The Core
Why We Are Here => Economics & Investing => Topic started by: littleman on February 21, 2019, 06:53:28 PM
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And what will that mean to you?
I personally know a lot of people who call themselves retired but are still doing part time work. I guess in my mind retirement would be the ability to make work decisions without having to worry about the economics of those choices. Realistically, I won't be able to get there for another 20 years.
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Two answers
1. Never if retirement means sitting around and not "working" on something that interests me.
2. Now if retirement means "the ability to make work decisions without having to worry about the economics of those choices."
Realistically, #2 is a long ways off. I am down to a rather busy "part time" these days at age 55. The master plan is to get Theresa to #2 this year, in her late 40s and see how that goes.
One of the big discussions we've been having is how much stuff we would or wouldn't give up in order to retire early or scale back to a part-time that basically feels like retirement.
Willing to pass on: fancy trips, fancy gear, new cars
Not willing: health insurance, healthy food, simple trips, visits to family
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Currently in the US, unless driven by dire personal circumstances, it is best to postpone drawing Social Security until you're 70 --even if you have to use other savings to supplement your income after age 62. (SSA regs change as to "full retirement" age based on year of birth, so this may vary some.)
Basically, SSA pays you 8% per year if you postpone after full retirement age (mine was 66). It penalizes you 8% per year if you start early. So the difference between 62 vs 70 is massive.
When I first hit on this back 15 years ago, it was a radical idea. Supposedly, the stock market was *guaranteed* to do better than 8% per annum. Heh, that's since changed and I see the above advice touted all the time now.
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When I first hit on this back 15 years ago, it was a radical idea.
When my dad retired back in 1992, he said that was his strategy - he said that he would put off taking SS or his military pension until he reached the max benefit, even though it meant a few tight years. Now he sits here at almost 90 able to offer himself all manner of luxury that he couldn't afford thirty years ago.
The one difference now is more skepticism about the solvency of pensions, govt or corporate or union. I took my tiny state pension (few years at low pay = small pension) the first year it was available (2018!), as advised by the state, because I wouldn't hit breakeven until 33 years from now. So by waiting until 67, I was going to be betting that everything was going to be the same or better until 2051. That didn't seem like a good bet to me.
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Other tidbit from my dad during this visit that surprised me. He said he had often thought about building a very small house that was super efficient and had low expenses (taxes, insurance) and just not having to worry.
It sparked the idea that we are close to where we could sell our house, buy a piece of land somewhere cheap, put a really modest and efficient home on it and be totally retired (in the sense that LM defines it). My wife says she wants to wait at least two more years before looking at that plan in detail.
PS - when I was six, someone asked me what I wanted to be when I grew up and I said "retired." I've been asking myself this question for almost 50 years now. The problem is for the first 40+ years I had an aversion to making money, so I didn't make that much progress on it.
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The tough part is to *realistically* calculate what income you're going to need to support a tolerable lifestyle after you retire. I am shocked by the wildly optimistic factors I see out there.
Inflation is the toughest, and inflation for expenses is going to be higher than inflation for revenues.
>Now he sits here at almost 90
The other tough one is projected lifespan. You can't bank on the population demographics of M81/F83. Use 91.
Oh, and the average US couple spends something like $250k on out-of-pocket medical, even with Medicare and supplemental insurance.
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All those factors, and especially the last one, is why the smarter half of our couple insists that whatever we do for the next decade, maybe two, we have to live so that, barring major events like medical issues, we are adding to savings, not pulling out.
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>the average US couple spends something like $250k on out-of-pocket medical
I believe Aaron called the US health care system a wealth extraction program.
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I am really looking forward to what you described in #2 Ergo; I just hope I have inspiration and creativity by the time I get to that point. I have a list of projects I'd like to do, but I have no idea if they will still be relevant by then.
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I'm at 2. but it isn't any different, you still the same person.
When I wake up I think what woolly mammoth I need to kill today.
It's very hard to turn the switch off. I'm getting there though.
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I'm at #2 and life is good.
I don't think of myself as retired, though.
>> list of projects
Yep. It never ends!
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I have no idea if they will still be relevant by then.
I would guess that if they aren't relevant, it's because you have found other projects that are.
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The tough part is to *realistically* calculate what income you're going to need to support a tolerable lifestyle after you retire
Interesting thoughts here, but I think Mark touches on the above. It is surprising what low income you can be happy on, although I am not sure we need to downsize just yet :) ( Re get a smaller efficient home, as the garage is always too small)
Also, its important not to forget that spending requirement changes as we age. In our 60s we are hopefully but not necessarily still very active, still wanting to "do". Many of us continue that in our 70's and a few into our 80s. But that vast majority of us will be dead in our 80s, and many of those still living will not want to spend too much time outside.
When we are younger, we only see the active oldies. Not those that cannot do anymore as they are sat in their chairs.
This is interesting I think:
https://finalytiq.co.uk/busting-myth-u-shaped-retirement-spending/
Enjoy life today.... :)
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>>the average US couple spends something like $250k on out-of-pocket medical
"A male-female couple leaving work this year can expect to pay $285,000 in healthcare and medical expenses throughout their retirement, Fidelity Investment said in a report released Tuesday.
For single retirees, women can expect to spend $150,000 toward healthcare and men $135,000, the financial services firm said. Those costs are up 3.6 percent from two years ago, a slower rise from 2015-2017, when the costs jump 12.2 percent."
Study: Americans could spend $285K on healthcare in retirement
https://www.upi.com/Top_News/US/2019/04/02/Study-Americans-could-spend-285K-on-healthcare-in-retirement/1241554208800/
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UK... NHS... :-X
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"A male-female couple leaving work this year can expect to pay $285,000 in healthcare and medical expenses throughout their retirement, Fidelity Investment said in a report released Tuesday.
And that makes a lot of optimistic assumptions about the future of Medicare, etc.
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I watched my uncle check out about a year ago. My prediction is that a lot of people will bypass the last six months of end of life care and diy an expedited process. Dying naturally can be a cruel process.
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Overall, 35 percent of U.S. households do not participate in any retirement savings plan.
Even among those households that do hold retirement accounts, many of them have low account balances. The median (50th percentile) household of all ages (the red bar) holds only $1,100 in its retirement account. Even the 70th and 80th percentiles of households have only about $40,000 and $106,000 in their retirement accounts, respectively.
Many Americans Still Lack Retirement Savings | St. Louis Fed
https://www.stlouisfed.org/publications/regional-economist/first-quarter-2018/many-americans-still-lack-retirement-savings
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Those are scary statistics.
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It's interesting that the 55-61 cohort has the highest savings.
In the 80th percentile at 62-67 (so presumably done with their earning years), you only have a bit over $200K. Using the 4% rule, that means you have $8,000 per year you can withdraw.
Basically, everyone outside the 90th percentile is utterly dependent on Social Security and continued work into relatively old age.
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Basically, everyone outside the 90th percentile is utterly dependent on Social Security and continued work into relatively old age.
Neil Young:
It's better to burn out than to fade away
I think I have a unique view on getting old. Its not pretty whatever money you have.
A little gets a bit of comfort, but rarely can pain be taken away.
A tough decision would be to say, Retire, blow a load on a fantastic retirement, keep a little bit for getting older, and enough in the bank to get to Switzerland as the end approaches.
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Who is the famous person who said he would go to Switzerland when the time came, but then got Alzheimer's and lost the ability to think clearly and never did go to CH?
I think it was Terry Pratchett.
If you have cancer, assisted suicide is an option. If you have cognitive issues, it gets much more complicated
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>think it was Terry Pratchett
Ditto.
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>complicated
I remember that there was a lady with early Alzheimer's who Dr. Kevorkian assisted and it was very controversial at the time. If I remember correctly they played tennis together the day before.
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Back to the essence of the original question, imho those in their 50s now in the UK have seen property values rocket, in a way I certainly never expected. I had assumed that our parents had made the big wins on property, and for us it would be more difficult. I has not been so far.
If we have made wise property decisions, then to a degree we are in luck. A £300,000 house (just above the national average,) gives an extra £10,000 for 30 years (I am assuming investment matches the inflation, a big a## I know but makes it simpler)
That on top of a state pension, a bit of gardening or chauffeur work to give beer or holiday money, should keep us quite comfortable if not rich.
The issue as Ergo said, is what to give up? Children, certainly not. Holidays can be cheaper. Most stuff is pretty irrelevant. I could be happy at that, so long as I have a boat, (maybe two, sail and motor) a mountain bike (elec later) a motor bike.... a dog... heat and food.
Simples. Just got to persuade the rest of the family.
As an aside, a good friend's (second) husband recently went off on a canal boat for good, saying " You love your family too much. Goodbye." That I find very sad.
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I find it very sad, but I also had trouble explaining to someone, who has never had a good relation with any of his family, why I find that sad.
The thing about the big win on property, is that it only helps if you can sell and move to somewhere cheaper.
>>what to give up
As much as possible, give up stuff in exchange for time and people, preferably time with people you care about.
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As much as possible, give up stuff in exchange for time and people, preferably time with people you care about.
Golden. If I may be so bold to add to that:
For as long as possible doing things together you both enjoy.
Aside, bit of a hijack. Just did this with Lucy (now 18) https://xrunner.co.uk/wild-thing-mud-run-obstacle-race/
I don't expect to be doing it forever, but it was fun while we could do it together :) Water temp bracing... 10 deg C
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A financial planner gives the same first piece of advice to new clients, and it usually leads to 3 important discoveries
https://www.businessinsider.com/financial-planner-advises-new-clients-track-spending-2019-6
This.
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Grossly over-simplified, as it does not account for inflation --but it's a start.
The Most Important Retirement Chart You'll Ever See -- The Motley Fool
https://www.fool.com/retirement/2019/08/01/the-most-important-retirement-chart-youll-ever-see.aspx
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So many people I know have a negative savings rate yet drive expensive cars, go out to eat in pricy restaurants and indulge in other forms of conspicuous consumption. I guess they'll win of an asteroid wipes us out.
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Families are going into debt to stay middle class
https://www.businessreport.com/newsletters/families-are-going-into-debt-to-stay-middle-class
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"Born in 1961, the oldest Xers are graying, aching, 57. And in trouble. A New School study projects that 40% of workers ages 50-60 and their spouses who are not poor or near poor will fall into poverty or near poverty after they retire ... The rapidity and scale of downward mobility among the elderly will shock American society, precipitating political upheavals as dramatic as those we saw during the 1930s."
40% of American middle class face poverty in retirement, study says
https://www.cnbc.com/2018/10/12/40percent-of-american-middle-class-face-poverty-in-retirement-study-says.html
Bernie's Plan to Address the Retirement Crisis: Good It Exists, But Not Nearly Enough to Solve the Problem
http://www.rasmussenreports.com/public_content/political_commentary/commentary_by_ted_rall/bernie_s_plan_to_address_the_retirement_crisis_good_it_exists_but_not_nearly_enough_to_solve_the_problem
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Once accustomed to a certain style of living, most people have trouble giving something up to stay within a budget.
So when prices rise faster than wages....
Also, I just feel like people (Including me) are not nearly as tough as in times past. Most people in their 40s and 50s that I see are incapable of physical labor. By the standard of 40 years ago, they would be disabled or nearly so. Not to mention that non-professional, unskilled labor is mostly a lot nastier than it was just 20 years ago. So if you fall from middle class, the fall is long and hard
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>many people I know have a negative savings rate yet drive expensive cars, go out to eat in pricy restaurants and indulge in other forms of conspicuous consumption
Here ya go, LM. Saw this quote yesterday on a machinist's shop video. I'm thinking of getting it as a tattoo, hhh.
Work While They Sleep.
Learn While They Party.
Save While They Spend.
Then Live Like They Dream.
- Abhinav Jain
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I have the first three down, waiting for the fourth.
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The antidote to that:
There was once a businessman who was sitting by the beach in a small Brazilian village.
As he sat, he saw a Brazilian fisherman rowing a small boat towards the shore having caught quite few big fish.
The businessman was impressed and asked the fisherman, “How long does it take you to catch so many fish?”
The fisherman replied, “Oh, just a short while.”
“Then why don’t you stay longer at sea and catch even more?” The businessman was astonished.
“This is enough to feed my whole family,” the fisherman said.
The businessman then asked, “So, what do you do for the rest of the day?”
The fisherman replied, “Well, I usually wake up early in the morning, go out to sea and catch a few fish, then go back and play with my kids. In the afternoon, I take a nap with my wife, and evening comes, I join my buddies in the village for a drink — we play guitar, sing and dance throughout the night.”
The businessman offered a suggestion to the fisherman.
“I am a PhD in business management. I could help you to become a more successful person. From now on, you should spend more time at sea and try to catch as many fish as possible. When you have saved enough money, you could buy a bigger boat and catch even more fish. Soon you will be able to afford to buy more boats, set up your own company, your own production plant for canned food and distribution network. By then, you will have moved out of this village and to Sao Paulo, where you can set up HQ to manage your other branches.”
The fisherman continues, “And after that?”
The businessman laughs heartily, “After that, you can live like a king in your own house, and when the time is right, you can go public and float your shares in the Stock Exchange, and you will be rich.”
The fisherman asks, “And after that?”
The businessman says, “After that, you can finally retire, you can move to a house by the fishing village, wake up early in the morning, catch a few fish, then return home to play with kids, have a nice afternoon nap with your wife, and when evening comes, you can join your buddies for a drink, play the guitar, sing and dance throughout the night!”
The fisherman was puzzled, “Isn’t that what I am doing now?”
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Rupert... the problem is that we live in the US and have the healthcare problem.
So now that we are scaling back and trying to emulate the Brazilian fisherman, we find that we have an insurance bill (property + car + health) of $23,200 per year in after tax money. We recently found a provider who knocks $5000 off our property insurance, so we are only at 18,200 in insurance :-)
If not for that, we would mostly be living like the Brazilian fisherman honestly. With four kids, it's even harder.
Easy to romanticize, but hard to pull off without ending up with high anxiety in practice. America has become the Land of Anxiety.
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America has become the Land of Anxiety.
Same here. But the Brazilian is right.
We are only anxious because we have stuff to lose.
The Nepalese are the same as the Brazilian. Happy generally .
We have too many fixed costs, I keep wanting to scale it down, but it seems the family will not allow me too either. :) Still keep trying. A Mate of mine has his own flat, and lives on less than £10,000 p.a. Includes a car.
I think the only thing the Fisherman is missing from his life is the health insurance, and for end of life costs I wonder if its really the bonus we think it is. I seem many very unhappy old folks.
I threw it in as a "food for thought" :) I know its not easy to emulate.
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We are only anxious because we have stuff to lose.
The Nepalese are the same as the Brazilian. Happy generally .
But back to the health insurance issue or homeowner's issue...
Yes, I see a lot of unhappy old people. There is a cruelty at end of life. You have to remember, though, that in past times, people were often "old" and debilitated for decades. John Calvin died at 55 after suffering from illnesses of old age for over a decade. Think about that for a second.
I was hiking in Nepal and we came across a fairly young guy who had a major leg injury, but something easy to fix in the US or UK. My friend (now a doc, but not yet at the time) asked them, "Can you take him to a doctor?" They kept saying no. He looked at me and whispered, "This guy is screwed. He will never walk again."
So yes, we have things to lose, but they are not necessarily our possessions. My fear about losing health insurance is based on the fact that my wife would be dead now without good medical treatment and we would be bankrupt if we hadn't had insurance. $700,000 in medical bills, of which we were required to pay less than $5,000.
As a historian I study a period when people in Europe lived more simply than most people in Nepal live now. There was some degree of "why worry about the future (aside from the salvation of your immortal sould)?" but that was because
- you could die at any time
- there was nothing you could do about it
There was a lot of anxiety about injury and death and a lot of pain associated with watching half your children and possibly 2-3 spouses die over the course of your life.
Check out the title of History 403 at Purdue: Reformation Europe: An Age of Anxiety
Summary: "Economic transformation, social mobility, unprecedented poverty and homelessness, rebellion, the encounter with new worlds overseas, and war, all conspired with religious upheaval to make this epoch an age of anxiety."
https://cla.purdue.edu/academic/history/documents/Syllabus-Spring/403-Farr_Sp2012.pdf
There is a "world we have lost" (famous book by Peter Laslett), but one should not romanticize the "simple" life overly much.
Dating back a long time, but especially beginning in the 18th century, there is a whole literature extolling the virtues of the simple life and how much happier people were. But they are almost all written by people of means. There are some examples of memoirs from peasants who became literate who basically debunk that and say that the life of the poor was mostly a life of toil.
Now, if you go back before agriculture and look at hunting and gathering societies, that's a different deal. There, people really do seem happier and there is virtually no incidence of depression. But you still have to deal with only 25% of births resulting in someone reaching adulthood - 50% die before 1 year, another half before 20. Again, as a parent, think of that.
I threw it in as a "food for thought"
Of course. I am throwing this in as food for thought. The high-level takeway from the fisherman is that one should be happy with what one has. I think a key is to be grateful for the things that wealth brings us, like safe drinking water, for example. That is incredible. That's the other way to take the fisherman's tale.
At a young age (teenager), I started reading Buddhist literature and I realized there are two ways to attempt to satisfy desire. One is to attempt to fulfill your desire, but that process is infinite and doomed to failure and unhappiness. The other is to reduce your desire, which is finite and is the surer path to happiness.
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Even though there are limitation imposed by the institutions of given societies, and the USA in particular isn't really set to let people ever have satisfaction I think a simplified, happy life is possible here.
http://www.professionalwealth.com.au/media/1116/pw-your-money-or-your-life.pdf
Ego is probably the biggest obstacle.
A 2004 Honda Civic (~$2000) is more reliable transportation than a 2019 Maserati GranTurismo (~$150,000). If one can hop off the rat race s/he could live a pretty nice life in the first world.
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So much to think about isn't there :)
I strongly believe the we in the west are the luckiest people ever to have lived. We SHOULD therefore be the happiest ever, but sadly it appears we are not.
Perhaps the big knocks of people dying in such huge numbers made those alive more aware of what they had/have.
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US: This Is, Statistically, the Worst Age to Take Social Security Benefits | The Motley Fool
https://www.fool.com/retirement/2019/08/18/this-is-statistically-the-worst-age-to-take-social.aspx
TL;DR: 64
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I'd like to give it until 50, but realistically it's probably 70 as pensions, savings is not nearly enough as it looks now.
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https://www.theatlantic.com/magazine/archive/2019/09/meritocracys-miserable-winners/594760/
A person who extracts income and status from his own human capital places himself, quite literally, at the disposal of others—he uses himself up. Elite students desperately fear failure and crave the conventional markers of success, even as they see through and publicly deride mere “gold stars” and “shiny things.” Elite workers, for their part, find it harder and harder to pursue genuine passions or gain meaning through their work. Meritocracy traps entire generations inside demeaning fears and inauthentic ambitions: always hungry but never finding, or even knowing, the right food.
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US:
Congress Passes Secure Act, Expands Retirement Plan Access
https://www.financialadvisoriq.com/c/2606353/299863/congress_passes_secure_expands_retirement_plan_access
<+>
https://www.forbes.com/sites/jamiehopkins/2019/12/16/congress-passes-secure-act-at-last-minute-impacting-retirement-planning-and-increasing-taxes/
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Americans are retiring to Vietnam, for cheap healthcare and a decent standard of living
https://www.latimes.com/world-nation/story/2019-12-25/americans-are-retiring-to-vietnam-for-cheap-health-care-and-a-decent-living-standard
via https://www.reddit.com/r/VietNam/comments/egdgdg/americans_are_retiring_to_vietnam_for_cheap/
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NFFC:
How do the healthcare quality and access in NAM compare to the UK?
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Quality is bordering on excellent at the right hospital, Singapore is world class and a 3 hour flight away.
Only contact I have had was pre-wedding. You need a compulsory "check you not crazy" visit with a doctor. We added on a bunch of blood tests, heart check, blood pressure, chest x-ray and lots more I can't remember. Was around 5 hours in total. $100.
The hospitals catering for the locals won't meet your needs. Had a friend whose wife gave birth, was 3 in a bed!
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Pricelist attached, hospital is like a 5 star hotel.
1 million VND about $43
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Nice that it is all listed with the price like that. A major concern in the US is just figuring how much a visit/procedure will actually cost.
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Presidential suite... nice 43M VND
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Nice that it is all listed with the price like that. A major concern in the US is just figuring how much a visit/procedure will actually cost.
If hospitals in the US were required to post their prices, that would be a huge help just by doing that. In a country that sings the praises of the free market and competition all the time, there is no access to the information that would make a free market possible. Unless you think cartels are free markets (which from an extreme perspective, they are).
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Presidential suite... nice 43M VND
23 million
Half tidy too.
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23 million
oops.. a dyslexic reading numbers sideways.
Love the Chair! Bet it massages too.
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>Love the Chair! Bet it massages too.
Many homes have them, they crazy about the massage thing.
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We are heading for a pensions apartheid | Coronavirus pandemic | Al Jazeera
https://www.aljazeera.com/indepth/opinion/heading-pensions-apartheid-200401062821093.html
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"This is not the sort of thing they teach at school - but perhaps it should be."
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IIRC, North Carolina schools were going to require a high school course in personal finance. ....That was back when we had schools.
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I thought i had a vague idea about my retirement until i read this thread, now i have a very vague idea!
Can't be sitting around fishing like the Brazilian guy in the story (a natural, philosophical thinker he is, don't know why i'm phrasing like Yoda), i like having projects, preferably money-making ones. But beyond hobbies, and travelling if i can, is pets or looking after animals on a larger scale. I don't even have savings so starvation will probably get me.
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The flip side of low interest rates:
Do you really need $8 million saved up for retirement? - MarketWatch
https://www.marketwatch.com/story/do-you-really-need-8-million-saved-up-for-retirement-2020-09-11
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I've been wondering how all that affects the so-called 4% rule. The 4% rule should work if you plan to die in 20 years, but what about all the FI people retiring at 35?
The reality is, though, that the gross net assets of the bottom 50% of Americans is slightly less than zero. Way less than 1% will retire with $8,000,000. A friend in his 70s is retired on social security and $6,000 in savings. That's scary.
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In many ways, it is still about local cost of living. In rural NC, with the mortgage paid off, we could live ok on Social Security (though our SS is on the higher end). This assumes that Medicare and supplemental health insurance is covering the medical bills.
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Well, I wasn't going to get into it, but in this case, he was self-employed most of his life and did not declare all his earnings, so his SS payment is low.
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>did not declare all his earnings
Yeah, you can't have it both ways. Low SS will come back to bite you.
For the last decade or so, about half of my income was classified as self-employed. I mostly did it to avoid the reporting hassle and bookkeeping costs of a single-person payroll. I reported everything to be sure I was bumping my SS, but -man- that self-employment tax takes a bite.
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>>man- that self-employment tax takes a bite
Yeah. My wife switched over halfway through 2019 and we were not close on our estimated taxes. We got hit with a $14,000 tax bill (and, the same week, an $8K homeowner's policy and $2K fridge replacement). Some of the $14,000 was getting ahead of things on our 2020 estimated tax, but yeah, it hurts. If Social Security were like a lot of defined pension plans where your payout is based on your three highest years, I would go a few years where I would skip all the deductions.
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I'm going to retire at the age of one hundred and eleventy one.
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Will you vanish at your retirement party, then?
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>> and, the same week
File that under OUCH!
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File that under OUCH!
Life. We've avoided the Big Ds. We're not destitute, divorced, dead, disabled or even depressed yet! Most everything else can be overcome by buying more ice cream.
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>Big Ds
Just ran across this headline:
Virus America, six months in: Disarray, dismay, disconnect
https://apnews.com/706587be1d93d2672087a0ad99459462
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>tax
Been grumbling about that too of late. Bought a new house and managed to get the deposit from my current place. Apparently if you own more than one house on the day you acquire the new one, you pay 4% of the purchase price as tax. You do get it back if you sell your other property within 27 months though.
So the plan was to rent it out the old place for 2 years or maybe forever more, but if you do the property then becomes subject to capital gains tax after selling it. It's the closest I've ever been to looking for professional financial advice.
Ideally the old home could've been a pension from the rent but probably not to be. Didn't like the idea of being a landlord anyway.
Found out that even though I'm 40 next year, banks are happy to do 30 year mortgages. Hopefully it's paid off by then.
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>> 30 year mortgages
My approach: set up a mortgage with the lowest monthly payment available, <and> also make sure there's provision to pay ahead without penalty.
Then, make extra payments as part of your regular financial routine.
That plan would give more wiggle room in a lean month than if you just took out a shorter mortgage with higher payments required.
If you analyze how much of an ordinary mortgage payment goes to interest, especially in the early stages, you'd likely be surprised at how small an extra payment would need to be to shorten your mortgage by a month.
Biweekly payments instead of monthly will also help the cause a bit.
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>>I'm 40 next year, banks are happy to do 30 year mortgages.
Swiss mortgages were commonly 100 years when I lived there. They don't expect you to pay off the loan until you sell the house.
>>early stages
On a 30-year, $300K mortgage at 4% your first payment is $1432, of which $1000 is interest. If you had the cash to double that payment, you shorten the loan by about 3.3 months. Whereas if you do the same thing 20 years into the loan, that extra payment shaves off less than a month and a half.
I'm sure a financial person would point out that since we paid down our 4.5% loan fast during a bull market, we're actually a lot poorer than we would be had we invested it. But debt stresses me out, so it was worth it to me. People who are less stressed by debt would take another strategy. It's a combination of what makes sense financially and what makes sense emotionally.
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>pay ahead without penalty.
Yeah, where I stand is if I sell the old place I'll incure a 2% hit on 60% of the house value, on the new place I can pay 10% of the total outstanding mortgage without a charge. I'll be on a 2 year mortgage. Idea is to pay up 10% for each of those years and I'll end up with a mortgage <3 years my wages which by today's standards ain't too bad. I'd probably overpay after the 2 years anyways. Hate interest, would rather fork out than pay it.
Interest over the 2 years is 1.34% so probably the cheapest money I'll ever borrow apart from a student loan.
The upside is I get a new room to exclusively work in.
Planned to retire at 40 (in my dreams) but it doesn't work out like that does it. Anyways I//we are fairly low maintenance so this is the last hurdle really. All about our life ambitions in the end. For me it is simply to get a hot tub in a back garden that is fairly private. If I sell the old place I'll have the means for that so I guess I'll have to figure out a new goal. Beer, hot tub, world cup seems like things worked out alright. There could be worse positions to be in, financially or health so I'm alright with it.
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Will you vanish at your retirement party, then?
Yes, up my ring ;+}
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>>hot tub
Ah, like my sauna dream. I think my wife is responsible for convincing me that maybe you can live a better life by designing a life that includes the things you enjoy and work that, if you don't enjoy, doesn't suck your soul, compared to focusing just on retirement or bust, which is ultimately a negative vision in that it is defined by what you won't do or won't have to do rather that what you will do or can do.
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>hot tub
I had a pinnacle moment when living in Canada, 2C outside, clear sky, cold beer and hot tub- no worries. I decided this is for me. It's a novelty/vanity thing most likely, but I could probably say I earned it.
Not so worried about retirement while my hands work but tbf my middle right finger seems to have a bit RSI. must be a sign of age :-)
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TL:DR; 5%
The inventor of the '4% rule' just changed it - MarketWatch
https://www.marketwatch.com/story/the-inventor-of-the-4-rule-just-changed-it-11603380557
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Thanks for sharing that. Interesting. I've been rounding the 4% rule down to 3% in my calculations (which are mostly just daydreams rather than plans since neither 3% nor 4% nor 5% currently gives me the life of ease I am shooting for).
Still, the difference between 3% and 5% is huge. However...
“It’s not a law of nature,” he says. “It’s empirical”
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In the UK the Telegraph is saying 3%
https://www.telegraph.co.uk/business/2020/09/28/new-retirement-savings-rules/
and
https://www.telegraph.co.uk/investing/news/forget-4pc-rule-real-way-fund-retirement-sustainably/
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TLDR: $2.8m
How Much You Need to Retire Comfortably in the 10 Biggest US Cities
https://www.businessinsider.com/personal-finance/how-much-to-retire-comfortably-in-biggest-cities-2021-8
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I'm surprised how many places are more expensive as a renter than as a homeowner. I wish they said what their assumptions were (e.g. house paid off?)
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High inflation isn't helping, though I planned on 4%+
Economist: ‘Retirement for most people is financial suicide’
https://finance.yahoo.com/news/economist-retirement-for-most-people-is-financial-suicide-185417957.html
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Worth a scan. Excluding Hawaii, there is still a big spread between high/low. Basically, blue/red.
US: How Long $1 Million in Retirement Will Last in Every State | GOBankingRates
https://www.gobankingrates.com/retirement/planning/how-long-million-last-retirement-state/