WatchI have been doing a lot of spreadsheets these last few days as we are about to retire in a couple of years. Because our income will be fairly "fixed", other considerations now need to be reassessed. I have been using the Home Calculator and that is Great! Being we plan to stay until we have to leave (either into a nursing home or act of God); renting seems to be not a desireable option when your income is pretty much "fixed" for the next 20-30 years. Rent will definitely go up and when you are 80 you don't want to be looking for a new place to live like my Aunt had to do after renting for over 40 years. She was "kicked out" and fortunately her daughter was able to take her in until she died. We don't want to have that insecurity. So using the calculator and my spreadsheets, we are able to get ourselves a "fixed" mortgage and adding in the extra for maintenance, taxes increases, etc. we have calculated not only if we should be paying that much for the house for sale, but also our limit too. This is so important. Rent for retirement, unless you have a very good fixed income that can cover rent increases or having to move late in years, we are finding it is best to buy. We will have a good fixed income and at least 6 figures in the savings for emergencies, after the down, moving expenses, etc...we don't need to "leave" any money; all our money is going to charity if we have any left when we leave this life.
Any thoughts out there for middle income, soon to be retirees...we think we have our "bases covered", but this site always brings good advice. So please feel free to advise or share your experiences. Again, retirement does make you look at your living situation much differently.
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Los Angeles, CA
I dont see why you cant rent for almost ALL of your retirement. Move to a differenct city every year, every 6 months. It would be sweet!
If 'rents get pricey' you simply move to a senior mobile home park in a rural area. Those will be cheap for ever. Or buy a small lot in a rural area zoned for mobile homes and park a used one on it. Again REALLY REALLY CHEAP.
not having/being able to work means you can live in a super cheap area with zero jobs - they will always exist. Detroit, rural FL, all of suburban flyover. No worries man!
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I guess you would be right if we were the "adventurous" retirees; we are "settlers" we have rented all our lives and are ready to stay in one place; and a rural area when you may have health issues, i.e. breast cancer treatments could be difficult. When we were younger we thought the same way, but as we get older...well, we have other priorities. But we do know one person who rented a cabin on a Cruise Ship for all of retirement; was able to travel, Doctor on board, etc.....I guess it depends on what you want with your life; but you are correct--we could do it if we wanted to travel!
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Baltimore, MD
PockyClipsNow says
If you are going to do that, then live in a RV.
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Madison, WI
Research the areas where the best hospitals are. Look into condo's so you don't have to mow/shovel, maintain. Don't worry to much about the cost, with interest so low who cares as long as you are in a place you want to be. Move near family, if your up to it so you can enjoy the grandkids. Look for low crime cities, then areas of the city that are low crime, usually the burbs, when they are smaller are low crime.
Look at property taxes. Look at the fiscal health of the state or city you are moving to. Consider public transportation as a way to cut travel expenses, although even that is expensive depending on your mode of travel. Hot or cold? I live in Madison WI, beautiful state, but would like to move to Aalaska for a couple of years just to take it all in, it's expensive, the people are weird, but it's beautiful, and not as cold near the coastline. Consider this. http://www.coolworks.com/ Met at least a few retirees playing that game, and they loved it! For instance, retire in Florida or AZ, then avoid the heat and for instance work at Denali State Park in Alaska for a summer, or anywhere up north! The jobs are usually pretty easy like running a kiosk, retail till, usually have to be able to stand up for 8 hours a day, then never work you over 40
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Thanks. We have done a lot of research. My husband grew up in the area and prices have dropped tremendously (Mountains). We know the "ins and outs" of living in the mountains; you have to be ready for that lifestyle, and actually we miss it. We live in a city because of our jobs and are looking forward to going back to the mountains. Costs are cheaper and great weather, healthcare, etc. We know the property taxes, insurance rates, etc and even with all that it is coming to much cheaper (almost $1000/month) then the same rent in the same area. I think your advice is great! Also, we have been to Alaska, and there are some places where it will be less expensive than you think and it is beautiful up there and you got the right idea to go to the "lower 48" but for the winter instead--it is too dark even for the locals!
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Denver, CO
One thing to add to your spreadsheet is how your post-retirement income would look if you kept a job for extra year or three. Or if you or your husband did some sort of part time work for 5 years...
I understand wanting to have a place that you can't get kicked out of, where your "rent" won't be increased....especially if you want to settle in for the long haul.
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Scottsdale, AZ
robertoaribas's website
if your price to own is that much lower than rent, then absolutely buy... especially if you plan to stay long term.
some of the nitwits on here wouldn't take a free home with a fridge full of beer...
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Yes we have thought about that too; but as the economy is right now, that is not something we can "count on" including the health issues (can't work), but the remainder of our retirement income will be stable including our savings account. But we did think about doing something part time if we needed to supplement. We know that with even a house, there are going to be expenses in the future that are unforeseen as well...and could be costly too.
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I agree with buying and as long as you understand "nothing" has no consequences unless you are independently weatlhy. But I would not call some of the folks on here "nitwits", as we knew someone who was independently wealthy, (extremely wealthy and we were lucky to have him as our financial advisor until he passed away) and he rented because he did not want to deal with plumbing, etc. but then again, he could afford to rent a wonderful apartment/condo that was very nice and no worries re: neighbors, etc....so again, I think you need to consider and be realistic about what you can truly afford for the life you want to live....in the end, as long as you know how to calculate (that's why I LOVE Patrick's calculators) your finances honestly, then ask, how you want to spend your remaining days.
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Scottsdale, AZ
robertoaribas's website
retire59 says
You answered your own question. Your wealthy friend didn't rent as a financial decision, but as a lifestyle decision.
I drive a nice car, i could buy a 5 year old hyundai... I'm well aware that there is a cost for that decision.
the home I bought to live in, is not the fantastic deal versus rent that my invesmtnes are. (250K remodelled, would rent for 1800 a month) The numbers aren't bad, but I wanted to live in a specific neighborhood, where I could bike to work, and walk my dog to the dog park... with no busy roads nearby, so it is utterly silent in my back yard....
YOUR numbers showed owning costing 1000 less a month then renting, where you want to live... If that is accurate, you would be very foolish to rent there as long term plan, as you noted rent will increase eventually, and you are foregoing $12,000 a year in savings. Also, when prices are that low compared to rent, there is a very real chance of price increases going forward, despite what the analysis challenged on here claim.
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Thanks for your comment. I realized when I reread my response, that I did answer my own question. But I just wanted to get my thoughts out there because there could be something I missed or did not think of, that would make me hesitate to buy...so all responses are good responses.
I love this Site and you guys on it!
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Scottsdale, AZ
robertoaribas's website
To further the discussion the, let's say I retire to Ecuador in a few years. Well, I would almost certainly rent there...
1. I might change my mind, and want to go somewhere else, why be tied down?
2. political climate could change, and tax laws that are very punitive to foreigners could be enacted...
3. it could become unstable, and I'd have to leave...
So, for these reasons, I would rent even at a premium to owning. In most foreign countries that would bear on my decision...
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Scottsdale, AZ
robertoaribas's website
To further the discussion the, let's say I retire to Ecuador in a few years. Well, I would almost certainly rent there...
1. I might change my mind, and want to go somewhere else, why be tied down?
2. political climate could change, and tax laws that are very punitive to foreigners could be enacted...
3. it could become unstable, and I'd have to leave...
So, for these reasons, I would rent even at a premium to owning. In most foreign countries that would bear on my decision...
BUT at some price, I'd have to say, what the heck... If the home price equaled only a few years rent, then I would probably gamble on buying...
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Great advice. Thanks so much.
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When I retire, I'm going to live on a gambling day cruise ship.
Think about it, where else can you live for $35 a day?
Room and board included?
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Actually someone did that and was very happy I read....they worked it out with the cruise line and paid a monthly fee; travelled all over the world, meals, doctor on board, etc....if you can make it work--why not!
[Won't work for me; I'm a land lover.... ;)
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Buy a home. Start building equity. If the time comes you can tap the equity for a reverse mortgage.
If buying is cheaper than rent with no future increases, then it is a no-brainer.
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El Cerrito, CA
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I'm in the same boat and here's what I come up with: 1) Unless you know the terrain, rent first in the area you want to buy in. 2) Buy enough land in a mild climate that you can fit a rental unit on the property. 3) Dry staples are cheap. Fresh, organic produce is healthy, expensive, requires trips to the store and is not as tasty as homegrown. Gardens are beautiful. Start gardening for your body, mind and spirit. 4) Cut your fixed expenses to the bare minimum. Best of luck.
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Pleasanton, CA
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robertoaribas says
I'd save the fridge from the rotting wood and the stench of black mold. Then drink all the beer in my new construction rental while calling the landlord to complain about things. ;)
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If buying is cheaper than renting you probably should. Just find a neighborhood where you are comfortable with your expenses. I've known people who moved out of state to reduce living expenses and are doing very well in retirement.
You are too old for equity, but not like loan sharks won't try to chase you down to sell you a reverse mortgage. Just be aware, lots of old folks get trapped by these crooks.
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Pleasanton, CA
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Raw says
How about this. Buy a home and start losing your downpayment equity. What the heck, it is only your savings. Then when you have absolutely nothing to your name be grateful when you cross over into underwater territory. You have now joined the rest of the ponzi scheme fools. At this point, whatever you do, don't call the lender to ask for help. The call will be a sign of weakness and they will use it to further exploit you. The best thing to do is squat for years and never talk to anyone. Avoid all contact with creditors, banks, etc. In 2-3 years, if you are lucky, you can get your original downpayment back. Now you are 5 years older and are back to where you began. However, you have to wait another 7 years to get your credit back. At that point your timing will probably be perfect to actually buy a home for real. ;)
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retire59 says
Right there is the absolute bullshite scare tactic they all throw around to get you to be a DEBT SLAVE. They feed that to the public left and right and people eat it up out of fear.
Unless, real estate becomes logical and priced correctly they will beg that 80 plus year old to hang around.
Anyone following the above I foresee that process creating a nightmare for 80 plus year olds into the future as the economy will now go forward with unknown results.
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Mountain View, CA
^^^^^^ This guy has Aspergers or something.
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repo4sale says
First up regarding that statement ...LMAFO
Now, I beg to differ on renting. I rented during this mess of the past ten years. I saw no mortgage debt and no losses. In my neighborhood I saved 700K minimum so in all honesty I think whatever "genius" course you took you better get your money back.