Retirement Planning - Lessons Learned

[Larry Caldwell]

Market Timing…

Real Estate often boom and bust… it’s been 11+ years of gains after the bottom dropped in my area.

Foreclosures on every block… 1922 bungalows going for 100k… those same homes now selling 950k

https://www.redfin.com/CA/Oakland/2736-Bartlett-St-94602/home/539447?utm_medium=share&utm_source=web_share&utm_campaign=native_dialog

It defies gravity especially in East Oakland CA…

If history repeats these 950k homes could be 200k foreclosures…

If we only had a crystal ball… old school I know.

Of course city owned abandoned homes we’re going for $1 in the 1970’s

Real estate prices vary widely, but real estate values do not. They are always a place to live and keep your stuff. Speculators may take it in the shorts, (pun intended) but home owners will be fine as long as they can make the payments. The worst case scenario is a world wide depression that takes a decade to climb out of. I'm hoping that is not likely. My more immediate concern is a monetary crisis like the late '70s that forces double digit interest rates to convince other countries to accept the dollar. The US economy can no longer function without imports, and 12% T-bills would break the treasury. I've lived through it before. If it happens again, it would be many times worse.

I'm very much a fiscal survivalist. My retirement planning always consisted of digging in so deep that the collapse of the economy could not dig me out. I have no debt, and the great majority of my expenses are voluntary. It may not be fun, but we will survive.

 

[ultrarunner]

With all the rent laws and new Covid policies most single family is owner occupied…

A home that sold new for $2400 and a hundred years later 950k is one thing but going from 100k to 950k in 10 years is another…

Know many that walked away 2009-12 never to return to ownership…

Remember… economics is one side but civil unrest, looting, squatters are very real too and I think deserving of consideration.

I have already been faced with massive looting and near pillaging and law enforcement at every level said try to leave if safe… we are not able to respond…

 

[philtyler]

Hiya Andy,

Although I am in Australia, this is what I have learnt from my own retirement.

Firstly I didn't plan far enough ahead. If I had my time again I would start planning 3-5 years before retirement.
2nd. I/we got good financial advice which has benefitted us and also taught me a bit. Our Financial Planner was via my Superannuation company, So probably not applicable to USA.
3rd. We have stayed put in our country town. I have seeen plenty of people move to the coast but having been in our current town for 35 years I/we feel a part of the community. If we were to move to somewhere else, we wpuld know very few people and that is a disadvantage I think.
4th. Having a few acres always means there is something to do. So we will keep our property till it gets beyond me.

Finally, I retired at 70 and it took me a year to get used to it, but now am loving every minute. I guess it is always important to have something to look forward to.

Cheers

 

[goeduck]

law enforcement at every level said try to leave if safe… we are not able to respond…

My feeling is that the will of the people will rectify this, but I sure do not know when.

 

[ultrarunner]

Immigrants from war torn areas often have a very different take on things when it comes to stability and long range projections...

One thing I had never thought about is the US Dollar and how dollar currency and coin from a century ago or even much longer is still legal tender... quite a feat compared to much of the world.

With stability comes the ability to plan...

One of my Grandparents friends came from Germany... was in a well to do family and he told me how German money became worthless... money enough to buy a home suddenly could only buy a bier... sobering prospect.

Some farmers wanted nothing to do with money when it came to retirement...

Contracts were drawn to receive one fatted steer, so many pigs, gallons of milk, grain etc... each year.

The belief is so long as there are people the staples of life have real value and can easily be bartered or converted as needed

It seems some using Real Estate are using a similar philosophy...

Gain ownership/control now and you will provide future inflation hedge and even better if income producing unlike precious metals...

Oh... the discussion all started when I as a kid said I want to have a million in the bank and be rich... he said been there and done that and overnight the money became worthless...

 

[MossRoad]

Immigrants from war torn areas often have a very different take on things when it comes to stability and long range projections...

One thing I had never thought about is the US Dollar and how dollar currency and coin from a century ago or even much longer is still legal tender... quite a feat compared to much of the world.

With stability comes the ability to plan...

One of my Grandparents friends came from Germany... was in a well to do family and he told me how German money became worthless... money enough to buy a home suddenly could only buy a bier... sobering prospect.

Some farmers wanted nothing to do with money when it came to retirement...

Contracts were drawn to receive one fatted steer, so many pigs, gallons of milk, grain etc... each year.

The belief is so long as there are people the staples of life have real value and can easily be bartered or converted as needed

It seems some using Real Estate are using a similar philosophy...

Gain ownership/control now and you will provide future inflation hedge and even better if income producing unlike precious metals...

Oh... the discussion all started when I as a kid said I want to have a million in the bank and be rich... he said been there and done that and overnight the money became worthless...

My dad collects postage stamps. As a kid, I remember him showing me multi-million mark German postage stamps from before WWII. There were lots of zero's. As I recall, that was my first introduction to inflation. I was well under 10 years old and still remember it.

 

[ultrarunner]

Yep... Million Mark bills used for toilet paper or to start kindling...

My simple approach for Grandma for the kids birthdays is the cost of a tank if gas...

A $5 spot in an envelope with a $3 card isn't the same as 50 years ago when the discount station sold gas at 25 cents a gallon.

Last year it was skip the card and put in a $50...

This year with gas at $4.50 it would be $90 using my formula

 

[MossRoad]

Yep... Million Mark bills used for toilet paper or to start kindling...

My simple approach for Grandma for the kids birthdays is the cost of a tank if gas...

A $5 spot in an envelope with a $3 card isn't the same as 50 years ago when the discount station sold gas at 25 cents a gallon.

Last year it was skip the card and put in a $50...

This year with gas at $4.50 it would be $90 using my formula

My wife wrote out a check for $50 for her sister in law's birthday last week. The next day we got a check for $50 from her mom for our anniversary. I told my wife that we've been recirculating that same $50 around the family for about 10 years now. Let's throw everyone's game off and send $55 next time.

 

[ultrarunner]

That's one way to do it...

 

[3Ts]

My dad collects postage stamps. As a kid, I remember him showing me multi-million mark German postage stamps from before WWII. There were lots of zero's. As I recall, that was my first introduction to inflation. I was well under 10 years old and still remember it.

There is a country in Africa where they print paper money with 9 zeros on the bill and you can get one for just a few US dollars. They used to be the "breadbasket" of Africa, but poor government policies led to the devaluation of their currency so much that it is next to worthless. The government officials do not want their currency, they prefer US.

 

[Larry Caldwell]

Immigrants from war torn areas often have a very different take on things when it comes to stability and long range projections...

One thing I had never thought about is the US Dollar and how dollar currency and coin from a century ago or even much longer is still legal tender... quite a feat compared to much of the world.

With stability comes the ability to plan...

One of my Grandparents friends came from Germany... was in a well to do family and he told me how German money became worthless... money enough to buy a home suddenly could only buy a bier... sobering prospect.

Some farmers wanted nothing to do with money when it came to retirement...

Contracts were drawn to receive one fatted steer, so many pigs, gallons of milk, grain etc... each year.

The belief is so long as there are people the staples of life have real value and can easily be bartered or converted as needed

It seems some using Real Estate are using a similar philosophy...

Gain ownership/control now and you will provide future inflation hedge and even better if income producing unlike precious metals...

Oh... the discussion all started when I as a kid said I want to have a million in the bank and be rich... he said been there and done that and overnight the money became worthless...

Inflation compounds. If we hit the Fed's 2% inflation target, that means the dollar loses 21.9% of its value every decade. If it bumps to 5%, you lose over half your cash in 10 years. The moral here is don't keep your money in money. Over the last century, the dollar has lost about 90% of its value, and for part of that time we were on the gold standard or going through deflation.

While consumer inflation has been modest over the last decade, asset inflation has been insane, mostly because of the Fed's free money policy. Nobody is keeping money in money, so anyone who has any is spending it on assets that hopefully will be worth something in the future. That's pretty much real estate and stocks, with a few people dipping into collectibles, firearms, precious metals, cryptocurrency, and art. Young people would be well advised to invest in life skills. Low consumer inflation has handed them the short end of the stick on student loans. With a high inflation rate, they could be paying off their debt with junk dollars.

I just checked, and was surprised to learn that 68% of 70+ homeowners are mortgage free, and 41% for boomers over all. Even the people still paying have locked in housing costs free from inflation. I'm sure many people in the Bay Area are only surviving because a big part of their living expenses cost previous decade prices.

 

[California]

There is a country in Africa where they print paper money with 9 zeros on the bill and you can get one for just a few US dollars. They used to be the "breadbasket" of Africa, but poor government policies led to the devaluation of their currency so much that it is next to worthless. The government officials do not want their currency, they prefer US.

Zimbabwe.

I've been following the adventures of Noraly, a blond Dutch lady and a professional geologist who is touring the world by motorcycle. Indonesia to Europe. Patagonia to Bolivia where she got quarantined in the Covid shutdown. This year South Africa, Namibia, and this month Zimbabwe. (Essentially up the west coast of southern Africa, then crossing the wildlife tourist reserves now, toward Mozambique on the east coast). Her descriptions of the culture and natural features everywhere are fascinating.

A few days ago the comment 'They still use US dollars everywhere'. She had to go to a second ATM in Harare (Zim capital) because the first one said dollars are rationed and that bank never receives enough. She showed a local Zim dollar. Lots of zeroes on it. That poor country has suffered the same fate as Venezuela, from incredibly rich to dirt-poor in one generation, as crooked government stole everything.

https://www.youtube.com/channel/UCEIs9nkveW9WmYtsOcJBwTg

 

[California]

Inflation compounds. If we hit the Fed's 2% inflation target, that means the dollar loses 21.9% of its value every decade. If it bumps to 5%, you lose over half your cash in 10 years. The moral here is don't keep your money in money. Over the last century, the dollar has lost about 90% of its value, and for part of that time we were on the gold standard or going through deflation.

While consumer inflation has been modest over the last decade, asset inflation has been insane, mostly because of the Fed's free money policy. Nobody is keeping money in money, so anyone who has any is spending it on assets that hopefully will be worth something in the future. That's pretty much real estate and stocks, with a few people dipping into collectibles, firearms, precious metals, cryptocurrency, and art. Young people would be well advised to invest in life skills. Low consumer inflation has handed them the short end of the stick on student loans. With a high inflation rate, they could be paying off their debt with junk dollars.

I just checked, and was surprised to learn that 68% of 70+ homeowners are mortgage free, and 41% for boomers over all. Even the people still paying have locked in housing costs free from inflation. I'm sure many people in the Bay Area are only surviving because a big part of their living expenses cost previous decade prices.

Lots of good points in that post.

(Far outer) Bay Area here. Prices are insane. I've read that Zillow jumps on new listings offering instant cash then after they have a few homes in a neighborhood they pay unreasonably high prices for a few more then boom, those new high priced comparables set the inflated value of anything listed there. They hold and rent their portfolio of homes, then may sell bundles to investment banks. Rinse, repeat, there's nothing left that first time buyers can afford if they don't have help from parents. I don't know how much of that narrative is just conspiracy theory but researching Zillow's profitability would clarify things.

"Young people would be well advised to invest in life skills." Yes! Anything that will pay well. In particular, its clear now that the generation that grew up indoors on the internet, instead of helping dad repair a fence, doesn't have anyone to take over as present tradesmen and women retire.

There's no handyman labor to be found around here as the old farts are booked far ahead and they don't have apprentices. Rebuilding after the recent major fires north of San Francisco has absorbed all the skilled labor. Forget finding a small scale roofing contractor etc. Strange times.

 

[Steppenwolfe]

With all the rent laws and new Covid policies most single family is owner occupied…

A home that sold new for $2400 and a hundred years later 950k is one thing but going from 100k to 950k in 10 years is another…

Know many that walked away 2009-12 never to return to ownership…

Remember… economics is one side but civil unrest, looting, squatters are very real too and I think deserving of consideration.

I have already been faced with massive looting and near pillaging and law enforcement at every level said try to leave if safe… we are not able to respond…

Sell and get out...

 

[drssg]

I've read that Zillow jumps on new listings offering instant cash then after they have a few homes in a neighborhood they pay unreasonably high prices for a few more then boom, those new high priced comparables set the inflated value of anything listed there.

My wife would be glad to hear that. We paid full asking price for a field adjacent to our property with no negotiating. Part of my wife's rationalization was that, if we pay more, it will help the value of our property.

The real reason was that she couldn't bear to attempt to negotiate money away from the little old lady who was moving off the property after her husband passed away.

 

[RickB]

My wife would be glad to hear that. We paid full asking price for a field adjacent to our property with no negotiating. Part of my wife's rationalization was that, if we pay more, it will help the value of our property.

The real reason was that she couldn't bear to attempt to negotiate money away from the little old lady who was moving off the property after her husband passed away.

The second reason was if you wanted it you needed to pay up. It’s not like there was an alternative across town.

 

[goeduck]

My wife would be glad to hear that. We paid full asking price for a field adjacent to our property with no negotiating. Part of my wife's rationalization was that, if we pay more, it will help the value of our property.

It would increase your property taxes here, both on the place you bought and on the place you previously owned. That is like shooting yourself in the foot. Maybe you do not have property taxes calculated on comparables as we do.

 

[drssg]

It would increase your property taxes here, both on the place you bought and on the place you previously owned. That is like shooting yourself in the foot. Maybe you do not have property taxes calculated on comparables as we do.

I don't really know how they calculate it, but this field is farmed, and the taxes are quite low for farm land here in Ohio. Most of the expense in our property taxes is due to our house and barn.

 

[ultrarunner]

One single over the top sale near me in Washington profoundly affected all nearby property owners… at least until the property went into foreclosure 3 years later…

The event was quite a wake up call whereas California neighbors paying higher prices carry zero impact on area owners property tax wise…

 

[kenmac]

Average Retirement Savings: How Do You Compare?

Curious how much the average person has saved for retirement? We break it down by age and provide the typical shortcoming.

smartasset.com

If this is correct, people aren't preparing for retirement