Comments on: Help a Reader: Keep the House or Save for Retirement? http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/ finance. money. action. Fri, 20 Nov 2009 12:02:44 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: John http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-9004 John Mon, 20 Jul 2009 20:24:06 +0000 http://www.mydollarplan.com/?p=862#comment-9004 Too many unknowns here, to include marital status and spousal income, however, if the cabin is within reasonable commuting distance to work, I suggest selling home and live in cabin. Second step is establish a budget and include a savings plan, as it is obvious your greatest need is to have savings plan. Plan should include meeting retirement goals by 67, not 69 or 70. Too many unknowns here, to include marital status and spousal income, however, if the cabin is within reasonable commuting distance to work, I suggest selling home and live in cabin. Second step is establish a budget and include a savings plan, as it is obvious your greatest need is to have savings plan. Plan should include meeting retirement goals by 67, not 69 or 70.

]]> By: nat http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8725 nat Tue, 09 Jun 2009 16:18:26 +0000 http://www.mydollarplan.com/?p=862#comment-8725 Sell the property, move into cabin, buy a cash flow positive apt building (three or fourplex) and let the tenants pay the mortgage of that place down and live on the rest. You can retired today. Sell the property, move into cabin, buy a cash flow positive apt building (three or fourplex) and let the tenants pay the mortgage of that place down and live on the rest. You can retired today.

]]> By: Rosa http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8703 Rosa Fri, 05 Jun 2009 22:07:38 +0000 http://www.mydollarplan.com/?p=862#comment-8703 I'm with Ben @7 - find a way to turn the cash flow positive. Rent out rooms if you can, rent out the cabin too - something to make cash flow from the property positive. If there's no way to do that, sell the big house & downsize into the cabin if that's possible. Where I live, the "rooms for rent" market is just swamped with renters because people are downsizing from apartments or have lost their homes, college kids are choosing not to get apartments for the summer because they can't find jobs, etc. I’m with Ben @7 – find a way to turn the cash flow positive. Rent out rooms if you can, rent out the cabin too – something to make cash flow from the property positive. If there’s no way to do that, sell the big house & downsize into the cabin if that’s possible.

Where I live, the “rooms for rent” market is just swamped with renters because people are downsizing from apartments or have lost their homes, college kids are choosing not to get apartments for the summer because they can’t find jobs, etc.

]]> By: Joseph B http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8673 Joseph B Mon, 01 Jun 2009 17:49:16 +0000 http://www.mydollarplan.com/?p=862#comment-8673 Marke can keep the house and continue to make payments, as it will be paid off in ten years. We are in a market low and his home should theoretically be worth much more in ten years than it is currently. If he sells his home there may be tax consequences which would further erode his assets. Also, a home is a way of “forcing” someone to save for retirement because it is an asset, plus there are numerous tax advantages to owning a home. If he doesn’t own a home, I highly doubt that each month he will save $1,700 each month on his own. Furthermore, once he reaches age 62 he can apply for a reverse mortgage, which can help his retirement cash flow tremendously, especially since it is tax-free (loans are not taxable) Marke can keep the house and continue to make payments, as it will be paid off in ten years. We are in a market low and his home should theoretically be worth much more in ten years than it is currently. If he sells his home there may be tax consequences which would further erode his assets. Also, a home is a way of “forcing” someone to save for retirement because it is an asset, plus there are numerous tax advantages to owning a home. If he doesn’t own a home, I highly doubt that each month he will save $1,700 each month on his own. Furthermore, once he reaches age 62 he can apply for a reverse mortgage, which can help his retirement cash flow tremendously, especially since it is tax-free (loans are not taxable)

]]> By: fern http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8671 fern Mon, 01 Jun 2009 13:52:50 +0000 http://www.mydollarplan.com/?p=862#comment-8671 I want to be helpful, but really, the first thought that entered my mind was, how could someone reach age 59 and have NO retirement savings? I would say rent the house and live in the cabin or get a roommate and continue living in the house. Everyone here made good points. Also refinancing. I want to be helpful, but really, the first thought that entered my mind was, how could someone reach age 59 and have NO retirement savings?

I would say rent the house and live in the cabin or get a roommate and continue living in the house. Everyone here made good points. Also refinancing.

]]> By: Weekend Linkage - May 31, 2009 http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8666 Weekend Linkage - May 31, 2009 Mon, 01 Jun 2009 04:36:50 +0000 http://www.mydollarplan.com/?p=862#comment-8666 [...] Help a Reader: Keep the House or Save for Retirement? @ My Dollar Plan [...]

[...] Help a Reader: Keep the House or Save for Retirement? @ My Dollar Plan [...]

]]> By: Clair Schwan of Frugal Living Freedom http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8654 Clair Schwan of Frugal Living Freedom Fri, 29 May 2009 16:31:00 +0000 http://www.mydollarplan.com/?p=862#comment-8654 There are too many unknowns to make a clear call with this. If I were Marke, I would consider the following: 1) If refinancing is cost-effective, then I'd consider doing that first. You'll pay a higher rate if you refinance a rental house, so don't rent it right away. 2) Rent the house to retain options open to keep it, sell it, or do a reverse mortgage. You can't take advantage of a rebounding economy if you unload the property. Renting it will defray the cost of holding it as an investment. Currently, it will cost more to simply live in it without the help of renters. The rental idea has drawbacks, but it also has great tax advantages. You can probably find good folks to rent the house that aren't quite in a position to buy in this tighter market. Take your time to make certain you get the right renters so the hassle factor is minimized. Consider renting the house fully furnished. It will make furniture and other resources in the house draw a higher rent. These furnishings won't fit in the cabin and storing them would just be another unnecessary financial burden. Consider a "corporate rental" type arrangement where a company in the area could make use of a fully furnished place for key employees looking to relocate, visiting executives, off campus meetings, casual conferences and other uses. It gets rented full time by the company regardless of how often the company uses the home. 3) Cabin rental might be great for a while but likely won't be regular but rather seasonal. Renting out the cabin will also incur cleaning costs and management costs that aren't going to be cost-effective. The cabin might be a life boat of sorts since it's paid for. I wouldn't sell it if it's possible to live there while still working. The cabin can be the new residence once renters for the house are found. 4) They say it's never too late to start saving for retirement, but it's an illusion to see $200K as a nest egg unless you plan to relocate to a very low cost of living area and live in a shack, cabin or camper. 5) Find a good friend with a soft shoe who is willing to kick you in the rear all the way around the block for living without a financial plan and winding up on the edge of retirement with no savings, limited assets, and high cost obligations to deal with. Clair There are too many unknowns to make a clear call with this. If I were Marke, I would consider the following:

1) If refinancing is cost-effective, then I’d consider doing that first. You’ll pay a higher rate if you refinance a rental house, so don’t rent it right away.

2) Rent the house to retain options open to keep it, sell it, or do a reverse mortgage. You can’t take advantage of a rebounding economy if you unload the property. Renting it will defray the cost of holding it as an investment. Currently, it will cost more to simply live in it without the help of renters.

The rental idea has drawbacks, but it also has great tax advantages. You can probably find good folks to rent the house that aren’t quite in a position to buy in this tighter market. Take your time to make certain you get the right renters so the hassle factor is minimized.

Consider renting the house fully furnished. It will make furniture and other resources in the house draw a higher rent. These furnishings won’t fit in the cabin and storing them would just be another unnecessary financial burden.

Consider a “corporate rental” type arrangement where a company in the area could make use of a fully furnished place for key employees looking to relocate, visiting executives, off campus meetings, casual conferences and other uses. It gets rented full time by the company regardless of how often the company uses the home.

3) Cabin rental might be great for a while but likely won’t be regular but rather seasonal. Renting out the cabin will also incur cleaning costs and management costs that aren’t going to be cost-effective.

The cabin might be a life boat of sorts since it’s paid for. I wouldn’t sell it if it’s possible to live there while still working. The cabin can be the new residence once renters for the house are found.

4) They say it’s never too late to start saving for retirement, but it’s an illusion to see $200K as a nest egg unless you plan to relocate to a very low cost of living area and live in a shack, cabin or camper.

5) Find a good friend with a soft shoe who is willing to kick you in the rear all the way around the block for living without a financial plan and winding up on the edge of retirement with no savings, limited assets, and high cost obligations to deal with.

Clair

]]> By: Friday Finance Findings for May 29th : Generation X Finance http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8652 Friday Finance Findings for May 29th : Generation X Finance Fri, 29 May 2009 14:11:49 +0000 http://www.mydollarplan.com/?p=862#comment-8652 [...] Help a Reader: Keep the House or Save for Retirement? - Sometimes we are faced with very difficult decisions. One of Madison’s readers is faced with trying to keep their house vs. retirement. There are no easy answers, but any additional input is welcome. [...]

[...] Help a Reader: Keep the House or Save for Retirement? – Sometimes we are faced with very difficult decisions. One of Madison’s readers is faced with trying to keep their house vs. retirement. There are no easy answers, but any additional input is welcome. [...]

]]> By: Anna M http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8649 Anna M Thu, 28 May 2009 23:47:46 +0000 http://www.mydollarplan.com/?p=862#comment-8649 First of all, I think Marke needs to look at refinancing his mortgage for the primary residence. I don't think refi into another 30 year mortgage is the way to go for him, instead he should investigate a refi into a 10-15 year mortgage with a much lower interest rate. Assuming he had his mortgage since the mid 80s, he's probably paying a higher that current interest rate and the fact that he's not underwater will make refi a breeze. I also like ideas about getting a roommate and renting out the cabin. Any savings from the refi and tenants should be put towards retirement. Now if Marke does not like to share his home with a roommate, he can look into one a more complicated option. This works for markets with very depressed real estate values, but decent rents (I see this in Phoenix). He can rent out both his primary residence and the cabin and buy a smaller, cheaper home to live in - programs like Fannie Mae's HomePath allow as little as 3% down payment with no PMI. In this scenario, he may have some negative cash flow on his primary residence (depending on market rents), positive cash flow on a cabin and much lower cost of housing for himself. If he buys correctly, he may even get net positive cash flow or at least come close to breakeven. The benefits for him would be: + $1700 or so per month that he can divert to savings (he should still see if he can refi the primary residence to lower the payment by paying less interest) + any appreciation he gets on the new home that was bought for cheap + free or almost free housing which he can extend into his retirement, so that he doesn't need a large nest egg to cover fixed costs. Of course this would only work if he has some savings. I know he doesn't have any retirement savings, so if he doesn't have any other money, he'd have to cut costs to the bone as Brian (#8) said and probably rent out the cabin in order to save for a down payment. It would be tough in the short term, but can set him up for a much more secure retirement! First of all, I think Marke needs to look at refinancing his mortgage for the primary residence. I don’t think refi into another 30 year mortgage is the way to go for him, instead he should investigate a refi into a 10-15 year mortgage with a much lower interest rate. Assuming he had his mortgage since the mid 80s, he’s probably paying a higher that current interest rate and the fact that he’s not underwater will make refi a breeze.

I also like ideas about getting a roommate and renting out the cabin.

Any savings from the refi and tenants should be put towards retirement.

Now if Marke does not like to share his home with a roommate, he can look into one a more complicated option. This works for markets with very depressed real estate values, but decent rents (I see this in Phoenix). He can rent out both his primary residence and the cabin and buy a smaller, cheaper home to live in – programs like Fannie Mae’s HomePath allow as little as 3% down payment with no PMI.
In this scenario, he may have some negative cash flow on his primary residence (depending on market rents), positive cash flow on a cabin and much lower cost of housing for himself. If he buys correctly, he may even get net positive cash flow or at least come close to breakeven.
The benefits for him would be:
+ $1700 or so per month that he can divert to savings (he should still see if he can refi the primary residence to lower the payment by paying less interest)
+ any appreciation he gets on the new home that was bought for cheap
+ free or almost free housing which he can extend into his retirement, so that he doesn’t need a large nest egg to cover fixed costs.

Of course this would only work if he has some savings. I know he doesn’t have any retirement savings, so if he doesn’t have any other money, he’d have to cut costs to the bone as Brian (#8) said and probably rent out the cabin in order to save for a down payment. It would be tough in the short term, but can set him up for a much more secure retirement!

]]> By: Weekly Roundup: The UN-BROKE Edition | Frugal Dad http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8640 Weekly Roundup: The UN-BROKE Edition | Frugal Dad Thu, 28 May 2009 10:02:17 +0000 http://www.mydollarplan.com/?p=862#comment-8640 [...] Keep the House or Save for Retirement? [...]

[...] Keep the House or Save for Retirement? [...]

]]> By: TStrump http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8637 TStrump Thu, 28 May 2009 05:23:17 +0000 http://www.mydollarplan.com/?p=862#comment-8637 I definitely would keep the home. You'd have to look at the cost at renting a similar place - I know here in Vancouver rents are skyrocketing and places are getting hard to find. Can you rent out a room to a student to make some extra cash? Why not rent out the cabin when it's vacant? I definitely would keep the home.
You’d have to look at the cost at renting a similar place – I know here in Vancouver rents are skyrocketing and places are getting hard to find.
Can you rent out a room to a student to make some extra cash?
Why not rent out the cabin when it’s vacant?

]]> By: Waiting For The Economic Recovery, Going Broke During The Recession http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8635 Waiting For The Economic Recovery, Going Broke During The Recession Thu, 28 May 2009 03:54:46 +0000 http://www.mydollarplan.com/?p=862#comment-8635 [...] My Dollar Plan: Help a Reader: Keep the House or Save for Retirement? [...]

[...] My Dollar Plan: Help a Reader: Keep the House or Save for Retirement? [...]

]]> By: QUESTRADE COUPONS - All Coupons, discounts, promo codes, offers, and reviews http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8632 QUESTRADE COUPONS - All Coupons, discounts, promo codes, offers, and reviews Thu, 28 May 2009 02:48:32 +0000 http://www.mydollarplan.com/?p=862#comment-8632 Personally i feel #3 is what i was going to say too. To add more i strongly consider a tenant to help with the mortgage payments. I think it is a bad idea to sell the home now because we are almost out of this crisis and the price will start to rise again Personally i feel #3 is what i was going to say too. To add more i strongly consider a tenant to help with the mortgage payments. I think it is a bad idea to sell the home now because we are almost out of this crisis and the price will start to rise again

]]> By: Nancy http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8629 Nancy Wed, 27 May 2009 16:03:17 +0000 http://www.mydollarplan.com/?p=862#comment-8629 I'm near retirement and it looks as if I'll have to keep working unless I decide to become a bag lady, which really isn't an option because I have too much stuff to fit in an abandoned shopping cart. Looking at it from my perspective I first have to ask if Marke has a wife or someone else who needs to be part of the equation. If that is yes and everyone is in agreement, I would say 1) Move to the cabin 2) Unload the house. Yes, renting is an option, but there's more to being a landlord than taking in the rent and paying the mortgage. For me, the grief wouldn't be worth it. That's another thing Marke has to decide. 3) Save for retirement. When you're tired and want to retire, it would be nice not to HAVE to have more than a part-time job. It would be wonderful to have no job at all if that could be arranged. ;p I’m near retirement and it looks as if I’ll have to keep working unless I decide to become a bag lady, which really isn’t an option because I have too much stuff to fit in an abandoned shopping cart.
Looking at it from my perspective I first have to ask if Marke has a wife or someone else who needs to be part of the equation. If that is yes and everyone is in agreement, I would say 1) Move to the cabin 2) Unload the house. Yes, renting is an option, but there’s more to being a landlord than taking in the rent and paying the mortgage. For me, the grief wouldn’t be worth it. That’s another thing Marke has to decide. 3) Save for retirement. When you’re tired and want to retire, it would be nice not to HAVE to have more than a part-time job. It would be wonderful to have no job at all if that could be arranged. ;p

]]> By: Brian http://www.mydollarplan.com/help-a-reader-keep-the-house-or-save-for-retirement/#comment-8627 Brian Wed, 27 May 2009 01:56:11 +0000 http://www.mydollarplan.com/?p=862#comment-8627 Her's my two cents. Sorry 59 w/no retirement savings, means no retirement for you at 65, maybe 70 check w. SS for exact $ figures, unless you have a pension that wasn't mentioned. #1. Stay in Home, I see that you will pay it off in ten years @ 1700. Refinance into a new 30 year mortgage, and put the diffference into your retirement savings. #2. Sell Home... when it comes to break even i'll assume that includes all the costs that come with selling your house, and the savings will not be the same $204,000 because of cost with new place to live. #3 Rent the House This would be the worst choice because of negative cash flow, you have all the headaches of owning the house such as repairs and maint and if you get the wrong renters you would never have any retirement savings. As others have said, max the rent from the vacation cabin, or sell the cabin. Get a roommate or someone to rent a room, refinance the house, to free up some money from the mortgage. Cut expenses to the bone, check over all your bills and look for the things you can cut, such as cable. Look at your insurance and change your deductable, and shop your needs to different agents/companies. Good Luck Her’s my two cents.

Sorry 59 w/no retirement savings, means no retirement for you at 65, maybe 70 check w. SS for exact $ figures, unless you have a pension that wasn’t mentioned.

#1. Stay in Home, I see that you will pay it off in ten years @ 1700. Refinance into a new 30 year mortgage, and put the diffference into your retirement savings.
#2. Sell Home… when it comes to break even i’ll assume that includes all the costs that come with selling your house, and the savings will not be the same $204,000 because of cost with new place to live.

#3 Rent the House This would be the worst choice because of negative cash flow, you have all the headaches of owning the house such as repairs and maint and if you get the wrong renters you would never have any retirement savings.

As others have said, max the rent from the vacation cabin, or sell the cabin. Get a roommate or someone to rent a room, refinance the house, to free up some money from the mortgage. Cut expenses to the bone, check over all your bills and look for the things you can cut, such as cable. Look at your insurance and change your deductable, and shop your needs to different agents/companies.

Good Luck

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