can and sticking to the plan.

Realize that the $2M figure is assuming that you don't pull out principal and only live off the return. For many that can't (couldn't/didn't) end up with that much will do exactly that. It's not bad thing provide you don't do anything excessive and drain your funds prematurely.

Obviously, no one knows how long they'll live. A conservative stance is the only logical approach. Plan on living to 90 and if you die sooner, there's no real downside. You definitely don't want to plan on living to 50 and end up broke when you get there plus have to live 20 years with no savings. That would suck.

[Kevin]

Sam,

My grandfather, who is still alive at 85, told me a few things while I was growing up:

1. As far as a job, "find something that you enjoy doing and the money will follow". I thought this was great advice because if you enjoy it, you will likely work hard and be compensated accordingly. In addition, it will not feel like a job.

2. "There is a stream of money, similar to a river, and the key is to anticipate the changes in its course as it ages. As the river of money goes by, scoop up a little piece and don't stop the flow. If you build a dam and take it all, the money river will find another place to flow and you will have nothing." As a result, I have always kept my eye out for the changes in the money flow, whether it be tech stocks, real estate, financial stocks, bonds, etc.

3. "Don't become a slave to your belongings" As a result, I have lived well within my means and gladly leave the office behind to go play with my kids. Who, after all, are the real investment in my portfolio.

As a result of following these ideas, I think that I have done a pretty good job of balancing saving vs. spending and job vs. family. I know the names of the kids' teachers, coaches and friends. I take the family on vacation three or four time a year and at 40 years of age I am on my way to funding an early retirement, instead of one at 65.

This was all the result of planning. Too many people don't have plan when it comes to retirement, investments and savings. As a result, too many people are eating cat food or dog food when they are 75. Even if a plan turns out be a bad plan, its better than having absoutely no plan at all. Social Security is not going to bail any of us out.

We can all disagree on the numbers, but I am glad to see that many of us are at least looking at the problem.

Kevin