Author Topic: Tips on assessing my own retirement plan  (Read 9510 times)

Offline Smurf Hunter

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Tips on assessing my own retirement plan
« on: May 13, 2016, 12:59:18 PM »
I'm turning 40 next month, which isn't depressing in itself, but it is a reality check in many ways. 
There's a lot of "where has the time gone?" sorts of reflection - but more pertinent to this board "where is the retirement nest egg?"

I've got a family of four and we live in a fairly expensive region.  In 20-25 years (or sooner) when retirement comes, I fully expect to downsize and live cheaper most of the time.  I'm hopeful when the time comes, we'd be able to life off 50% my current income (adjusted for inflation).

I won't give specific figures for privacy, but here's the summary:

*I currently have about almost 1 year salary (gross) saved in my traditional IRA and employer 401K combined.
*I contribute the max amount matched by my employer, which is 6%.  9% after company match.
*About 3/4 of the pre-tax retirement is in the IRA with the rest in the company 401K.


Every calculator I can find on the internet suggests I need to double my contribution and double my rate of return to have a chance at living comfortably.
If I could mathematically prove this would work, I'd be willing to make some sacrifices, but I worry increasing my contributions may be too little too late.

in 2008 we lost of a ton of equity in our new home we bought.  Put 20% down in 2007, and the value lost 40% the next year.
While it didn't clean me out, my IRA lost about 20%, and I've since built that back to pre-2008 levels with some trades.

Today I think we'd be lucky to pull $20-30K equity from our home after we paid it off.  I have to live somewhere, and even in the cheapest real estate markets, that doesn't buy much.

Most friends and family will say "you're better off than most".  Thanks, but starving to death last isn't my ideal plan. 

Is there a way I can pull this out of the toilet before it's too late?


Offline FreeLancer

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Re: Tips on assessing my own retirement plan
« Reply #1 on: May 13, 2016, 03:01:27 PM »
It's never too late. 

But you are faced with some major decisions:

What expenses to cut in order to free up income that can then be put towards increasing retirement contributions?  Because saving more, as soon as possible, is always the solution to increasing the retirement nest egg, at every stage of the game.

What gets priority between education and retirement?  Many advise kicking the kids to the curb, because college students can easily borrow money, retirees can't.

Where is your tolerance level in terms of investment risk and return, and how do you maintain focus in up and down markets?  That raises a ton of questions that can be argued ad nauseam.


Offline Smurf Hunter

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Re: Tips on assessing my own retirement plan
« Reply #2 on: May 13, 2016, 03:48:50 PM »
Regarding education - that's a cluster.

At the moment I'm inclined to "kick the kids to the curb" until I can sort out my own retirement.


Offline fred.greek

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Re: Tips on assessing my own retirement plan
« Reply #3 on: May 13, 2016, 04:40:35 PM »
Consider buying a retirement home now, and using it as a rental. 

Offline Smurf Hunter

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Re: Tips on assessing my own retirement plan
« Reply #4 on: May 13, 2016, 04:43:18 PM »
Consider buying a retirement home now, and using it as a rental.

I've been itching for some recreational property.  That sounds a lot more fun in the meantime compared to just throwing a few hundred a month into a pre-tax blackhole :)

Offline fred.greek

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Re: Tips on assessing my own retirement plan
« Reply #5 on: May 16, 2016, 04:03:59 PM »
With the right custodian, a self-directed IRA or a solo-401k can invest in real estate.

Offline David in MN

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Re: Tips on assessing my own retirement plan
« Reply #6 on: May 17, 2016, 01:07:26 PM »
As far as a fiscal assessment I'd have to know a lot more about all other finances and I doubt you'd post that all over the interwebs (I wouldn't).

From the OP, reading between the lines, I heard two themes:

Sunk too much into a house right before the collapse.

Pay way too much in taxes.

As far as the former, I'm empathetic. We bought in 2006 and summarily lost all equity and then some. But we were fortunate in that we bought a small(ish) house, less than half what we qualified for. You might want to think about downsizing a little now rather than a big step later. Just an idea. At the very least start chatting with lenders about opportunities. I met with a lender twice per year for 4 years until I found a better deal. But after cutting a check, changing the rate, and shortening the loan duration we still saved on a monthly basis.

As far as taxes, I'm assuming you pay through the nose. Start looking at how to minimize the bleed. After all, GE pays almost none. Consider paying a CPA for a tax assessment. From property to sales there's usually a way to save something.

As an additional thought, make sure your retirement funds aren't mired with costs, fees, load, etc. It's that 1-3% off the top that really starves the little guy while lining the bankers' pockets. And look at lesser discussed options like insurance.

Offline Smurf Hunter

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Re: Tips on assessing my own retirement plan
« Reply #7 on: May 17, 2016, 01:48:22 PM »
As far as a fiscal assessment I'd have to know a lot more about all other finances and I doubt you'd post that all over the interwebs (I wouldn't).

From the OP, reading between the lines, I heard two themes:

Sunk too much into a house right before the collapse.

Pay way too much in taxes.

As far as the former, I'm empathetic. We bought in 2006 and summarily lost all equity and then some. But we were fortunate in that we bought a small(ish) house, less than half what we qualified for. You might want to think about downsizing a little now rather than a big step later. Just an idea. At the very least start chatting with lenders about opportunities. I met with a lender twice per year for 4 years until I found a better deal. But after cutting a check, changing the rate, and shortening the loan duration we still saved on a monthly basis.

As far as taxes, I'm assuming you pay through the nose. Start looking at how to minimize the bleed. After all, GE pays almost none. Consider paying a CPA for a tax assessment. From property to sales there's usually a way to save something.

As an additional thought, make sure your retirement funds aren't mired with costs, fees, load, etc. It's that 1-3% off the top that really starves the little guy while lining the bankers' pockets. And look at lesser discussed options like insurance.

Thanks David.  Good reply.

My responses:

Housing - yep, lost bunches of equity when we bought new construction in early 2007.
We have a 30 year fixed at 5.0%.  We've paid enough into the mortgage that the possibility of refinancing is at least feasible enough for a few lenders to call us.   While I'd love another few thousand each year, I'm not certain that's enough to justify resetting the loan.  Sure, there's big tax advantages to all that upfront interest on a new loan, but I also have 9 years worth of payments under my belt.  We're just recently come ahead on the market value being above our owed balance.

Here's the big unknown for the house:

Today I believe I can sell it, pay off the mortgage and take at best $20-30K profit.  For reference in 2007 we put about $90K cash down from selling our first house.  So we either relocate to a different region, or make a radical shift in our standard of living.

Hypothetically if we bought half the house and had half the mortgage, that would free up a lot of monthly cash.  That's a big ask for the family, but maybe it's important enough to strongly consider???

Taxes - Whenever there's been a big life event (new house, new kid, wife stopped/started working) we've paid a CPA to file our taxes.  My wife works part time as an account receivables accountant at a private school, so she's the book keeper in the house.  We've used the previous CPA filings as a template assuming not much has changed.  A few times we paid $300, but got $1800 more than we anticipated.

Maybe I should enlist a CPA for an overall assessment as you suggest.

Lastly, the company matched 401K is filled with fees.  It's terrible.  The only upside is the match.  I contribute 6% of my gross, employer adds 3% to that.  However I regularly lose 1%+ to BS admin fees.  I previously rationalized the account as a 50% return on what I put in, but taking a step back, the NET-NET gain is probably on par with a CoD from a bank :(


Offline Black November

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Re: Tips on assessing my own retirement plan
« Reply #8 on: May 17, 2016, 01:56:35 PM »
You may want to setup some liquid and semi-liquid retirement vessels like a regular cash savings acct or Roth IRA if you haven't already. Then set a budgetary goal for yourself. If both you and your wife work, maybe try to save $500-$1000 per month combined. This may sound like a lot, but it is amazing how much you can save when you start cutting things out. 

For most people it is easier to cut expenses than to increase income. For that reason, I recommend figuring out where you spend your money and curtailing it. There are also great free online tools like Mint.com that will graph and chart your spending habits over months or years. Mint will even show you what other people in your area spending on food, gas, ect.

Some examples of potential things to cut:

Food- How much do you spend per month on groceries? Could you decrease it by $100-$200 per month by not going out or cutting out junk food?Average Food budget

Subscriptions-Do you still pay for cable, phone lines, magazines, gym membership dues, public storage , ect. Get rid off any recurring monthly expenses   

Interest rates- Are fairly good right now. Depending on your current interest rate, you may be able to refinance to take advantage of a lower rate. Just check to see how long it takes to recoup closing costs. 

There is nothing that says you have to live only off top Ramen in a tiny apartment. It is important to enjoy life in its present moment, instead of always worrying about the future. Just be fiscally responsible. Perform a good Family Financial Assessment on yourselves. Set some goals and stick to it.

Our media brainwashes us to spend money. However most of the world doesn't live like that. Save your money, and only spend it on the things that are truly import to you, not whatever the tv is advertising. Also learn to be content with what you have. There will always be someone richer/poorer then all of us.

http://www.fool.com/investing/general/2015/10/03/the-average-americans-retirement-savings-by-ageand.aspx
« Last Edit: May 17, 2016, 02:05:40 PM by Black November »

Offline David in MN

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Re: Tips on assessing my own retirement plan
« Reply #9 on: May 17, 2016, 02:53:30 PM »
Thanks David.  Good reply.

My responses:

Housing - yep, lost bunches of equity when we bought new construction in early 2007.
We have a 30 year fixed at 5.0%.  We've paid enough into the mortgage that the possibility of refinancing is at least feasible enough for a few lenders to call us.   While I'd love another few thousand each year, I'm not certain that's enough to justify resetting the loan.  Sure, there's big tax advantages to all that upfront interest on a new loan, but I also have 9 years worth of payments under my belt.  We're just recently come ahead on the market value being above our owed balance.

Here's the big unknown for the house:

Today I believe I can sell it, pay off the mortgage and take at best $20-30K profit.  For reference in 2007 we put about $90K cash down from selling our first house.  So we either relocate to a different region, or make a radical shift in our standard of living.

Hypothetically if we bought half the house and had half the mortgage, that would free up a lot of monthly cash.  That's a big ask for the family, but maybe it's important enough to strongly consider???

Taxes - Whenever there's been a big life event (new house, new kid, wife stopped/started working) we've paid a CPA to file our taxes.  My wife works part time as an account receivables accountant at a private school, so she's the book keeper in the house.  We've used the previous CPA filings as a template assuming not much has changed.  A few times we paid $300, but got $1800 more than we anticipated.

Maybe I should enlist a CPA for an overall assessment as you suggest.

Lastly, the company matched 401K is filled with fees.  It's terrible.  The only upside is the match.  I contribute 6% of my gross, employer adds 3% to that.  However I regularly lose 1%+ to BS admin fees.  I previously rationalized the account as a 50% return on what I put in, but taking a step back, the NET-NET gain is probably on par with a CoD from a bank :(



Yeah, no surprises. Good news is that you're in the same bucket as many of us. I'd suggest talking to lenders. I understand not wanting a brand new 30 year mortgage but you could transition to a 25 year or something like that. There are a lot of options and meeting for lunch to talk through them costs you little. My mortgage guy would meet me for a beer whenever he was on this side  of the city. What's the harm in talking?

Also consider that a move to a slightly smaller home could be accompanied with a reduced property tax if you look in the right area. Or you might be able to use a new property for tax exemptions. If relocation is on the table you might as well kill two birds with one stone. We're doing this right now as we consider moving to acreage. As I age I see that tax structuring is the secret to wealth preservation. If I could prove that I live in a region with no property tax, work in a region with no income tax, and shop in a region with no sales tax, well... (corporations do this all the time).

Sucks to hear about 401 fees. Sometime fiddle around in Excel and calculate exactly what you surrendered for nothing. That little 1% off the top adds up like crazy, especially over a lifetime. When I did it I blew a gasket. Maybe I should feel happy they offered 8 different funds with a silly risk rating.

From what I gather, you're one of us tech breeds. Engineer, programmer, analyst, etc. like many of us. One of my business mentors used to joke that I was useless due to my engineering background until I realized that money was just like mass or voltage or a line of code. It's just a unit of measure. Find where it's leaking or broken and fix it. It took me a few years but I caught on.

Offline msparks

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Re: Tips on assessing my own retirement plan
« Reply #10 on: May 18, 2016, 01:30:36 PM »

As far as taxes, I'm assuming you pay through the nose. Start looking at how to minimize the bleed. After all, GE pays almost none. Consider paying a CPA for a tax assessment. From property to sales there's usually a way to save something.

As an additional thought, make sure your retirement funds aren't mired with costs, fees, load, etc. It's that 1-3% off the top that really starves the little guy while lining the bankers' pockets. And look at lesser discussed options like insurance.

+1

As far as retirement, I think they try to scare us all into this retirement trap. I'm never planning on retiring.

Consider reading the book, Busting Retirement Lies: http://amzn.to/1TZSG2O


Offline Smurf Hunter

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Re: Tips on assessing my own retirement plan
« Reply #11 on: May 18, 2016, 01:43:06 PM »
+1

As far as retirement, I think they try to scare us all into this retirement trap. I'm never planning on retiring.

Consider reading the book, Busting Retirement Lies: http://amzn.to/1TZSG2O

I dunno about the never retiring part, but I downloaded the free book to my kindle.
Thanks

Offline FreeLancer

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Re: Tips on assessing my own retirement plan
« Reply #12 on: May 18, 2016, 07:30:15 PM »
As far as retirement, I think they try to scare us all into this retirement trap. I'm never planning on retiring.

I'm related to people who planned that way during their peak productive years, and they're not thinking it was such a good plan now.  Situations change, it is risky to plan on remaining healthy enough, relevant enough, or motivated enough, to be able to keep working until the day you drop dead.

Offline David in MN

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Re: Tips on assessing my own retirement plan
« Reply #13 on: May 18, 2016, 08:20:16 PM »
I'm not sure about "never retiring" but living as an investor does change the perspective. The more I heard it was impossible the more I admired Giles Corey. "MORE WEIGHT". And never deter.

Offline notmyrealname

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Re: Tips on assessing my own retirement plan
« Reply #14 on: May 19, 2016, 05:09:52 AM »
I'm a fan of Dave Ramsey's podcast and here's a list of his 7 baby steps:
https://www.daveramsey.com/baby-steps/

He advises getting totally out of debt and then putting 15% towards retirement. 
He also recommends living on a budget. 

Let's talk about your home.  You say you have approximately 20k equity now, but when it it paid off, the market value will be your home equity.
Is your house payment reasonable compared to your income level?   

As far as buying rental property for retirement, it really depends.  Some people do great with real estate, but you have to dedicate yourself to learning that business and being an active manager of your property, or an active manager of your property manager.  For me, I decided that rental real estate is not for us right now, but I respect the folks who do it and make it work.  You must buy low.  Learn from your mistake in your personal residence.  You cannot overpay for real estate, and you have to find exceptional value and buy low.  As they say you make your money when you buy.

If your residential market is expensive it may not work for rentals.  Or it may not work for rentals that fit your finances.  Renting out a vacation property is a romanticized dream for people, it is generally not good financially and especially if your finances are stressed.

Check out Dave Ramsey.  Also consider opening and funding a ROTH IRA.   Good luck.  You are young and healthy, that is a fantastic asset.  Be careful with your money out there. 

P.S.  Happy Birthday!   Keep taking care of your health and wellness, exercise and nutrition in your 40s.

osubuckeye4

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Re: Tips on assessing my own retirement plan
« Reply #15 on: May 19, 2016, 08:03:01 AM »
You're about 20 years from retirement then?

Remember that your home (which I understand looks like a sunk cost right now) is also an asset in the long term.


Right now you're in the hole, but 10-12 years from now when you're paid a lot of that principal down you're going to be able to sell at a profit. If you hold onto that home until you retire, you should have quite a nice windfall coming from it.



That's why I've continued to hang onto my condo that I purchased in 2006 (right before the bubble burst).

I bought it for $135,000... within 4 years it was worth $47,000 (TONS Of foreclosures).  :(

Now, there are units going for anywhere from $75-82,000 and I have $89,000 left on my mortgage (I re-financed out of my 6.25% rate down to 3.75%, but kept making my old payments)


I COULD cash out right now and walk away with a slight loss (it's actually quite tempting). Or, I could continue to rent it out at around a break even, pay down the mortgage, and in 15 years when my daughter is looking at college.. hopefully have a good $80,000-100,000 coming my way from the sale. (I'm assuming a slight appreciation in value)


Then again, there are no guarantees in life. My condo could be worth $30,000 in 15 years... or it could be worth $300,000. Who knows? The same thing holds for my 401(k), stocks, and other investment vehicles. The important thing is that you are factoring everything into the equation.
« Last Edit: May 19, 2016, 08:17:08 AM by osubuckeye4 »

Offline Smurf Hunter

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Re: Tips on assessing my own retirement plan
« Reply #16 on: May 19, 2016, 08:26:54 AM »
You're about 20 years from retirement then?

Remember that your home (which I understand looks like a sunk cost right now) is also an asset in the long term.


Right now you're in the hole, but 10-12 years from now when you're paid a lot of that principal down you're going to be able to sell at a profit. If you hold onto that home until you retire, you should have quite a nice windfall coming from it.



That's why I've continued to hang onto my condo that I purchased in 2006 (right before the bubble burst).

I bought it for $135,000... within 4 years it was worth $47,000 (TONS Of foreclosures).  :(

Now, there are units going for anywhere from $75-82,000 and I have $89,000 left on my mortgage (I re-financed out of my 6.25% rate down to 3.75%, but kept making my old payments)


I COULD cash out right now and walk away with a slight loss (it's actually quite tempting). Or, I could continue to rent it out at around a break even, pay down the mortgage, and in 15 years when my daughter is looking at college.. hopefully have a good $80,000-100,000 coming my way from the sale. (I'm assuming a slight appreciation in value)


Then again, there are no guarantees in life. My condo could be worth $30,000 in 15 years... or it could be worth $300,000. Who knows? The same thing holds for my 401(k), stocks, and other investment vehicles. The important thing is that you are factoring everything into the equation.

We bought our first home in 2002 for $216K, and sold it for about $310K 5 years later.  The first place was 1600sf, and after the 2nd child, was getting tight.  We took $90K to put down on my current home, which was 20% down on the $450K house (no PMI).  Ever since I was a kid, I had parents and grandparents follow this pattern and become wealthy.  Because if I could write a check for 20%, that's not too much house...

That last transaction was summer 2007, and within a year our county tax assessment came in at $260k, down from the $450K purchase price :(   

In hindsight I could have been $250K ahead if I magically knew to rent for 18 months in between homes - but of course I don't have magical powers.

osubuckeye4

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Re: Tips on assessing my own retirement plan
« Reply #17 on: May 19, 2016, 08:56:24 AM »
We bought our first home in 2002 for $216K, and sold it for about $310K 5 years later.  The first place was 1600sf, and after the 2nd child, was getting tight.  We took $90K to put down on my current home, which was 20% down on the $450K house (no PMI).  Ever since I was a kid, I had parents and grandparents follow this pattern and become wealthy.  Because if I could write a check for 20%, that's not too much house...

That last transaction was summer 2007, and within a year our county tax assessment came in at $260k, down from the $450K purchase price :(   

In hindsight I could have been $250K ahead if I magically knew to rent for 18 months in between homes - but of course I don't have magical powers.

Trust me, none of us do. I'm in the same boat, and I didn't have the luxury of flipping a first home to get that down payment. The first condo I bought (at 25) was literally all the money I had saved up from busting my ass from when I was 14 up until that point. It was pretty devastating to fast forward 5 years and watch that $135,000 evaporate into $44,000 (market value)... and know I still had another 26'ish years of payments to make.

A lot of my friends in the same boat just walked on their condo/home, destroyed their credit, waited 5 years, then bought a new home. In hindsight, I should have done that. I'd be ahead of where I am now.

I can't look at it that way though. I made a decision and I'm past the walk away point. I also can't kick myself for not waiting 14-18 months. I did what I thought was responsible, I got dealt a bad hand... time to re-ante up and move forward.


Bigger picture, what I'm saying... is if you keep making payments and paying that principal down. You're not going to cash out with only $20-30k. The only way that's going to happen is if you start going crazy and borrowing against the equity every time you pay it down enough to do so.

Whatever you sell at is money towards retirement. If you pay the house completely down and sell for $200k (let's say that's a worst case), don't look at it as a $250k loss... because you're going to have $180,000 or so when you walk away. View it as $180,000 towards retirement.

Also, you might be able to sell for $450k (you never know with the long'ish term housing market) and then all of a sudden you're walking away with all the money you need for retirement (combined with your other vehicles).




It took me a really long time to come around to this way of thinking. I kept saying "well, I basically lost $100,000" ($135,000 down to $44,000) on that investment.

That's not accurate at all though, it's not a loss until I sell (or forfeit by not making payments).

If you hang onto the home and pay it down, that $250,000 liability turns into a $200,000 liability, down to $100,000 and then you have it completely paid out and you're looking at a nice profit when you sell. Even if you sell for $200,000... if you've paid the house down that's not a $250,000 loss, it's $180,000 (after fees) towards retirement.

Don't factor in what you initially put down... that's gone and never returning. Factor what you can expect to get out of it when you sell. (assuming you keep paying down principal)


---

Not saying you don't need to readjust your 401k or IRA, just saying that you need to factor in the future sale of your home as well. It's a very important and potentially large piece of your retirement puzzle in 20 years.
« Last Edit: May 19, 2016, 09:20:12 AM by osubuckeye4 »

Offline PorcupineKate

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Re: Tips on assessing my own retirement plan
« Reply #18 on: October 25, 2017, 03:17:15 PM »
I married into a rental property.  My husband bought a 2 family home in a not so good neighborhood several years before we met. He bought it in the spring of 2005 at the very peak of the market so we are still underwater on it. It was very affordable when we were living there and renting the other unit but we hating living in the city.   Luckily it is 2 units so it is slightly cash positive at this point but it is work and stress.  What my husband and I have found is we do not have personalities that make good landlords and I can't do the maintenance myself so that makes things more expensive.

If you do decide to become landlords I strongly recommend finding some local mentors that can help you along the way.  We have found some great mentors that are invaluable in minimizing problems and hiring good help to maintaining the property.   

Offline surfivor

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Re: Tips on assessing my own retirement plan
« Reply #19 on: October 25, 2017, 03:53:08 PM »

 I have never been too sure on easy investment that doesn't take a lot of time to figure out. If you have a lot of hobbies and work full time, it's hard to find time to figure it all out and still have fun doing it.

 Certain real estate type investments did sound interesting, a friend of mine told me about  Real
Estate investment trusts ..

 I was also thinking of buying more land adjacent to my BOL, but it mostly gives me more room to play in, more trees to cut down, better space for gardening or fruit trees. It has a bit more upland type soil .. I am not sure rural land in Maine is going to skyrocket in price or anything though

Offline FreeLancer

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Re: Tips on assessing my own retirement plan
« Reply #20 on: October 25, 2017, 04:51:43 PM »
If you have a lot of hobbies and work full time, it's hard to find time to figure it all out and still have fun doing it.

What’s fun got to do with it? 

Offline mountainmoma

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Re: Tips on assessing my own retirement plan
« Reply #21 on: October 25, 2017, 05:07:47 PM »
Since you are looking for opinions, look into refinancing that house at 15 years. Yes, it will be alittle more a month, but you are thinking of saving more a month, and that diversifies your investment instead of just having 401k's etc.... the prop tax and maintenance are already sunk costs on this piece of property and you will gain more by paying less interest. Also, it will give you alot more flexibility in 15 years.

Offline David in MN

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Re: Tips on assessing my own retirement plan
« Reply #22 on: October 25, 2017, 05:17:58 PM »
I'm stealing this straight from Adam Corolla.

My grandfather had a pension. His retirement was a river. My dad had a smaller pension and some investments. His retirement was a couple streams. My retirement is an attempt to align 500 garden hoses.

We have 2 401s, a roth, an IRA, 3 brokerages (one is the kid's), 2 very small pensions... and this could move again. When I think "retirement" I hear living off dividends in perpetuity. Sounds silly... Unless I start hitting 3,4,5 million across multiple accounts. I'm 36 and past one...

My advice these days is to find a garden hose and kick it the right direction. I love Bob Kiyosaki's idea that you need to start seeing money flow in. Start a small business. My goofy woodworking hustle pays for itself and the shop upgrades. Teach a class. Offer a product. Bank the income and create something that grows. I came damn close a few years ago to opening a food truck. Couldn't make the numbers work, though.

I should admit I am in an unfair position. My wife earns an engineer's salary with benefits. I am left free (while being at home with the kiddo) to run wild with businesses and investment ideas. But you guys would be amazed how many housewives (I include myself) have amazing side hustles. Home Ec and Shop class were not intended to teach us job skills, they were self-employment guides.

Offline mountainmoma

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Re: Tips on assessing my own retirement plan
« Reply #23 on: October 25, 2017, 05:46:45 PM »
One of the mistakes, well, for most people it is a mistake there could be good reasons in some cases, but people have a tendency to keep adding years until their home is paid off ! Either by refinancing to a 30 years, or moving and getting another 30 year loan. Seems to me it is hard to get ahead when you keep setting the clock back to zero on the biggest expense (and need) that you have. Seems to me you should never add years (in general) to the loan life, even if you refi and even if you move. Make the new loan have the same or less years as where you started. So, for you, you first bought when you were 25yo, right now you have added 5 years to the payoff date, but if you re-fi at 15 years, or pay extra to the same result, you will be back to your original payoff date, when you are 55.

Offline Morning Sunshine

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Re: Tips on assessing my own retirement plan
« Reply #24 on: October 25, 2017, 06:05:36 PM »
One of the mistakes, well, for most people it is a mistake there could be good reasons in some cases, but people have a tendency to keep adding years until their home is paid off ! Either by refinancing to a 30 years, or moving and getting another 30 year loan. Seems to me it is hard to get ahead when you keep setting the clock back to zero on the biggest expense (and need) that you have. Seems to me you should never add years (in general) to the loan life, even if you refi and even if you move. Make the new loan have the same or less years as where you started. So, for you, you first bought when you were 25yo, right now you have added 5 years to the payoff date, but if you re-fi at 15 years, or pay extra to the same result, you will be back to your original payoff date, when you are 55.

this.  My parents bought their house for 80k 40 years ago.  In August, when they sold it, they still had $150k left on the mortgage (and 15 years).  They did get 100k equity out of it, so that is something.

But if they had paid off that first mortgage, even in the first 30-year loan, they would have gotten SOO much more out of the thing.  More than the 250 they sold it for.

Offline NWPilgrim

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Re: Tips on assessing my own retirement plan
« Reply #25 on: October 26, 2017, 02:34:27 AM »
Since you are looking for opinions, look into refinancing that house at 15 years. Yes, it will be alittle more a month, but you are thinking of saving more a month, and that diversifies your investment instead of just having 401k's etc.... the prop tax and maintenance are already sunk costs on this piece of property and you will gain more by paying less interest. Also, it will give you alot more flexibility in 15 years.

Also, 15 yr mortgages generally have a lower interest rate than 30 yr.  I did that after 7 yrs of payments on our second house, got a lower rate due to the economy then, and the shorter term.  That meant we would  have the house paid off sooner and make retiring earlier more feasible.

If you are in the Seattle area I feel for you.  I was living in Olympia and commuted to Seattle for a year on a consulting contract.  Had to decide if I was going to continue working there and move to shorten the commute or look elsewhere.  It was discouraging because of the Sound, Lake Union, Lake Washington and Lake Samammish there are only a couple of narrow North-south commute corridors.  Anything within an hour drive is pretty expensive.  We would have had to move almost as far out as we already were to get "reasonable" housing prices.  I ended up taking a job in Portland which has much more rural area within commute distance and more distribution of house prices.  A house is a huge expense, not just the mortgage but you will need to re-roof ($10k-$25k?) it before the end of 30 yrs, probably replace the furnace ($5K+), hopefully the siding stays intact, but surely a couple of complete interior and exterior paintings, landscaping supplies and/or labor, probably some plumbing/sewer repairs, replace fans, toilets, faucets, garbage disposal, etc.  The bigger the house the more of these and the bigger they are and the more expense to do them. 

So, if at all possible you should seriously consider selling and moving to a smaller house: less upkeep expense, less taxes, less interest.  Looking back I think we could have raised our kids in a much smaller house if we had a covered/enclosed out building.  Square footage of a furnished house is dang expensive.  But you can put up one or two 200 sqft buildings (without code in many places) and use them for play/family room, hobbies, entertaining.  I think it would be much cheaper to have a small house on a good size lot (older neighborhood) and build 1-2 semi-detached "sheds".  You could have a covered walkway between it and the main house.

Offline Carl

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Re: Tips on assessing my own retirement plan
« Reply #26 on: October 26, 2017, 06:52:00 AM »
  Treat yourself ,and others ,right,or as right as you can.
Get right with God,or you diety of choice to have hope for the future.
Feed body and spirit and things tend to work out and everybody just calls your preparation ....LUCK.
Faith often opens doors that you didn't think of and often guides our lives in unplanned directions .
Market 'investments ' are fictional and too much manipulated at the whim of others .
Land or a home can be good investments and are less likely to be 'stolen' by seizure ,forfeiture,but
more likely to be abused by renter/non owners if not closely monitored and maintained.

  Good land can be improved with prepared house sight and wells,power provision,and leased as farm land or hunting,or cattle land if it must earn it's keep. and prove a good 'investment for the future ...if you know where your future is taking you.I would not rent a home that you plan to retire to,but would build your future home and live in it and rent your current home until you sell it in a higher market for homes that should happen in the next 5 years or so. Get a good management company to keep an eye on it if you are not close enough.

  You can't eat money ,or take it with you so property,a good family home,and life insurance are the best 'future provision' I have found for your,and your families future as insurance is not prone to inheritance tax though many other items of value are . I rarely worry about such things and often find good ideas for temporary investment just fall into place like my gun collection that has many old Winchesters,Colts,and class 3 items worth hundreds of times more than I paid for them 30 to 40 years ago even Thompsons that were $549 in my past bring $40 K plus now .. and three barreled Drillings are the Holy Grail to many collectors now as they only go up in value. Today,I look for quality of semi custom guns from manufactures that are better finished and offered in quantities enough to not be unique and unknown to the future market.

  QUALITY and the cost to produce it ,always goes up,but the interest and desirability rises faster and can often PEAK and then fall,so an investment can only earn if you are prepared to let go of it.

Offline surfivor

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Re: Tips on assessing my own retirement plan
« Reply #27 on: October 26, 2017, 09:34:46 AM »
What’s fun got to do with it?

 If it's not interesting or fun then it's all work, how many hours a day do you want to work ? Maybe if you work hard enough you won't have to worry about retirement because you won't live long enough ..

 On the other hand, chopping wood and cutting trees is sort of like work but to some extent it's exercise and relaxation as long as I don't overdo it .. Reading some books is interesting and less like work if I like it and don't have to do it