Starting Over After Losing It All

[kyounge1956]

Cut expenses, expect a lower standard of living in the future. Save as much as possible, probably a little more aggressive than typical. Maybe work till 67 to postpone and maximize social security. Hopefully SS would fund a significant portion of future spending needs.

If there is equity in the house, it might be possible to sell and buy a cheaper place outright, or at least reduce expenses. Reverse mortgage is also an option.

Withdrawal rates higher than 4% might also be appropriate (even though it is risky) if retirement at 65 is a must.

Mr Lost-it-all might also be able to refinance, lowering his monthly mortgage payment and freeing up some of his salary to go to savings instead.

 

[deepc]

As previous posters have stated, you got to get your expenses way down. This is very doable.

Boat living was mentioned. Can be cheap (we did) but not the reason to liveaboard...believe me you have to like being afloat. If not, mo bettah is renting a room in someone else's mortgaged house. 2-300 month even in our resort town, they pay utilities, phone, and when I did it even provided the social fun as since I lived there was invited to all the parties/dinners/etc that the landlord hosted. Got my rent down even cheaper through a little bartered labor to boot. You can live for nothing or even get paid to live somewhere (caretaker, college dorm leader, camp counselor, etc.)

There are some posters on this board whose properties have only doubled in value every year. Can't say I'm one of them. Making money in RE for me has required some timing luck, and the ability to get out of it when the getting is good. Like the lottery, RE is a gamble that the OP can't afford to lose.

Get rid of the car! Read the book Divorce Your Car by Katie Alvord and there are others. That vehicle costs you (if you're not atypical) like 6-10k annually. It gives you nothing. Get a bike, public transport, walk, ride-share. Reduce your stress, increase your fitness, stop contributing to global warming. Read the book, it will open your eyes to the evils that have been marketed to you as necessities. My last bike cost me $2 and lasted more than ten years...it self destructed as I was riding it home from my retirement ceremony on the day I retired.

Truthfully I think the chances of living off your investments after ten years is slim to none, so I'd concentrate on reducing your expenses and finding unique means of paying your way after retirement. I'd consider college as a career since Grad students often obtain fellowships/tuition waivers and such and you can live dirt cheap in a college town. Never know, you might learn something too. Then summers are spent getting paid to do what you'd otherwise pay others to do. Work as a deckhand/teach sailing/camp counselor at a ritzy Maine summer camp, drive the yacht club launch...whatever it is that you're into.

 

[honobob]

But honobob's suggestion makes me wonder if "Mr Lost-it-all" could rent out the house he lives in now, and move to a small apartment or a mobile home as described by rec7. Depending on the existing mortgage, maybe that would give him a foot in the door of rental property investing.

Getting there! Better to rent current home and buy as principal residence new home with FHA/VA, owner financing and live in and rent out rooms until able to afford another property to move into and do the same. By the time you're at the 3rd or 4th home you should be able to live in one all by yourself.

Saving $20K a year with 6-8% returns will never match leveraging your money in real estate with other people paying your mortgages.

 

[FIREd]

Actually, thinking about it, my wife and I have started from scratch just over 8 years ago. Even after 8 years of consistently saving between 30% and 50% of our gross income, we are only about a third of the way to our FIRE goal.

 

[REWahoo]

Saving $20K a year with 6-8% returns will never match leveraging your money in real estate with other people paying your mortgages.

YMMV.

 

[unclemick]

Well - so far this thread beats 'never lick your fingers' or some poor little kid getting or not getting circumcised.

heh heh heh -

 

[honobob]

Well - so far this thread beats 'never lick your fingers' or some poor little kid getting or not getting circumcised.

heh heh heh -

Starting all over after losing it all to circumcision but not licking your fingers.

 

[jazz4cash]

One thing that pops into my mind is to get the home paid off and look at a reverse mortgage to augment SS along with saving every extra cent.

I agree with Connie. A reverse mortgage is a good "plan B" in my opinion. I've been doing some research for a family member which has resolved some conflicts I had about them. A 65 yr old with 250k in equity could reverse mortgage into a 140k lump sum or lifetime income of $7-800/ per month.

 

[Texarkandy]

And then there's always the option of purchasing a classy wardrobe, cultivating a charming demeanor and an amusing banter - then become a gigolo or kept-man.

 

[Frugality_of_Apathy]

At 50K take home is only going to be 36-40K.

Being single there's no reason you should have 3K in expenses a month unless you also have lots of debt or new cars on a payment plan and a house you can barely afford.

At 50K you shouldn't be paying more than $1000 a month for a mortgage and then what's the other 2K going toward? Everything past that mortgage amount can be severely reduced if you don't have other debt. Cut the cable, you only need a cell phone and not a $1000 phone with a $100/month plan. Buy a car you can pay cash for or have no car at all. Who do you think you are buying a $500 suit every month? Anyone that's shunning you because you aren't buying them drinks at the bar or spending hundreds on gifts for them is better off out of your life anyway. I good book is a much more meaningful and personal gift than that $1000 diamond necklace. If you can't cook you better learn or get used to Ramen.

Basic strategy, cut non mortgage expenses to $600 or less a month, get a roommate and now your total expenses are only $1200 a month. sticking that extra $1800 a month into your mortgage should pay it off in around 5 years. Once that house is paid off keep the roommate and now your expenses are $200 a month leaving you with $2800 a month to save or invest. Even if you just stick the money under your mattress 5 years of $2800 a month will get you $168,000. Now if you can get a return of 7% you can withdraw 4% (initially $560/month) and keep pace with inflation. If you end up with $24000 a year in social security and have no house to pay off you've now got $2500 a month give or take, in money to spend or $3000 a month if you keep the roommate. You won't be buying your way into any charity dinners but you'll have much more money to spend on yourself than you did when you were 55 and still working.

 

[ziggy29]

Saving $20K a year with 6-8% returns will never match leveraging your money in real estate with other people paying your mortgages.

It may not match it. Then again, it won't crater the economy like excessive speculation on real estate with borrowed money, either.

 

[FANOFJESUS]

Getting there! Better to rent current home and buy as principal residence new home with FHA/VA, owner financing and live in and rent out rooms until able to afford another property to move into and do the same. By the time you're at the 3rd or 4th home you should be able to live in one all by yourself.

Saving $20K a year with 6-8% returns will never match leveraging your money in real estate with other people paying your mortgages.

That true IF they pay the rent. Where I live the houses are falling the amount of the rent or more each year right now. That means if you luck is good you make no money right now. On the other side of the coin if you have some bad luck the renter does not pay so you will lose several months of rent that year and the home is dropping also at the same time. If I could find a 8% CD I would choose it over a house any day. A person can make more money in houses but they are taking on alot more risk. I know of homes that have a 25% cap rate but the risk is off the scale.

 

[OAG]

I agree with Connie. A reverse mortgage is a good "plan B" in my opinion. I've been doing some research for a family member which has resolved some conflicts I had about them. A 65 yr old with 250k in equity could reverse mortgage into a 140k lump sum or lifetime income of $7-800/ per month.

One major drawback to the RM is that you had better like where you RM or you will take another financial bath when your move (unless it is to the "hereafter")!

 

[calmloki]

buy one dozen free range farm eggs. candle them, keep the fertilized ones warm and eat the others. When the fertilized eggs hatch keep the hens and a rooster, eat the other roosters. continue as above with each clutch of eggs. within ten years you will have the biggest egg farm in your state or be dead from excessive cholesterol (too many egg yolks). either way...

 

[sailor]

Beautiful clip. I've never seen a better ad.

Ha

Mike, I never thought about it this way, but I agree with you.
DW, who is not sentimental by any stretch of imagination had tears in her eyes after watching this clip, even knowing beforehand that it was a marketing trick

sailor

 

[unclemick]

buy one dozen free range farm eggs. candle them, keep the fertilized ones warm and eat the others. When the fertilized eggs hatch keep the hens and a rooster, eat the other roosters. continue as above with each clutch of eggs. within ten years you will have the biggest egg farm in your state or be dead from excessive cholesterol (too many egg yolks). either way...

Winlock, Washington - we got tours in grade school. After the egg business went bust - for a while they tryed to push it as 'the' place to retire.

heh heh heh - plan B, American passport, pssst Wellesley and the cheapest place to retire you can find.

 

[jazz4cash]

One major drawback to the RM is that you had better like where you RM or you will take another financial bath when your move (unless it is to the "hereafter")!

Explain, please......before it's too late to help my brother! Are you referring to the closing costs for the RM? I sortof think the RM might provide some protection against falling RE values. I do agree the RM is mostly for folks that want to stay in thier homes.

 

[OAG]

Explain, please......before it's too late to help my brother! Are you referring to the closing costs for the RM? I sortof think the RM might provide some protection against falling RE values. I do agree the RM is mostly for folks that want to stay in thier homes.

From my investigation of RM's it is mostly the up front costs which can be up to about $20K coupled with the fact you do not get a great percentage of equity in the form of cash - maybe like about 60%. So as an example I would use a home, fully paid off, with an appraised market value of $200K. So you would get, maybe $115K Cash out. Then additionally the interest on the money, which you do not pay currently, but it is added (actually subtracted from the final balance) to the "balance" when the home is sold. With that kind of monetary encumbrance on the future sale of the property I doubt there will be much cash left in the end. That coupled with the fact that if a RM holder must move permanently to a Nursing Home or other care facility that would be, the way I read this stuff, an occasion to force the sale of the property. IMO it seems much better, financially, for other family members to purchase the home from the owner or for it to be set up as a life estate. Be careful here and let me point out clearly I AM NOT an EXPERT on the subject - you would need to get legal counsel to be sure it can work. In any even the RM MAY work for some but one needs to search out the alternatives.

 

[Gardnr]

From my investigation of RM's it is mostly the up front costs which can be up to about $20K coupled with the fact you do not get a great percentage of equity in the form of cash - maybe like about 60%. So as an example I would use a home, fully paid off, with an appraised market value of $200K. So you would get, maybe $115K Cash out. Then additionally the interest on the money, which you do not pay currently, but it is added (actually subtracted from the final balance) to the "balance" when the home is sold. With that kind of monetary encumbrance on the future sale of the property I doubt there will be much cash left in the end. That coupled with the fact that if a RM holder must move permanently to a Nursing Home or other care facility that would be, the way I read this stuff, an occasion to force the sale of the property. IMO it seems much better, financially, for other family members to purchase the home from the owner or for it to be set up as a life estate. Be careful here and let me point out clearly I AM NOT an EXPERT on the subject - you would need to get legal counsel to be sure it can work. In any even the RM MAY work for some but one needs to search out the alternatives.

I agree with your assessment. It is much better to have somebody like family invest in the property, essentially setting up a low cost RM. Of course many people won't be able to set up a situation like that.

The RM can be a solution, but it's a rather high cost way to go. But if you really want to stay in the house and you really need the cash flow, and you don't care about the remaining value (and thus estate value), then it can be a way to access equity. Selling would be a better way to do it without giving up a large portion in fees and interest.

 

[jazz4cash]

Thanks for additonal comments on RM by OAG and Gardnr. I generally agree with your opinions which is why I called the Reverse Mortgage 'plan B'.......but still may be very suitable for the OP's hypothetical situation (or my brother.)