Realistic expenses over the long haul rant

[Fermion]

The OP assumes that everyone needs a house, which is nonsense

Ding ding ding, winner!

When retired on a fairly big budget, what are you mostly doing? Traveling. Why do you need a 3 or 4bd big expensive house while vacationing in Costa Rica or Europe?

A retired couple could likely drop expenses by $10,000 to $15,000 a year by significantly downsizing or even selling their home and renting a tiny 1bd apartment. Just the saving on insurance and taxes for a lot of people would be more than the rent. The money tied up in the house could then be invested to generate positive real returns.

 

[BellBarbara]

I don't see how renting an apt drops expenses of a paid off house by 10-15K? Maybe for some. Our taxes are less than 5K and there is maintenance (we budget 3600 per year), insurance is 1200. That totals less than the amount we would pay for a 1 bedroom apt where we live (Boston suburbs). A really crappy 1 bedroom in this area (unsafe) would be 1K - a decent one would be 1500 a month.

Don't get me wrong, I can't wait to downsize, but we don't expect to see huge savings since we will likely replace the mortgage interest we pay with HOA fees which tend to be high here due to snow removal and the beating parking lots and roofs take.

Also I just noticed I was wrong, we budget 18K for medical due to the high deductible plan. Boston has the highest insurance rates in the country due to all the teaching hospitals. If we moved to NH, we would save a ton. But not willing to do that since we feel ACA is at risk - and Mass will retain their plan if republicans get in control and vote it out.

 

[Fermion]

I don't see how renting an apt drops expenses of a paid off house by 10-15K? Maybe for some. Our taxes are less than 5K and there is maintenance (we budget 3600 per year), insurance is 1200. That totals less than the amount we would pay for a 1 bedroom apt where we live (Boston suburbs). A really crappy 1 bedroom in this area (unsafe) would be 1K - a decent one would be 1500 a month.

$5k taxes, $3.6k maint., $1200 insur. = $9.8k

Assuming your house is worth around $400,000 (maint. is usually 1% of house value) you also have to consider the opportunity cost of the $400,000 if invested at 4% real return (assuming the house "investment" just matches inflation as it should in the long run).

4% of 400,000 = $16,000

So a total of $25,800 a year to stay in your house vs paying $18,000 for a decent safe apartment. $7,800 added to the bottom line per year.

 

[BellBarbara]

Makes sense.

I just could not live in a small apt and take the risk of having to move, etc. I do agree with the numbers though. Maybe I am saying it's worth 7800 a year to have peace of mind and not end my marriage due to lack of space. ;-) (that would cost a whole lot more!)

 

[Fermion]

Makes sense.

I just could not live in a small apt and take the risk of having to move, etc. I do agree with the numbers though. Maybe I am saying it's worth 7800 a year to have peace of mind and not end my marriage due to lack of space. ;-) (that would cost a whole lot more!)

Sure, I agree with you. Your numbers are also a lot closer to parity than some. If you don't travel very much then having a nice larger home with a yard to spend a lot of your retirement makes sense.

If you are out of the state/country for 6 months out of the year, maybe the small apartment starts to make sense.

 

[BellBarbara]

Honestly, I felt my marriage was in jeopardy about 5 years ago - when we married he moved into my house as I still had a high schooler. The house was a darling old colonial in a town with great schools, but it was small, no garage, no air conditioning. It was just too much for all the kids, and busy careers. Sort of luckily for us his work was transferring him to an area that would put us out further from Boston - we were able to buy a big house (with garage and air and 1 acre) for less money than the little house we had before. Our marriage really improved with the quiet location, lots of space, etc.

It was sort of amazing in a way. We should have bought a bigger house together when we married. We both really learned the importance of a good living environment. When we downsize, I am sure we will be able to pay cash, but the environment will be important to us, location, and both inside and outside.

The rental market is horrible - I bought my son a 1400sf condo for only 150K (he pays me 4%) because he was paying 1500 a month for an OK rental.

 

[daylatedollarshort]

Makes sense.

I just could not live in a small apt and take the risk of having to move, etc. I do agree with the numbers though. Maybe I am saying it's worth 7800 a year to have peace of mind and not end my marriage due to lack of space. ;-) (that would cost a whole lot more!)

American homes in 2014 are a lot bigger than many other countries or U.S. homes of the 1950s.

"According to the National Association of Home Builders, the average size of a new single-family American residence in 1950 was 983 square feet. Today, it is nearly 2500 square feet. "

The Righteous Small House: Challenging House Size and the Irresponsible American Dream by Jason McLennan YES! Magazine

Household size also used to be larger as well, making living space per square foot smaller. According to the chart in the Yes magazine article, living space per person in the 1950s used to be 258 sq ft a person. The American Dream has gotten a lot bigger over the years.

In the 1950s families had smaller homes, filled them with less stuff, often only had one parent in the workforce, and the person staying home, usually the mom, only had 983 sq ft of space to clean.

 

[jjquantz]

American homes in 2014 are a lot bigger than many other countries or U.S. homes of the 1950s.

"According to the National Association of Home Builders, the average size of a new single-family American residence in 1950 was 983 square feet. Today, it is nearly 2500 square feet. "

The Righteous Small House: Challenging House Size and the Irresponsible American Dream by Jason McLennan YES! Magazine

Household size also used to be larger as well, making living space per square foot smaller. According to the chart in the Yes magazine article, living space per person in the 1950s used to be 258 sq ft a person. The American Dream has gotten a lot bigger over the years.

In the 1950s families had smaller homes, filled them with less stuff, often only had one parent in the workforce, and the person staying home, usually the mom, only had 983 sq ft of space to clean.

In the mid-60's I was brought up in a 900 sq ft house along with my 3 brothers and sisters. A DIY addition brought us up to 1100 sq ft just before the 5th child was born. As a pretty extreme introvert, I spent MANY hours walking through the woods behind the house just to get away from everyone.

DW and I are now empty nesters in 2400 sq ft. We definitely feel that we have too much house but our collection of musical instruments makes it difficult to downsize. We need floor space for the instruments and we need escape space for DW when I am playing/practicing. I could custom design a house ca. 1500 sq ft that would be perfect but I couldn't afford to build it.

So, although I would agree that house sizes have expanded beyond reason, I can't go back to 900 sq ft, it just isn't going to happen.

 

[daylatedollarshort]

In the mid-60's I was brought up in a 900 sq ft house along with my 3 brothers and sisters. A DIY addition brought us up to 1100 sq ft just before the 5th child was born. As a pretty extreme introvert, I spent MANY hours walking through the woods behind the house just to get away from everyone.

DW and I are now empty nesters in 2400 sq ft. We definitely feel that we have too much house but our collection of musical instruments makes it difficult to downsize. We need floor space for the instruments and we need escape space for DW when I am playing/practicing. I could custom design a house ca. 1500 sq ft that would be perfect but I couldn't afford to build it.

So, although I would agree that house sizes have expanded beyond reason, I can't go back to 900 sq ft, it just isn't going to happen.

No one says you have to. This is just one way people are living well on less. I still have a big house, too, but the ER forums and blogs and happiness studies have opened my eyes to a lot of ways of living well for less. And less house for us would = more free time + lower expenses + higher income (with the remainder of the house proceeds invested) + easier travel (no house sitter / lawn care).

 

[haha]

Honestly, I felt my marriage was in jeopardy about 5 years ago - when we married he moved into my house as I still had a high schooler. The house was a darling old colonial in a town with great schools, but it was small, no garage, no air conditioning. It was just too much for all the kids, and busy careers. Sort of luckily for us his work was transferring him to an area that would put us out further from Boston - we were able to buy a big house (with garage and air and 1 acre) for less money than the little house we had before. Our marriage really improved with the quiet location, lots of space, etc.

It was sort of amazing in a way. We should have bought a bigger house together when we married. We both really learned the importance of a good living environment. When we downsize, I am sure we will be able to pay cash, but the environment will be important to us, location, and both inside and outside.

The rental market is horrible - I bought my son a 1400sf condo for only 150K (he pays me 4%) because he was paying 1500 a month for an OK rental.

This was a great move. I did similar in Nov 2011. But in many places at many times with many capital cost structures, this kind of arbitrage won't work.

I also agree with overall post. To my eye, usually good things and good lifestyle cost money. I really cannot see how anyone can think a 10 or 12 year old car is as suitable as a new one. Safety and reliability alone are vastly different. And DIY- if someone likes doing jobs with no risks, more power to him. But he or she is spending time doing these things that s/he are not expert at, and which other people in fact get paid for. Is this why one retires? And outdoor house maintenance, ask an ER doctor about chain saws and ladders and roof repairs. Many people will go a lifetime with no mishaps, but that is where an actuarial pov can help. These tools cause problems with varying frequencies- but when they do so the results can be catastrophic.

We all have to make compromises, but we don't all admit that these things can be compromises.

Ha

 

[daylatedollarshort]

But he or she is spending time doing these things that s/he are not expert at, and which other people in fact get paid for. Is this why one retires? And outdoor house maintenance, ask an ER doctor about chain saws and ladders and roof repairs. Many people will go a lifetime with no mishaps, but that is where an actuarial pov can help. These tools cause problems with varying frequencies- but when they do so the results can be catastrophic.

We all have to make compromises, but we don't all admit that these things can be compromises.

Ha

Every year I go over the risk / reward cost of paying some young, nimble footed, experienced, workers' comp insured roofing company staffer to clean our gutters for vs the potential downside risk of my husband doing it himself to save $150.

 

[haha]

Every year I go over the risk / reward cost of paying some young, nimble footed, experienced, workers' comp insured roofing company staffer to clean our gutters for vs the potential downside risk of my husband doing it himself to save $150.

Well, keep your pencil sharp! Rich people doing jobs with high workmen's comp premiums just doesn't compute for me. Those actuaries are not wrong. From my standpoint, that is one reason why people try to get rich, to make life safer.

My DIL's Dad had a ladder collapse under him, and he never again had normal mobility, though he tolerated pain well and made do with cheer. He was well off too; his widow travels in style frequently.

Ha

 

[jkern]

For me:

Essential living expenses (housing, food, utilities, transportation, medical, insurance)

$ 21,000 per year

Spending (gifts, clothes, travel, entertainment, recreation, miscellaneous)

$ 21,000 per year

Irregular expenses (car, appliance, furniture, roof, electronics, sports, etc....)

$ 12,000 per year

Total budget (not counting taxes): $ 54,000 per year

While I could reduce it if I had to, getting to $40K per year wouldn't be pleasurable.

 

[Fermion]

Well, keep your pencil sharp! Rich people doing jobs with high workmen's comp premiums just doesn't compute for me. Those actuaries are not wrong. From my standpoint, that is one reason why people try to get rich, to make life safer.

My DIL's Dad had a ladder collapse under him, and he never again had normal mobility, though he tolerated pain well and made do with cheer. He was well off too; his widow travels in style frequently.

Ha

Yes, but rich people end up doing other stupid stuff like climbing Everest and losing all of their toes to frostbite.

 

[pb4uski]

Every year I go over the risk / reward cost of paying some young, nimble footed, experienced, workers' comp insured roofing company staffer to clean our gutters for vs the potential downside risk of my husband doing it himself to save $150.

Well, keep your pencil sharp! Rich people doing jobs with high workmen's comp premiums just doesn't compute for me. Those actuaries are not wrong. From my standpoint, that is one reason why people try to get rich, to make life safer.

My DIL's Dad had a ladder collapse under him, and he never again had normal mobility, though he tolerated pain well and made do with cheer. He was well off too; his widow travels in style frequently. ...

+1 (I can't believe I am agreeing on something with DLDS ) A friend of ours was shoveling his roof and fell off and suffered a brain injury that has significantly reduced his quality of life. Another guy who worked for me fell off a ladder and suffered a bad back injury. I avoid ladders as much as possible and when I do get on one I am very cautious and careful.

 

[Walt34]

I avoid ladders as much as possible and when I do get on one I am very cautious and careful.

I just noticed that one of the lights on the rear of the house is out and needs to be replaced. This requires climbing a 25-foot extension ladder. I'll probably spring for a bunch of LED lights instead of CFLs and replace all four of them at once and hopefully I'll never have to do it again.

DW cringes when I do this and stands there with a cell phone with 911 on speed-dial. If the LEDs ever burn out I'll hopefully be moved out by then or I'll just hire someone to do it. And yes, I keep a very tight grip on the ladder, careful on setup and such.

 

[Mulligan]

In the mid-60's I was brought up in a 900 sq ft house along with my 3 brothers and sisters. A DIY addition brought us up to 1100 sq ft just before the 5th child was born. As a pretty extreme introvert, I spent MANY hours walking through the woods behind the house just to get away from everyone.



DW and I are now empty nesters in 2400 sq ft. We definitely feel that we have too much house but our collection of musical instruments makes it difficult to downsize. We need floor space for the instruments and we need escape space for DW when I am playing/practicing. I could custom design a house ca. 1500 sq ft that would be perfect but I couldn't afford to build it.



So, although I would agree that house sizes have expanded beyond reason, I can't go back to 900 sq ft, it just isn't going to happen.

I am single and had a 1500 sq. foot home built for me. I could be doing just fine if it was 900 sq ft. Probably the only reason why I didn't is because I would be afraid it would never sell, and also I would have been to embarrassed to ask a builder to build one that size. I bet 99% of the time I am in 600 sq. feet of my home and rest of it I am only in it when it's time to vacuum and dust.


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[EastWest Gal]

In the mid-60's I was brought up in a 900 sq ft house along with my 3 brothers and sisters. A DIY addition brought us up to 1100 sq ft just before the 5th child was born. As a pretty extreme introvert, I spent MANY hours walking through the woods behind the house just to get away from everyone.



DW and I are now empty nesters in 2400 sq ft. We definitely feel that we have too much house but our collection of musical instruments makes it difficult to downsize. We need floor space for the instruments and we need escape space for DW when I am playing/practicing. I could custom design a house ca. 1500 sq ft that would be perfect but I couldn't afford to build it.



So, although I would agree that house sizes have expanded beyond reason, I can't go back to 900 sq ft, it just isn't going to happen.

Our situation is the same. We are all musicians and downsizing would be a huge challenge. My first couple if years I really intend to make the most of our incredible home life-and hopefully DS will move out and take some of his instruments with him (xylophone and vibes, for starters.) playing music is our delight and our passion and DH's part time livelihood. We are not interested in giving that up in the interest of downsizing just yet.


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[BellBarbara]

Has anyone been watching that series "Tiny House" or seen the documentary with the same name? I am fascinated by it. I could live in a tiny house, but only ALONE - no dogs or people. One episode showed a family in VT who built a 500sf home in their property and rented out their large SFR. They mentioned they were doing this for retirement income. I thought this was smart.

Re: funding my son in the condo. It was an easy decision because I inherited some money from my mom and wanted a way to help him with it. The deed has both of our names, and when either of us dies, the other gets it free and clear (no more payments to hub if I die). I did it this way because my hub used his inheritance on his girls (200K per kid on college). Seemed fair to me. My sister bought my nephew and his wife a 500K house in SF bay area, they had a lot of cash (risk adverse) so now they have some nice income.

Tiny House episodes on line free: http://www.fyi.tv/shows/tiny-house-nation

 

[BellBarbara]

And OMG, so happy hub is starting to hire people to do stuff. We have always been DIYers, but I can't do it anymore. I don't like it! I don't mind interior stuff (tiling painting) but hate things like putting in a patio. (I am working on him on this issue) If he tried to clean the gutters I would threaten to leave him.

Whenever he is being reluctant on something like this, I offer to give up some of my budget to fund it. My budget being house stuff. He usually agrees.

 

[ksr]

I am single and had a 1500 sq. foot home built for me. I could be doing just fine if it was 900 sq ft. Probably the only reason why I didn't is because I would be afraid it would never sell, and also I would have been to embarrassed to ask a builder to build one that size. I bet 99% of the time I am in 600 sq. feet of my home and rest of it I am only in it when it's time to vacuum and dust.

I bought my 1700 sf home when I was newly divorced and living alone. My SO lives here now with me, but even with 2 of us it is still more space than we need. I think a well laid-out 1000 to 1200 sf home would be plenty for us. The problem is that houses of that size, in this area, seem to all be in not-very-nice neighborhoods. It is very difficult to find a nice small home in a safe, quiet, and well-maintained neighborhood around here.

 

[BellBarbara]

Yes, it would be hard to sell a house that is too small unless it's a house or condo in a downtown area. I think 1000-1200sf is perfect for a couple. I had a 900 sq (2 bdr/ 1bath) condo in California before I moved to Boston, and it was a little too small for my son and I. Not terrible, but could have used another half bath and the bedrooms were to small.

 

[Mulligan]

I bought my 1700 sf home when I was newly divorced and living alone. My SO lives here now with me, but even with 2 of us it is still more space than we need. I think a well laid-out 1000 to 1200 sf home would be plenty for us. The problem is that houses of that size, in this area, seem to all be in not-very-nice neighborhoods. It is very difficult to find a nice small home in a safe, quiet, and well-maintained neighborhood around here.

That is certainly true. Any neighborhoods that are all 1000-1200 sq. ft home seems to be at least 40 years old where I live. I see articles all the time about people wanting to build/buy micro houses, but never any mention of 1000-1200 sq. ft homes.


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[haha]

Yes, but rich people end up doing other stupid stuff like climbing Everest and losing all of their toes to frostbite.

Sure, this is probably a lot more frequent than falling off a ladder.

 

[ProspectiveBum]

Has anyone been watching that series "Tiny House" or seen the documentary with the same name? I am fascinated by it. I could live in a tiny house, but only ALONE - no dogs or people. One episode showed a family in VT who built a 500sf home in their property and rented out their large SFR. They mentioned they were doing this for retirement income. I thought this was smart.

The biggest problem with the tiny home movement that I can see is that most of the homes seem very impractical for older people. They're almost never a single story, beds are often in a lofted space that requires climbing a ladder, etc. I'm 42, and could certainly climb a ladder, but that doesn't mean I want to if I have to get up to use the facilities in the middle of the night.

Any neighborhoods that are all 1000-1200 sq. ft home seems to be at least 40 years old where I live. I see articles all the time about people wanting to build/buy micro houses, but never any mention of 1000-1200 sq. ft homes.

I agree that something in this size range seems like the best trade-off. Where I live, the only newer homes in this size are condos. Single family homes are all a minimum of 1600sf (with most being 2000+). To get something small like that, we'd have to go into an older neighborhood, and probably do a to-the-studs remodel to get the place up-to-snuff.