Sunday, January 26, 2014

Parental Home Sales motivate me to Save

Selling your house sucks. At least that is my view after seeing my parents struggle in various situations to sell their house. I work with someone who is very smart. He doesn't believe in real estate personally because he has also come to the same conclusion independently -- selling your home sucks. And in short, I agree with him now.

That said, they need to sell. Why?

Many baby boomers are in a similar situation where for many many years, they paid their bills dutifully and then continued to pay and live a nice lifestyle until they realized at the end of their working years that there was not all that much money available to handle things that needed to be paid for, particularly if they stopped working.

Social Security to the Rescue?

So, we'll just bank on social security? Not a great plan in my option. So at this point, we're back to more traditional methods of handling your retirement. Trading up in houses over and over and paying off an expensive house with hopes of cashing out later is not a great option. The other option of having investment accounts is good, but even if my parents had done this, I don't think that they could have afforded to maintain the large house into retirement.

Mortgage Pay-Off

Thankfully, all of the parents in my family who are in the process of selling homes have significant equity in the home that will allow them to basically sell it and walk away with a nontrivial amount of profit. However, during the time that they are selling it, they spend large amounts of money on getting it ready, redecorating, and all sorts of other things.

When I have seen the struggle for the people in my life around selling their homes I have paid attention. And life will be a good teacher if you pay attention, I think. And I have. I have a mortgage on a small 2 bedroom condo. Do I wish it were bigger? Yes. But in the end, I plan to pay it off a full 25 years before I plan to retire. And I think that will make a huge difference for me because all of that money that would have otherwise gone into maintenance/repairs etc will now go into retirement and other investments to generate income for me later in life.

What's more, if I choose to slow down, I can. I am not obligated to pay a mortgage.When things look more and more tenuous with respect to the country's long-term fiscal outlook, the GAO has even said the following: "The window of opportunity for putting federal health and retirement programs on a sound footing without disruptive effects on the large population of near retirees is closing." Read more about the GAO report.

Sustainable Living

One of the things that I feared as I grew up is seeing people in my family who were a burden on each other. I don't want to involve myself in this kind of a situation. I don't think that being a burden is a good outcome. Similarly, I don't want to be in a position where I am forced to be someone else's caretaker/caregiver. So for me, the golden outcome I struggle to achieve all around in my life is one of sustainable living.

Achieving Critical Mass is a critical part of that sustainability. Once that is achieved, it no longer matters what you do with respect to your money and then one of the two most precious commodities that we have in life that constrains us (the other being time) is forever taken care of. And you're no longer worried about trading one for the other. You just live life as best you can without worrying about the outcome.


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