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Provided I never sell my house I can't create a scenario in this where my retirement doesn't work out. If I have to rent though? It's a very different situation

Provided I never sell my house I can't create a scenario in this where my retirement doesn't work out. If I have to rent though? It's a very different situation.

yodsanklai 3y ago
Did you consider scenarios with high inflation and high housing tax...
- wincy 3y ago
  At least where I live the elderly can’t lose their house from failure to pay housing taxes.
  - pc86 3y ago
    This sounds good in theory but what are the options? 1. You can forgive the taxes in which case everyone else in the tax jurisdiction just pays this person's taxes indirectly. 2. You can lien the property and pass the bill on to the estate, in which case you're either having the heirs pay the taxes (and late fees, and interest) with extra steps, or if no heirs the buyer pays less for the property and the end result is basically #1.
    - positr0n 3y ago
      I don’t see how a lien is the same as #1. Say retired couple owns a $500k home and can't pay $5k/yr property tax. They will live for 10 more years. With no lien, they are forced to sell and buy a cheaper $450k house, using the equity to pay property taxes. When they die, heirs get $450k. With the lien, in 10 years the estate sells the house and the heirs receive $450k after paying the back taxes. Obviously this is simplifying a lot, but I don't think the rest of society is being shortchanged by the lien mechanism. Except in the case where the unpaid taxes exceeds the value of the house.
- dahfizz 3y ago
  Inflation highly favors those who own a house. Their mortgage payment is fixed, your rent payment goes up every year.
  - vinyl7 3y ago
    Property taxes will skyrocket though
    - wredue 3y ago
      Property taxes are built in to rents and then some. My property tax is considered “extremely high” at $4500 a year. Rent for $4500 a year is like a closet, even in a cheap place.
      - pc86 3y ago
        Where is $4500/yr "extremely high?" We are basically middle-of-the-road for taxes in our area and it's over $11k/yr.
        BizarreByte 3y ago
        I'm located in Nova Scotia and outside of the HRM 4500/year would be an absolute obscene tax rate in all except the biggest towns.
        wredue 3y ago
        My properties taxable assessment value is only in the 250,000 range. So the property taxes are considered quite high. Property taxes aren’t a flat rate.
    - xeromal 3y ago
      Depends on the state.
    - stetrain 3y ago
      I pay $2500/mo to rent a house that was purchased for $280k in 2015 and is now worth about $550k. That's comparable rent to what I would pay for a decently desirable 2bd apartment. Property taxes county + city are about $4300 per year. They have increased recently, and so has the rent. If they owner put down a 10% down payment, I estimate their total monthly payment for mortgage + taxes + insurance is about $2000, and will likely remain in that ballpark. That means rent is currently paying the entire mortage/tax/ins plus $6k per year. At the end of their mortgage that monthly cost drops to about $700, and they will own an asset likely worth $500k+.
- BizarreByte 3y ago
  My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year. In terms of inflation? Owning the house has already made that a lot less painful.
bluGill 3y ago
If you rent you need to spend less on housing in the early days, and invest the difference. If you do this all along you should be fine. However if like many who rent you just taking your savings from rent (vs a house - including not just the payment but also property taxes, insurance and maintenance) and party you are in trouble. Houses can be a great forced savings plan. (so long as you don't cash our refinance like many do, you don't move too often, and a bunch of other fine print things)
- ghaff 3y ago
  A lot of people probably underestimate how much a house costs even if you ignore mortgage (or have paid it off). It varies of course but I figure it's a good $1,000/month and that probably understates various infrequent but expensive maintenance items.
  - BizarreByte 3y ago
    My house has cost significantly less than that over the time I've owned it. Last year I spent 4000$(CAD) on maintenance, this year I'm at just under 1000$. It's about 60 years old and it really doesn't take much to keep it in decent condition, but I'm also happy to and skilled enough to do a lot of work myself. If I owned a giant American style McMansion I could see it costing that much, but it's a very modest house. When it comes to maintenance costs it's hard to estimate when talking online because every location, house, and person is very different.
    - ghaff 3y ago
      It is an old house but it's less than 2,000 sq. ft. which is not small but certainly not McMansion size. $4K/year property taxes, >$1K/year insurance. Plowing (though that's fairly cheap because my neighbor who shares use of my long driveway does it). I do a lot of little routine stuff but did have a bunch of new windows about 5 years back and a bathroom needed to be redone at about the same time. Have to pay for trash collection. Have had some major projects over the years that were necessary like a new roof. Need a couple new appliances and associated work at the moment. So, yeah, even owning my house outright, it probably costs a good $1,000/month to pay regular bills and keep it in a reasonably stable state.

Provided I never sell my house I can't create a scenario in this where my retirement doesn't work out. If I have to rent though? It's a very different situation.

yodsanklai 3y ago

Did you consider scenarios with high inflation and high housing tax...

wincy 3y ago
At least where I live the elderly can’t lose their house from failure to pay housing taxes.
- pc86 3y ago
  This sounds good in theory but what are the options? 1. You can forgive the taxes in which case everyone else in the tax jurisdiction just pays this person's taxes indirectly. 2. You can lien the property and pass the bill on to the estate, in which case you're either having the heirs pay the taxes (and late fees, and interest) with extra steps, or if no heirs the buyer pays less for the property and the end result is basically #1.
  - positr0n 3y ago
    I don’t see how a lien is the same as #1. Say retired couple owns a $500k home and can't pay $5k/yr property tax. They will live for 10 more years. With no lien, they are forced to sell and buy a cheaper $450k house, using the equity to pay property taxes. When they die, heirs get $450k. With the lien, in 10 years the estate sells the house and the heirs receive $450k after paying the back taxes. Obviously this is simplifying a lot, but I don't think the rest of society is being shortchanged by the lien mechanism. Except in the case where the unpaid taxes exceeds the value of the house.
dahfizz 3y ago
Inflation highly favors those who own a house. Their mortgage payment is fixed, your rent payment goes up every year.
- vinyl7 3y ago
  Property taxes will skyrocket though
  - wredue 3y ago
    Property taxes are built in to rents and then some. My property tax is considered “extremely high” at $4500 a year. Rent for $4500 a year is like a closet, even in a cheap place.
    - pc86 3y ago
      Where is $4500/yr "extremely high?" We are basically middle-of-the-road for taxes in our area and it's over $11k/yr.
      - BizarreByte 3y ago
        I'm located in Nova Scotia and outside of the HRM 4500/year would be an absolute obscene tax rate in all except the biggest towns.
      - wredue 3y ago
        My properties taxable assessment value is only in the 250,000 range. So the property taxes are considered quite high. Property taxes aren’t a flat rate.
  - xeromal 3y ago
    Depends on the state.
  - stetrain 3y ago
    I pay $2500/mo to rent a house that was purchased for $280k in 2015 and is now worth about $550k. That's comparable rent to what I would pay for a decently desirable 2bd apartment. Property taxes county + city are about $4300 per year. They have increased recently, and so has the rent. If they owner put down a 10% down payment, I estimate their total monthly payment for mortgage + taxes + insurance is about $2000, and will likely remain in that ballpark. That means rent is currently paying the entire mortage/tax/ins plus $6k per year. At the end of their mortgage that monthly cost drops to about $700, and they will own an asset likely worth $500k+.
BizarreByte 3y ago
My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year. In terms of inflation? Owning the house has already made that a lot less painful.

bluGill 3y ago

If you rent you need to spend less on housing in the early days, and invest the difference. If you do this all along you should be fine. However if like many who rent you just taking your savings from rent (vs a house - including not just the payment but also property taxes, insurance and maintenance) and party you are in trouble. Houses can be a great forced savings plan. (so long as you don't cash our refinance like many do, you don't move too often, and a bunch of other fine print things)

ghaff 3y ago
A lot of people probably underestimate how much a house costs even if you ignore mortgage (or have paid it off). It varies of course but I figure it's a good $1,000/month and that probably understates various infrequent but expensive maintenance items.
- BizarreByte 3y ago
  My house has cost significantly less than that over the time I've owned it. Last year I spent 4000$(CAD) on maintenance, this year I'm at just under 1000$. It's about 60 years old and it really doesn't take much to keep it in decent condition, but I'm also happy to and skilled enough to do a lot of work myself. If I owned a giant American style McMansion I could see it costing that much, but it's a very modest house. When it comes to maintenance costs it's hard to estimate when talking online because every location, house, and person is very different.
  - ghaff 3y ago
    It is an old house but it's less than 2,000 sq. ft. which is not small but certainly not McMansion size. $4K/year property taxes, >$1K/year insurance. Plowing (though that's fairly cheap because my neighbor who shares use of my long driveway does it). I do a lot of little routine stuff but did have a bunch of new windows about 5 years back and a bathroom needed to be redone at about the same time. Have to pay for trash collection. Have had some major projects over the years that were necessary like a new roof. Need a couple new appliances and associated work at the moment. So, yeah, even owning my house outright, it probably costs a good $1,000/month to pay regular bills and keep it in a reasonably stable state.