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I just think the idea that people should keep big mortgages and take cash out of the house to gamble on the stock market is a foolish long term strategy and can make it impossible to retire because of the big debt. Over extension of debt is the big, big economic problem right now. The beneficiaries of that sort of strategy are the brokers, banks (if they avoid foreclosure), and fund mangers. It is especially foolish in a sinking real estate market - you can easily end up with more debt than the house is worth while the money you invested isn't making all that much either or even losing money.
But again ... it would depend on how you do it. I don't think this is always a bad idea.
For example, between me and my husband, we have both 401 and 457 plans (four total) where, in a few years when we turn 50, we would be able to save up to $80,000 a year total for retirement.
I wouldn't think about doing this with the bear market now but, in a couple of years when I think stocks will turn around ... borrowing on the house to increase our retirement savings could make a lot of sense ... especially if interest rates are low.
If the debt still costs only 5 percent ... but the market takes off at 15 percent ... and a third of your income that ordinarily would go to taxes is also earning 15 percent for your retirement ...
With a ten percent spread, that's a pretty good deal. Especially when you get tax breaks on the debt AND additional deferred income tax breaks by investing and growing more money into your retirement account.
I'm not talking about borrowing huge on the full value of the house but ... it could make sense to cash out some of your equity in this scenario.
Your story describes why there needs to be regulations and social security so when people get rooked, they have some recourse. Maybe if yo had a good lawyer you could have challenged the old hospital bills. If they didn't submit the bills in the first place, then they shouldn't be able to come back years later. But good lawyers are very expensive.
I hope your luck is due to turn for the better. It sounds like you are overdue.
I have social security, I have multiple disabilities. I paid in for over 40 years, and still had to go to court twice to get it. DH should have had it, but somehow they 'lost' his records, and according to social security, he hadn't worked his entire adult life. I wish it had been the IRS that had lost them! I thought about getting a lawyer for the hospital thing, but it would have cost me as much as was owed, at a minimum. What I ended up doing, which is not at all the kind of thing I usually do, was tell them it was their mistake, not mine, deal with it. I'm not paying for your errors. Just to make things a bit more interesting, now that I'm a 'single' person, I no longer qualify for anything else. My social security gross is a couple dollars over the limit for any other benefits.
Originally Posted by debw6051 It all started with an idiot named DUBYA! Think of how well off we were in the 90's. VOTE HILARY AND WE WILL BE AGAIN.
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Originally Posted by Buckhead_Broker
That is the most frightening thing I've heard in years!
Why? She's got lots of experience - especially at ignoring unpleasant things like her husband having constant affairs, all for the sake of maintaining her own power. One can only wonder what other things she might ignore.
I think for a lot of families, it is a combination of lower paying jobs and the the expense of raising a family. Maybe savings is a lot easier when one trip to the hospital can set you back several thousand dollars. Then the cost of necessities such as eyeglasses and dental when your insurance only covers medical. So how does a family save 15,000 a year for retirement when the income coming in is 45,000. It is impossible to do. Also, many are employed by small businesses that cannot offer benefits such as 401K. So time goes on and after 20 years, people are no closer to saving for retirement. You really can't judge so many families and say that they are being irresponsible for not building wealth when living their income keeps them paycheck to paycheck. When you are struggling to pay rent, utilities, insurance, food etc... retirement savings is not going to happen. Credit card debt too is another trap that has kept a lot of families from saving, but some of credit card debt is for emergencies. Having struggled financially for so many years, you just come to accept that this is the way things are. My own retirement savings is so small. About the time I go to drop some more in my IRA, one of my cars needs tires or major repairs. The dog gets sick or the washer breaks. It is frustrating to work hard and never make more that 30K-35K. Still, whenever I have some extra, I try to put it back for retirement, but it doesn't have the effect of being able to save consistently. I think if there were more programs that would encourage small businesses to set up small payroll dedections, even if it is 10 a check, it may help. It is such a hassle to even add to IRA's . You have to take off work, fill out forms etc.. When you get paid by the hour, taking off work means losing income. Does anyone else think the vehicles to save for retirement are complicated and cumersome?
But again ... it would depend on how you do it. I don't think this is always a bad idea.
For example, between me and my husband, we have both 401 and 457 plans (four total) where, in a few years when we turn 50, we would be able to save up to $80,000 a year total for retirement.
I wouldn't think about doing this with the bear market now but, in a couple of years when I think stocks will turn around ... borrowing on the house to increase our retirement savings could make a lot of sense ... especially if interest rates are low.
If the debt still costs only 5 percent ... but the market takes off at 15 percent ... and a third of your income that ordinarily would go to taxes is also earning 15 percent for your retirement ...
With a ten percent spread, that's a pretty good deal. Especially when you get tax breaks on the debt AND additional deferred income tax breaks by investing and growing more money into your retirement account.
I'm not talking about borrowing huge on the full value of the house but ... it could make sense to cash out some of your equity in this scenario.
You have a much greater risk tolerance then many people approaching retirement. This is a strategy that could work or could help create the title of this thread. What would your situation have been if you pulled the equity out two years or even a year ago? Perhaps now is the time to do it since the market has so much up side. A year ago it had so much downside potential that was realized.
This is a great discussion and a number of people pretty much nailed it.
I would only add that while college and retirment are indeed daunting expenses, its not like time is not on your side. A couple has at least 18 years to save for college. And no, I do not mean they will be able to write a check for the whole thing. But with 18 years of warning time, they can certainly set aside something substantial to soften the shock. Our strategy is that we will give him "something".
And retirement? Hell, people have decades to prepare for that.
Does anyone else think the vehicles to save for retirement are complicated and cumersome?
Yes. And thank goodness for Social Security because if you get to a point of not being able to work, you will at least have something to keep a roof over your head. You described why my mother could never get much in the way of savings and she was never extravagant. There is a move afoot to get employers to automatically sign up employees into the 401k plans and make them take an action to opt out. But there are so many ways for fraud to happen with that (remember Enron, anyone?) and most people aren't educated in wise investing. A lot of advice is also promulgated to benefit the investing industry more than the investor.
Your post was a good reminder of a number of things that are teetering in our society and that explain why reasonable people have financial trouble that is beyond their control to rectify. It isn't just the spendthrifts who have no one but themselves to blame who are having trouble.
It is such a hassle to even add to IRA's . You have to take off work, fill out forms etc.. When you get paid by the hour, taking off work means losing income.
You can print out the forms from the computer and mail them. Or call the institution and they will mail them to you. Even if it were true that you actually had to take some time off (an hour maybe?), does not retirement qualify as something of vital importance? Are you going to be destitute in your old age because you could not find the time to fill out a form?
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Does anyone else think the vehicles to save for retirement are complicated and cumersome?
Personally, no. However if you do, and there is nothing wrong with thinking so, then do the right thing and hire a good financial planner.
Beyond a few basics, I cannot hope to fix my car. Therefore I pay a mechanic. Now, I could learn, theoretically at least. But I do not wish to invest the time. You could learn all about personal finance. But if you do not wish to invest the time, then hire someone to do it for you.
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