"This isn't going to work out exactly the way I'd planned."
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Retirement Postponed
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Baby boomers who'd expected to quit work by now discover they can't afford it. Blame the meltdown.......
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......The triple whammy of the housing bust, the weakening economy and the turbulent stock market affects most Americans, but few are as shaken as leading-edge baby boomers on the brink of retirement. "There's a lot of sheer panic out there," says financial planner Bert Whitehead of Cambridge Advisors. For many boomers who'd planned the stereotypical retirement play of selling their house and downsizing to a sun-belt condo, falling home values and a lack of offers have put those plans on hold......
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....... Washington State real-estate agent Pili Meyer, 62, says many of her 55-and-older clients are held in suspended animation by homes that just won't sell. Their most common sentiment: "This isn't going to work out exactly the way I'd planned." Typical are Jim and Jane Shefler of Port Angeles, Wash., who put their house on the market last April for $445,000. Since then they've cut the price to $399,000 and offered to provide seller financing to a qualified buyer. With no takers, they've moved into a rental near Seattle, and Jane, who turns 58 this week, has gone back to work part time. "It's probably caused more emotional disruption than financial disruption," says Jim, 59. But their retirement will remain slightly crimped until they convert their home equity into investments that provide a monthly income.....
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Retirement Postponed
.
Baby boomers who'd expected to quit work by now discover they can't afford it. Blame the meltdown.......
.
......The triple whammy of the housing bust, the weakening economy and the turbulent stock market affects most Americans, but few are as shaken as leading-edge baby boomers on the brink of retirement. "There's a lot of sheer panic out there," says financial planner Bert Whitehead of Cambridge Advisors. For many boomers who'd planned the stereotypical retirement play of selling their house and downsizing to a sun-belt condo, falling home values and a lack of offers have put those plans on hold......
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....... Washington State real-estate agent Pili Meyer, 62, says many of her 55-and-older clients are held in suspended animation by homes that just won't sell. Their most common sentiment: "This isn't going to work out exactly the way I'd planned." Typical are Jim and Jane Shefler of Port Angeles, Wash., who put their house on the market last April for $445,000. Since then they've cut the price to $399,000 and offered to provide seller financing to a qualified buyer. With no takers, they've moved into a rental near Seattle, and Jane, who turns 58 this week, has gone back to work part time. "It's probably caused more emotional disruption than financial disruption," says Jim, 59. But their retirement will remain slightly crimped until they convert their home equity into investments that provide a monthly income.....
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Comments
The way I remember it, the common wisdom was to have the existing house completely paid off well before one retires, such that one could continue to live there for the long term on a lower, fixed income.
Either way, this falls into 'cry me a river territory'. I save a significant amount of my paycheck today (in my 20s) so I will be able to retire. If you didn't start saving until age 53, then don't blame a downturn in the housing market for why you can't retire at age 62.
Whatever happened to contingencies? Have they gone the way of common sense?
Your house is like any other item than can be bought/sold/traded--in the final analysis, it is only worth what a buyer will give you for it, at that exact point in time at which you are trying to sell it.
I had a client who did that exact thing: buy first and then sell. She had two mortgages to pay for a few months as a result, but did she listen to me, her practicality minded real estate agent? No. I told her to sell first,and to take her time looking to buy because prices were falling, but she had visions of homelessness. she couldn't quite grasp that reality had changed. She thought that all these other buyers would be beating her out with higher than asking price offers, waiving the inspection, etc.
Only in this country...in this era. 1950 America, or most of the developed world I'm more like a crow. Fairly common and just slightly smarter than most of the other birds.
Ok, that was a strawman anyways, because you actually did specify you were comparing me to Americans.
I don't see anything wrong with being the ant (in the parable of the ant and the grasshopper) so long as the grasshopper starves in silence when winter comes.
And now it looks like Bernake wants to inflate our way out of this mess.
I wouldn't worry too much about the minority of soon-to-retire folk who have enough assets to retire if they get a fair return on investment (say 6%-9%). The likely deflation will make their dollars go so much further that CD rates will be ample. Their voices will be drowned out by the vast majority with essentially no savings.
I stopped trusting the safety of IRAs and 401Ks. The risk isn't worth the benefit of making interest on deferred taxes. Now I want all my money post-tax immediately, where I have better control over it.
First off, that's pretty nit-picky to pick on my spread for being 1% above yours. Just as it's misleading to start in 1930, it's equally misleading to start in 1928, so 5% it isn't either. I just did a quick Google search and most sites picked a time in the 1920s a little earlier, like 1926. Such starting points produce numbers in the 6%-9% range.
Likewise, you could start your analysis on Jan 1st 2000, and say that this millennium returns have been a lot closer to 0%. But there is actually a good reason why returns tend to be quoted in the 7%-8% ballpark, and it's because stocks tend to sell for a PE of about 14 (100/14 = 7.14).
But why argue about historic returns at all? My point - and my concern - is that demographics and macroeconomic functions will drastically reduce the rate of return for the next 15 years.
All else being equal, the further back you go the better the average. But the further back you go, you get into a different era, with, for example, different banking regulations. My thinking is that the 6%-9% range is a skewed by the massive borrowing the fed has done since 1980. I'm sure I could give a big group of people a 9% return quite easily for a few decades if someone else would let me borrow a few trillion dollars. The US gov't borrows money and showers corporations with it, esp. war-related companies.
I didn't see that that was your point. Do you think deflation is going to lower the price of, say, shoes? I can see the prices of houses and electronics deflating, but isn't the price of most everything else going up fast?
That's a question I wish I could answer, but frankly it's way beyond me. The way the economy should work, is that most commodities should be getting cheaper most of the time. This is what free trade, economies of scale, technological improvements, and productivity gain should be doing.
Imagine a world with one apple farmer: Mr. Smith. Smith grows apples and of course sells most of them. Let's say Smith figures out how to double his apple crop for the same effort, or grow the same amount with 1/2 the work. Disregarding his monopoly status, we know that apples will become cheaper, or Smith will work less.
Back in the real world, productivity has been improving at a rapid clip for a large part of the last 20-25 years. Ergo, identical goods should become cheaper, we should all be working less hours, or the quality (complexity) of the goods should be increasing enough to offset the productivity gains. So take shoes, I don't see how the quality has improved much in shoes between 1990 and 2000, but the price certainly rose quite a bit (I picked that decade because productivity increases were especially profound then, and outsourcing was happening rapidly). In a real sense, the price of Nike's should have dropped significantly, but instead rose. I think the answer is that credit availability rose more quickly than productivity did. Back to Smith's Apples, if he's twice as efficient and twice as many people can afford apples (due to credit), he might get twice the profit from twice the apples.
So my short answer is that I think if price rose in the 1990s, I think they will continue to rise unless two things happen. Productivity continuous its upward climb (technology makes this nearly inevitable over the long haul, but anything can happen for a decade or so), and credit doesn't contract. If we have a significant credit contraction however, all bets are off and I think shoe prices and everything else might crumble.