How much is enough to retire?

Blessed said:
I am lucky to be mortgage free. I was just reviewing my property taxes last night getting ready to send the payment. In the scheme of things it might seem like a big hit but in reality it is not, still cheaper to live in my own home than in an apartment. The taxes will go down, at least 40% when I hit 65. Then they will be locked in somewhat. We are blessed in that regard. I have just been trying to make a new budget for the next 2 or 3 years based on all the information I can gather. Increased SS, insurance cost once I start Medicare, will it be better to get an advantage plan or keep my federal coverage. Looks like federal will win that one so far.

I always thought I would get to the point I would not have to worry, not to be constantly comparing options. That is not the case for most of us, retired or not, fixed income or not, we all have to be proactive in watching the financial and insurance options we have available.
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Except there is a flaw in that thinking .

an important part of the equation is if you sold the house , got an apartment because you no longer need a whole house and that money tied up in the house was invested in a balanced portfolio it would be generating an average of 6% a year over the long haul Providing a nice cash flow and the comfort of liquid assets that can be had with the push of a button.

we rent now and if we bought a similar apartment to ours as a condo it would cost us less on the surface .

but once you figure that the over 400k spent on that apartment would no longer be generating a minimum of 24k in income that equation changes ..

it actually would cost us 18k a year in cash flow more then renting If we bought .

the fact we would have a paid off condo in retirement means nothing ..we can’t spend the hall closet at the supermarket. More important to us is the cash flow we can enjoy and spend ..

plus we have the security of having access to our money instantly if needed and not count on costly loans if we ever wanted our money unlike when it’s trapped in a house .

actually we took it a step further ..we sold our house in 2003 and bought a extremely lucrative commercial real estate business in Manhattan .

we sold that off over the years and now the money we made using that money no longer in a house can buy multiple homes like we had If we wanted ..so today that money generates enough in our conservative balanced portfolio to not only pay the rent but our entire living expenses .

so I love these comparisons people do but they forgot those hundreds of thousands of dollars trapped in the house and the income not being generated by that money when they compare to renting .

I am not advocating renting in many parts of the country because I wouldn’t want to deal with some amateur landlord wanna bee but when it comes to the usual comparison people do they leave out an important financial consideration which is what that money tied up in the house would be bringing in .

here in nyc renting favors buying because we have mostly high rise living which has very different metrics in cost to a house .

you can rent a two bedroom , 2 bath apartment with pool , tennis courts and gated entry here in queens for about 2600 a month ..single family homes start at 7 figures .

So most people rarely rent what they would buy …so apple to Apple comparisons can be rare in the real world since most don’t rent as much house as they would buy ..especially if rentals offer apartment houses and high rises .

plus nyc has very strong tenant laws so most hi rise buildings have guaranteed renewal and rent increases are determined by a voting board yearly .

so not all places have an advantage to owning when one has choices of selling what they have and pocketing a lump sum to invest elsewhere.

but certainly in all cases the cash flow not being generated on that money tied up in the house has to be accounted for in any comparison
 

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@mathjak107, I am not a financial wizard, I can only look at my day to day life here. I could not even imagine living in NYC and the cost of living. Right now for me, I would rather have the home equity. I have other funds that I have even moved into low risk areas since the pandemic hit.

I was widowed in 2010, in addition I was sidelined by health problems to the point I can't work. I don't qualify for disability but was able to draw my husband SS at age 60.

We already went through that big hit in 2008, so I have been trying to build back up the balance since my husband passed and I was still working. It is difficult sometimes but as I have aged I have realized that a want is not a need in my case. I have been able to give up those extras without suffering.

Would appreciate any input but feel I am doing the right thing for right now.
 
NO one can say what is right for someone personally..

but there are certain parameters in calculations that one needs to consider to compare things .

I do want to say this though , anyone who lost money in 2008 lost money because of their own poor investor behavior , not markets .. diversified portfolios went on to go higher and higher so it is one’s poor actions that caused losses .

but in any case , how much you are drawing from savings to live determines how you need to invest …someone with 20% or less in equities and drawing 4% inflation adjusted is taking very large risks of running out of money before they run out of time .

to support a draw rate of 4% inflation adjusted has taken at least 35- 40% equities to have a 90% chance of not running out of money over 30 years .

on the other hand if one takes a 25% pay cut to a 3% draw they should be fine with just fixed income .

personally though I didn’t scrimp and save a lifetime to make inefficient use of my money at just a 3% draw , but others may feel differently

so to have a safe secure retirement is dependent on not what we want to do , but what the needs are we want to meet with a high degree of success
 

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@mathjak107, in 2008 we were going through a tough period, husband had cancer, we had to meet a lot of out of pocket expenses for about five years that ate into our normal savings.

Investment/retirement funds were never touched in that time frame but we took a big hit in liquid assets at that time. Then we had to look at market loss. Not an easy time but it was what it was.

I have not had to tap into retirement funds/investment funds and do not anticipate that anytime in the near future. Like I said, the house is paid off and continues to appreciate, I see that as a good investment. The kid was put through college without any student loans, good investment. I will admit I live a simple life, I drive a 14 year old car that only has 40M miles. I no longer work so I don't have to buy work clothes. I don't have to spend money at the beauty shop, hair and nails. To be honest, my biggest expense are the care of my dogs and medical bills after insurance. for me.

The home, my son and his family lived here for 3 1/2 years saving for their own. I also moved my Mom in when she could not live alone for a couple of years. So, the home has served me well. If things keep going I could see the kids giving up their home and coming back here. I have the room and the out of pocket expense for them would be much lower. In any case, I can't see myself doing anything unless I become unable to care for myself. At that point, the house would be sold.
 
Blessed said:
@mathjak107, in 2008 we were going through a tough period, husband had cancer, we had to meet a lot of out of pocket expenses for about five years that ate into our normal savings.

Investment/retirement funds were never touched in that time frame but we took a big hit in liquid assets at that time. Then we had to look at market loss. Not an easy time but it was what it was.

I have not had to tap into retirement funds/investment funds and do not anticipate that anytime in the near future. Like I said, the house is paid off and continues to appreciate, I see that as a good investment. The kid was put through college without any student loans, good investment. I will admit I live a simple life, I drive a 14 year old car that only has 40M miles. I no longer work so I don't have to buy work clothes. I don't have to spend money at the beauty shop, hair and nails. To be honest, my biggest expense are the care of my dogs and medical bills after insurance. for me.

The home, my son and his family lived here for 3 1/2 years saving for their own. I also moved my Mom in when she could not live alone for a couple of years. So, the home has served me well. If things keep going I could see the kids giving up their home and coming back here. I have the room and the out of pocket expense for them would be much lower. In any case, I can't see myself doing anything unless I become unable to care for myself. At that point, the house would be sold.
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In retirement we don’t really care about a home appreciating anymore , those days are over ..

what we care about is cash flow ….that determines what we can spend on ourselves or kids and grand kids while we’re alive .

so the fact if we bought the condo may see appreciation on the money tied up in it , it can’t be enjoyed while we are alive .

so we feel much more secure with lots of liquid assets generating lots of cash flow for us while renting . We could buy something at any time but we see no reason to.

especially with all the protections renters have here …

don’t forget renters are a mixed bag ranging from very poor with no assets or credit to buy and they likely will always be low end .

on the other hand there are well off renters who can do better using the landlords money to provide a place to live , while deploying their own resources in to more lucrative things ..

our building has loads of professionals who are just starting out and instead of buying a house they are buying practices or businesses .

so this myth that renters are paying for nothing isn’t always true …many renters are just using the landlords money to provide that place to live so they can do better elsewhere
 
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This is going to sound bad, I don't worry about what I want to do now because I don't have anyone to do it with. I just want to get through the rest of my life without worry and be able to leave something behind, like a college account for the grand kids. Already set up.
 
Sippican said:
Well, actually it is yours, for as long as you want it to be. When you look at a home from a financial standpoint, it makes sense.
The money I would have spent paying off the house to do away with 2.75%, I can make 5,6,7%, pay the 2.75% and still make money.
If paying off a house brings someone comfort, then thats fine. But from a 'utility' standpoint (having a roof over your head) it makes sense from a financial standpoint.
I can do the same things to the house/home either way.
Putting your money in revenue generating assets, while paying down a very low interest rate, is a prudent approach.
Its all about the interest rate and your funds available that determines if it makes sense. If someone has a high interest rate (6-7%) then it makes sense to pay it down sooner or refinance at a lower rate if possible.
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The answer really is it depends .

when we keep a mortgage so we can invest or leave our mown money invested in effect we are borrowing to invest .

if most of us were going to borrow money to invest we want a risk premium for taking the risk over and above what we would want if we weren’t borrowing money to invest .

many make a mistake here ..

so as an example , if a risk free govt bond is paying 4 to 5% , if I am going to take a mortgage and invest in my portfolio I want at least 2% to 3% more as a risk premium over a risk free bond to use borrowed money , plus I have to cover the interest .

at one time my 100% equity portfolio could do that .. but today it isn’t so easy to get enough in a 40% equity portfolio to warrant using borrowed money and the associated risks of using borrowed money .

dont forget in down years like now you are shelling out tens of thousands in interest on top of regular spending .

so it isn’t a case in retirement of borrowing money to invest and simply getting a point or two better like when you don’t borrow money ..you really want a risk premium on top of that one or 2% in retirement.

that puts a risk premium return at beating a bond rate of 4% or so , plus the mortgage interest , plus a risk premium of 2-3% for using borrowed money ..that is tough for a balanced portfolio to do
 
Blessed said:
This is going to sound bad, I don't worry about what I want to do now because I don't have anyone to do it with. I just want to get through the rest of my life without worry and be able to leave something behind, like a college account for the grand kids. Already set up.
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Well it All depends what percentage you are drawing out vs how you allocate ..
 
mathjak107 said:
Well it All depends what percentage you are drawing out vs how you allocate ..
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At this point I am not drawing anything out of my retirement account so I hope to be able to leave something, only time will tell. I guess that applies to a lot of us.
 
Blessed said:
At this point I am not drawing anything out of my retirement account so I hope to be able to leave something, only time will tell. I guess that applies to a lot of us.
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If you are not spending assets down then no problem in what you do . Your savings isn’t supporting you ..you really are blessed ha ha.

plus even if hypothetically if you sold the house and rented and took that lump sum and invested it , you don’t seem the type that would exhibit good investor behavior when things went down so there is no better option in my opinion then what you are doing
 
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C50 said:
Welcome!

In the last couple of years I too have decided fixed earnings are a better fit for me. I still have a little over 20% of my portfolio in the market but the rest is all fixed interest investments. I may pull that last bit out of the market soon and move it to a fixed earning account, then I will never have to check the ticker tape again!

My thinking at this point in my life is a steady return is so much easier to plan around, and just makes me more comfortable. Honestly if I can keep my money in 3% to 5%
earnings I should be able to live comfortably for the rest of my life.
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That is only true if inflation cooperates in the right sequence

those in 1965 and 1966 who retired never predicted expenses jumping double digits in just a few short years and staying up

negative real returns had them going broke many more years a head of where they should have
 
In the years after 1965, the perfect storm of retirement killing conditions took place.

Inflation grew rapidly over the following decade, exceeding 10% in several years in the 1970’s and averaging 6% a year from 1965 to 1985.

Interest rates rose rapidly, from ~4% in 1965 to ~8% in 1970, up to 15% in 1982, causing bonds prices to plummet.

The combo of fast rising high inflation and rising interest rates destroyed bonds.


Stocks also performed horribly. Adjusted for inflation, the stock market didn’t rise above its 1965 value until 20 years later.

Dividends moved sideways over 2 decades

The most insidious portfolio killer was inflation.

Retirees were pulling out way more dollars to live then they ever imagined .

By the time. The smoke cleared the fact the greatest bull market in history was in their time frame did not help as they already spent down to far for markets to help.

those only in fixed income were destroyed even sooner

Few even gave it a thought prior since inflation was low and not even on the radar
 
This question has been asked before. There is no correct answer. Usually some turkey financial adviser goes on the media about this time of the year and says you need $1.3 million dollars or so. That is pure BULL! It depends on your lifestyle and whether you have any debts and own your home or condo.

I have been retired now for 23 years and I will tell you a little secret for free. No charge! When you retire your health is a lot more important than the amount of money in the bank. If you are sick, unhealthy and maybe dying, $10 million in the bank is not going to help you much.
 
Money doesn’t buy happiness but I learned early on it can buy important choices in life .

not everything can be fixed with money , we get that .

but choices in life are one of the most Important options you can have and many times it takes money.

even renovating your house so you can stay in it instead of having to go to a nursing facility is an important option paid for with money .

don’t underestimate the things money can do , as opposed to what it can’t do …

I grew up in an nyc housing project . I know what it can do
 
mathjak107 said:
Except there is a flaw in that thinking .

an important part of the equation is if you sold the house , got an apartment because you no longer need a whole house and that money tied up in the house was invested in a balanced portfolio it would be generating an average of 6% a year over the long haul Providing a nice cash flow and the comfort of liquid assets that can be had with the push of a button.

we rent now and if we bought a similar apartment to ours as a condo it would cost us less on the surface .

but once you figure that the over 400k spent on that apartment would no longer be generating a minimum of 24k in income that equation changes ..

it actually would cost us 18k a year in cash flow more then renting If we bought .

the fact we would have a paid off condo in retirement means nothing ..we can’t spend the hall closet at the supermarket. More important to us is the cash flow we can enjoy and spend ..

plus we have the security of having access to our money instantly if needed and not count on costly loans if we ever wanted our money unlike when it’s trapped in a house .

actually we took it a step further ..we sold our house in 2003 and bought a extremely lucrative commercial real estate business in Manhattan .

we sold that off over the years and now the money we made using that money no longer in a house can buy multiple homes like we had If we wanted ..so today that money generates enough in our conservative balanced portfolio to not only pay the rent but our entire living expenses .

so I love these comparisons people do but they forgot those hundreds of thousands of dollars trapped in the house and the income not being generated by that money when they compare to renting .

I am not advocating renting in many parts of the country because I wouldn’t want to deal with some amateur landlord wanna bee but when it comes to the usual comparison people do they leave out an important financial consideration which is what that money tied up in the house would be bringing in .

here in nyc renting favors buying because we have mostly high rise living which has very different metrics in cost to a house .

you can rent a two bedroom , 2 bath apartment with pool , tennis courts and gated entry here in queens for about 2600 a month ..single family homes start at 7 figures .

So most people rarely rent what they would buy …so apple to Apple comparisons can be rare in the real world since most don’t rent as much house as they would buy ..especially if rentals offer apartment houses and high rises .

plus nyc has very strong tenant laws so most hi rise buildings have guaranteed renewal and rent increases are determined by a voting board yearly .

so not all places have an advantage to owning when one has choices of selling what they have and pocketing a lump sum to invest elsewhere.

but certainly in all cases the cash flow not being generated on that money tied up in the house has to be accounted for in any comparison
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Yes, there is money in real estate. When we owned a bigger home in a good area, and sold it, the money from the sale was able to buy 2 more homes in less expensive areas. I am now living in one of those homes, mortgage free.
 
palides2021 said:
Yes, there is money in real estate. When we owned a bigger home in a good area, and sold it, the money from the sale was able to buy 2 more homes in less expensive areas. I am now living in one of those homes, mortgage free.
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We sold the house , rented and bought a real estate package of 9 co-ops over looking Central Park in New York city’s second most desirable co- op in the city .

the hitch was they were original rent stabilized tenants who didn’t buy under the conversion. So they remained stabilized tenants .

they were paying half market rents

we offered 100k to any tenant that would leave and 7 out of 9 took the offer and left .

we sold them for 1 to 2 million each .

plus we bought a 10% stake in some commercial lease rights in Manhattan with real estate mogul Bernie spitzer as a partner …elliot spitzer is his son .

so we scored big with a fabulous deal ….

all is sold now and we have no intention of buying anything .no reason to …we have better cash flow renting
 
Given the age of many here a 30 year strategy should have been in place before reaching your 60's & 70's. As is evident from the various posts no one set of circumstances is the same. But the different approaches are interesting to read.
 
mathjak107 said:
We sold the house , rented and bought a real estate package of 9 co-ops over looking Central Park in New York city’s second most desirable co- op in the city .

the hitch was they were original rent stabilized tenants who didn’t buy under the conversion. So they remained stabilized tenants .

they were paying half market rents

we offered 100k to any tenant that would leave and 7 out of 9 took the offer and left .

we sold them for 1 to 2 million each .

plus we bought a 10% stake in some commercial lease rights in Manhattan with real estate mogul Bernie spitzer as a partner …elliot spitzer is his son .

so we scored big with a fabulous deal ….

all is sold now and we have no intention of buying anything .no reason to …we have better cash flow renting
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Very interesting, @mathjak107 ! I had some questions -
When you bought the real estate package of 9 co-ops, was it at 20% down (or less) or did you pay in full? Also, to sell them at 1 - 2 million each, did you have to do much work on the units? I doubt if tenants took care of the property as they should (at least from my experience). So you probably need to put the cost and the time and effort it took you into the formula. How much time from purchasing to selling them did it take? Just curious. :)
 
Way back when I was a whole lot younger, I kissed the wife and headed to work. Nothing unusual about the day. By nightfall that day, I was in intensive care with 2nd and 3rd degree burns over 60% of my body, and a less than 20% chance of survival. What that taught me was... save some for the future, but, don't spend so much time worrying about that future that you forget to enjoy life today.


I did that.jpg
 
palides2021 said:
Very interesting, @mathjak107 ! I had some questions -
When you bought the real estate package of 9 co-ops, was it at 20% down (or less) or did you pay in full? Also, to sell them at 1 - 2 million each, did you have to do much work on the units? I doubt if tenants took care of the property as they should (at least from my experience). So you probably need to put the cost and the time and effort it took you into the formula. How much time from purchasing to selling them did it take? Just curious. :)
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No lenders will finance investors buying occupied stabilized apartments so these are all cash deals .

all apartments are sold as is both to us and by us .


the 9 apartment's were sold as the tenants took the offers ..the first couple went in the first year .

The rest over about a 10 year period .

The last two were sold to an investor group two years ago as the tenants wouldn’t take a buy out offer .

the apartments had a value of 1.1 million each .

we sold them for 360k for both at break even rents …so that gives you an idea how low these apartments that are occupied go for as tgere is no way to get the tenant out .

so it has a fair amount of risk but very very high reward
 
Sippican said:
Ahhhh, nope, not a paid off house. all 3 financial advisors advised against it. With a 2.75% interest rate and monthly P&E of $866.00, I could get far more on my investments than 2.75%. At anytime I could pay it off, but won't. Let it ride and use the money to make more than the 2.75%.
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Yup

I'm no stock investor
But keeping that money free to buy land, build a cabin, double (more like triple) my money......I'm there

​

 
mathjak107 said:
Like I said , financial writers who have no clue …a million here in nyc can be like 500k in cheapsville .

plus we all back in to what we have and make it work ….

no respectable planner will ever throw out a magical number as a blanket statement
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Not disagreeing with you...just stating what I've come across over the years.
 

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