petitefrancaise

They are all just living the american dream!

mrken30

I just got my pension statement in and it estimates that I will get less the $3k per year for every $100k saved, so that means I have to save a lot of money, $1m to get $30k a year in retirement. I doubt if many people will get anywhere close to that. The baby boomers had an easier time. Gen Y have got an almost impossible task ahead

Maybe people just give up even trying to save enough money. There is a ticking timebomb waiting to happen. Underfunded personal and company pension schemes and tax payer funded schemes that will be paid for by increased taxes.

robin1234

In what way did baby boomers have an easier time? Also, that $3k per year for every $100k in the account is just an estimate - who knows what conditions will prevail years in the future?

So say you have 500k saved in the pension? That's 15k a year, plus social security. A perfectly comfortable income for one person (I'm assuming a couple has double that.) Assuming the house is paid for etc., and you also have additional after tax savings etc.

ddsrph

That's true, plus you also have to consider using up the principle over time, which should bump it up. Like you said its critical to have a house paid for at retirement. Living in retirement mode for 20 to 25 years is very common and I would hate to have to depend on renting inflation for that long. Reverse mortgages is also another potential scource of retirement income for those with a paid for house.

mrken30

15k pays for water and property tax. I don't thing social security will pay for much else. 15k is about half the state minimum wage

Pulaski

A good part of the problem is that people don't understand that investment returns and mortgage interest are opposite sides of the same coin.

What should have happened as mortgage and savings rates collapsed is that the money people "saved" because of the reduction in the cost of borrowing to buy a home should have gone into long term savings, preferably something tax-advantaged. Instead Gen Y has gone off on a rampage of buying extravagant houses and fancy cars.

When we moved to the US we bought a house using part of the proceeds of the sale of our house in London as a deposit, and investing the rest. When I applied for a mortgage the amount the bank was willing to lend was scary! I set a budget and we bought a very nice house, more than we needed at the time, in anticipation of having a family, but in truth we could have financed a house for three times as much!

By investing and buying a relatively modest house we have left ourselves in a strong position. We live on about half our net income but have a retirement income projected to exceed our current income, by quite a large margin. ..... Maybe we have been too conservative?

robin1234

One thing about retirement is the freedom to live anywhere - with no effect on income. Many places in America, 15k would pay your property taxes for five years, and with a well and septic tank, you don't pay for water. Many places, you can by a house for 150k, or 100k, or 50k ... or less.

petitefrancaise

well, not quite true.

One look at the french (and I assume other parts of the EU) forum at the mo, will tell you what a 16% reduction in income means....this is due to the fall in £ against the €.

mrken30

The same in England, I was just offered a 2 bed large flat in a seaside town , about 1/2 mile from the beach for 60k. Do I really want to look at a big move in retirement?

Pulaski

I was about to say the same thing, because you have just described our house, all four bedrooms and 2,750 sqft of it, with one major difference: at current tax rates $15,000 would pay for more than TEN years taxes.

mrken30

Maybe we will move nearer to your part of the world, sounds like a bargain.
A 2,600 sq ft single story here is about $6-7k per year , so yes location makes a big difference. We have had this discussion before. But I assume you either suffer in services provided or the county/city obtain income from other sources. There was a 1500 sq ft 1972 house sold last year nearby which is only $5,000 a year property tax.

Pulaski

I "suffer" nothing, I get all the services I need, and want for none (I need no additional services).

It is offensive that cities can get away with charging so much to provide "services" that many people neither need nor want.

mrken30

I agree, maybe the cities around here could learn a lot from cities like yours.

robin1234

Well, obviously exchange rate movements are a different matter. There are a lot of risks in life.

robin1234

I think most workers get somewhere between 12k and 24k in SS when they retire, so it would double that notional 15k income .... it would pay for quite a bit ....