2022 Real Estate Observations (new house, high school, compensation)

[yesmaybe]

BTW I expect equities to do very poorly over the long term. Mostly because I do not expect the political will to continue to prop up the stock market to last.

[bricka]

Originally Posted by yesmaybe

BTW I expect equities to do very poorly over the long term. Mostly because I do not expect the political will to continue to prop up the stock market to last.

i've thought about this a lot recently. i wonder if real estate is basically the ultimate hedge in a world where the fed does not let the FFR get below 4% for the foreseeable future (5-10 years)?

[New Englander]

Originally Posted by id77

Ah, yes, of course. Unless...

1. The 4% rule is based off a person with an expected lifespan of 30 years (or less), and is not to be confused with money available in perpetuity. A 40 year old relying on the 4% rule may well run out of money by the time they're 80, barring better-than-average success in investing in stocks (which itself is most definitely not a strategy to rely upon).

2. A 65 year old couple retiring today can expect to pay around $315k in health care costs over their lifetimes, but a 40 year old doesn't have the benefit of Medicare and can expect to pay double that or more over their lifetime for insurance premiums for 25 years plus whatever out of pocket. Most of those super-saver 40 year old workers have free or employer-subsidized insurance today, and I bet most haven't a clue just how much their plan actually costs each year.

3. Congratulations Mr. FIRE, you just gutted your Social Security benefit when you do hit 67-70. Given that one's benefit is indexed over a 35 year period, even if one gets sufficient credits in time to quality (which most 40 year olds should have), that same person just zeroed out over half of that 35 year period, years that usually were the highest earning years.

4. That's $125k per year before taxes. But with everything else on this list, this one's pretty minimal. Even then, $125k doesn't go very far around here, which means downsizing and/or moving somewhere not very interesting and cutting back on travel and all those other things we keep saying we'll do in abundance once we get the time to.

5. You're making financial estimates based on the costs of goods and the rate of inflation in 2022. In 2042 or 2062, those costs are almost certainly going to be higher and significantly so. Will you still be comfortable with $125k/year in 20 years? 40 years? I doubt it. And because of #3, Social Security isn't going to help you very much later.

Yeah, I'll play it safe and aim higher, and I'm not alone.

This is spot on. It's not worth it to bother with financial neophytes and rubes who won't agree/believe what you say anyway. However for the open minded folks, your words, if implemented, assures that the retirement will be financially worry free.

[bricka]

some bogleheads on this forum i see

[simplexsimon]

Originally Posted by id77

Ah, yes, of course. Unless...

1. The 4% rule is based off a person with an expected lifespan of 30 years (or less), and is not to be confused with money available in perpetuity. A 40 year old relying on the 4% rule may well run out of money by the time they're 80, barring better-than-average success in investing in stocks (which itself is most definitely not a strategy to rely upon).

2. A 65 year old couple retiring today can expect to pay around $315k in health care costs over their lifetimes, but a 40 year old doesn't have the benefit of Medicare and can expect to pay double that or more over their lifetime for insurance premiums for 25 years plus whatever out of pocket. Most of those super-saver 40 year old workers have free or employer-subsidized insurance today, and I bet most haven't a clue just how much their plan actually costs each year.

3. Congratulations Mr. FIRE, you just gutted your Social Security benefit when you do hit 67-70. Given that one's benefit is indexed over a 35 year period, even if one gets sufficient credits in time to quality (which most 40 year olds should have), that same person just zeroed out over half of that 35 year period, years that usually were the highest earning years.

4. That's $125k per year before taxes. But with everything else on this list, this one's pretty minimal. Even then, $125k doesn't go very far around here, which means downsizing and/or moving somewhere not very interesting and cutting back on travel and all those other things we keep saying we'll do in abundance once we get the time to.

5. You're making financial estimates based on the costs of goods and the rate of inflation in 2022. In 2042 or 2062, those costs are almost certainly going to be higher and significantly so. Will you still be comfortable with $125k/year in 20 years? 40 years? I doubt it. And because of #3, Social Security isn't going to help you very much later.

Yeah, I'll play it safe and aim higher, and I'm not alone.

I agree with most of what you say and I am not in the FIRE crowd, but excluding mortgage and daycare my annual spend is not close to $100k/year, an income level that for a family of four would qualify for ACA subsidies.

[id77]

Originally Posted by simplexsimon

I agree with most of what you say and I am not in the FIRE crowd, but excluding mortgage and daycare my annual spend is not close to $100k/year, an income level that for a family of four would qualify for ACA subsidies.

I would agree those are also variables. That said, a typical 60 year old couple is more likely (though certainly not guaranteed) to have no kids at home and a home that's either paid off or close to while a 40 year old couple is more likely to have the opposite, which also speaks to the need for a younger couple looking to stop working to aim even higher than they might otherwise have should they have decided to work into their 60s or even 50s. A retired couple could skip the daycare cost, though I'd argue that's now trading in one job for another -- even if it's one they enjoy a little more. The time is sunk all the same.

[massnative71]

Originally Posted by id77

Ah, yes, of course. Unless...

1. The 4% rule is based off a person with an expected lifespan of 30 years (or less), and is not to be confused with money available in perpetuity. A 40 year old relying on the 4% rule may well run out of money by the time they're 80, barring better-than-average success in investing in stocks (which itself is most definitely not a strategy to rely upon).

2. A 65 year old couple retiring today can expect to pay around $315k in health care costs over their lifetimes, but a 40 year old doesn't have the benefit of Medicare and can expect to pay double that or more over their lifetime for insurance premiums for 25 years plus whatever out of pocket. Most of those super-saver 40 year old workers have free or employer-subsidized insurance today, and I bet most haven't a clue just how much their plan actually costs each year.

3. Congratulations Mr. FIRE, you just gutted your Social Security benefit when you do hit 67-70. Given that one's benefit is indexed over a 35 year period, even if one gets sufficient credits in time to quality (which most 40 year olds should have), that same person just zeroed out over half of that 35 year period, years that usually were the highest earning years.

Who said anything about FIRE??? While understood that this forum is quite skewed from reality, the overwhelming majority of folk retire at 65. Or 70. Sometimes in their 50s, although they tend to be public sector with pensions where this isn't applicable. Nobody has a "right" to retire at 40, nor is it remotely normal. It is an extreme outlier and not relevant to any discussion about typical retirement math.

Originally Posted by id77

4. That's $125k per year before taxes. But with everything else on this list, this one's pretty minimal. Even then, $125k doesn't go very far around here, which means downsizing and/or moving somewhere not very interesting and cutting back on travel and all those other things we keep saying we'll do in abundance once we get the time to.

When you are 65 and retired, your home should be paid off and not have any student loan costs or dependent kids. Medicare kicks in so you will not have to worry about that. Since you are retired, you will not have commuting costs either. $125K is more than PLENTY to maintain a good lifestyle in retirement, as most survive totally fine with much less. Now is it a "bad" idea to shoot for $2M-$3M, absolutely not! But only "if" it doesn't require one to stretch during your prime years and forgo pleasures while you can enjoy them. WE CAN ONLY LIVE ONCE, and ANY day could be our last. Your target should be to "maintain" your current lifestyle, while not "exceeding" it during retirement. Either/or is not a good thing.

Originally Posted by id77

5. You're making financial estimates based on the costs of goods and the rate of inflation in 2022. In 2042 or 2062, those costs are almost certainly going to be higher and significantly so. Will you still be comfortable with $125k/year in 20 years? 40 years? I doubt it. And because of #3, Social Security isn't going to help you very much later.

Yeah, I'll play it safe and aim higher, and I'm not alone.

Yes and the market/portfolio values tend to go up along with inflation, as do social security payments. Nobody can predict the future, but I think I'll trust the word of my financial advisor over some know-it-all bragger on social media.

[matrix5k]

Originally Posted by bricka

the boomer generation going into retirement is extremely house-poor. likely hoping to string together social security checks.

How are boomers house poor when houses cost nothing (compared to today) for them? Most millennials can't even buy a house today. The boomers we bought from paid under 200k for our house in the 90s. It was in turn key condition when they bought. Adjusted for inflation, that's around 400k when we bought. We paid nearly twice that and had to put in another 100k+ for repairs/maintenance. We also had a ton of student loans, boomers did not. Every boomer I know has at least one vacation home in NH, Maine, the Cape etc or multiple timeshares around the world. They are all multimillionaires from stocks or real estate.

Maybe I'm totally ignorant or living in a bubble or something. It seems like if you don't have at least 1-2 million from investing from the 70s or 80s until now, then something went wrong assuming no major medical bills or anything like that.

[r_p]

Originally Posted by matrix5k

It seems like if you don't have at least 1-2 million from investing from the 70s or 80s until now, then something went wrong assuming no major medical bills or anything like that.

To be fair if you entered the job market in 2007/2008 and simply maximized your 401k, you will have a cool half a million. For dual income households that's an easy million. Folks who separately bought TSLA/AAPL/GOOG or BTC did even better.

A lot of wealth has been created in last 10-15 years (The US equity market value increased from $10 trillion in 2008 to $50 trillion in 2021).

[matrix5k]

Originally Posted by r_p

To be fair if you entered the job market in 2007/2008 and simply maximized your 401k, you will have a cool half a million. For dual income households that's an easy million. Folks who separately bought TSLA/AAPL/GOOG or BTC did even better.

A lot of wealth has been created in last 10-15 years (The US equity market value increased from $10 trillion in 2008 to $50 trillion in 2021).

That's what I'm saying. How can boomers be house poor when they had 3-4 decades to become wealthy? There are already millennial millionaires who didn't have the opportunities that boomers had.