South Florida, a senior enclave, sees more people ‘unretiring’ due to living costs

[Pablo]

Per the article "“Senior citizens, among other things, are fighting housing affordability costs driven upward by rising condo assessments, higher rents and maintenance costs, and back-breaking insurance premiums on multiple fronts,” the article explained."

How many retirees do you know that can afford a six-figure assessment? I'm going to guess, not many. The reassessment on these older condo projects are even forcing some seniors to sell.

There is that - and when people tell us what the association fees are? Completely and utterly insane. IMHO. $1000-$2500 PER MONTH. Not principle. Not interest. Not insurance. Yes there is a pool. Yes a small gym. Common room. But not a $1000+ worth per month.

Choices!!

 

[TomYoung]

Now, run the numbers on that same 100,000, 30 years, and a conservatively low market return of 8% on a similar calculator.

Look at the total after 30 years of compounding returns. (It’s a hair over $1,000,000).

Subtract 446,774 from that total.

See how big the delta is?

You are ahead by over half a million by investing vs. paying off the loan.

And that’s at 8%.

At 10% return (the historic average for the S&P), and the total is about $1.7 million, and you’re ahead by well over a million.

What’s nonsensical is failure to see the benefit of the arbitrage, of analyzing the best place to put your money.

An example - my own - starting 17 years ago, we got married and started investing modestly.

Now, we could have done what you suggest, and applied that investment portion of our cash flow into pre-paying the mortgage. We would have it paid off about now.

But we chose to invest. The result?

Our portfolio has a value that is more than ten times our current (3.25% refinanced) mortgage. About five times the total value of our house.

In your method, we would have a paid off house. No portfolio.

We are much father ahead because we invested. We could now pay off the mortgage and still have a substantial portfolio. We have about ten times the money that paying off the mortgage would have yielded.

It’s not even close

That's not exactly what my calculation concerned. I was reacting to the poster who was claiming that reverse mortgages are misunderstood and have some hidden virtue that we are all missing. He, meanwhile, showed how great they are when they have an interest rate of zero... which of course never happens. My argument is that they rapidly eat into hard-earned equity.

Your point is well-taken. If you have a 5% reverse mortgage and an 8% annual return, you should max out that reverse mortgage. (BTW, the original poster's plan was to use the reverse mortgage to replace a roof).

The only concerns I have are about your assumption that your returns are guaranteed... but I am with you, while maintaining that folks should be very careful when considering reverse mortgages.

 

[BMWTurboDzl]

How common was this?
How many people really were in line to get pensions?
How many people paid into a pension and lost it completely?
How many were offered 401Ks with zero matching?
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

In long term reality 401K's and IRA's are the best things that ever happened for American workers willing to save money for retirement.

Private pensions were de jour until the late 1980's - early 1990s when companies started to offer 401k's with or without matching. Matching was not as ubiquitous as it is today. When I started in banking in the mid-1990's we had a pension and then we were bought out for some lump sum amount once the company fully transitioned to 401k prior to 2000.

There are three big problems with 401k's. #1 You can never contribute enough to match what a company would have to set aside under the pension scheme. #2 As an employee you're at the mercy of the employer with regards to what company is chosen to administer the 401k and how much they charge. #3 Enrollment is not mandatory.

 

[Astro14]

They can but did they when their pensions were pulled. My point is they ripped out pensions and offered optional 401k many without any match or contribution by employer.

This happened in late 70s when folks did not have internet just newspapers, magazines and TV.

Not as many people actually had pensions as you suggest. Fewer than half of workers had pensions in the 1970s and the numbers were dropping every years as big companies went bankrupt and restructured.

Pensions weren’t “ripped out” by any single company or force. Pensions were underfunded for decades in the 190s and 1960s.

In response, in 1974, ERISA required companies to fully fund pensions every year, every year, according to a formula based on assets and liabilities. A plan that was OK one year, might require a billion dollars of contributions the next due to normal market fluctuations in the asset value. It was a time of poor market returns, and high inflation.

Those big pension funding requirements drove a lot of plans into insolvency, accelerating the demise of pensions, ironically, as the point of ERISA was to save pensions.

In 1979, when Congress created the 401(k), fewer than 20% of workers had a pension and the 401(k) was an attempt to help fix the problem of so many company and pension insolvencies.

Look, this is a topic that is personal for me, because my own pension was wiped out, liquidated, in 2002. In 2000, it was funded at 165%. Solid, strong fund. Market forces and ERISA requirement led to it being at 65% funded in 2002 and was a large part of why the airline filed for bankruptcy. I have no pension as a result.

It’s a fantasy to talk about the “good old days” of pensions - because by 1979, they didn’t exist for 80+% of workers. And even those that survived that decade didn’t make it into the future.

The number of private pensions has been holding at about 15% for the past 50 years. Very few folks on this board saw the environment change while they were working. So, no, the world didn’t change, not recently, it’s been this way for a long time.

 

[Astro14]

That's not exactly what my calculation concerned. I was reacting to the poster who was claiming that reverse mortgages are misunderstood and have some hidden virtue that we are all missing. He, meanwhile, showed how great they are when they have an interest rate of zero... which of course never happens. My argument is that they rapidly eat into hard-earned equity.

Your point is well-taken. If you have a 5% reverse mortgage and an 8% annual return, you should max out that reverse mortgage. (BTW, the original poster's plan was to use the reverse mortgage to replace a roof).

The only concerns I have are about your assumption that your returns are guaranteed... but I am with you, while maintaining that folks should be very careful when considering reverse mortgages.

I missed the post to which you were responding, then. My apologies. I thought you were talking about paying off the mortgage.

Of course the market returns are not guaranteed, but in the long run, they are there, and the savvy investor has to weigh those competing factors.

 

[BMWTurboDzl]

There is that - and when people tell us what the association fees are? Completely and utterly insane. IMHO. $1000-$2500 PER MONTH. Not principle. Not interest. Not insurance. Yes there is a pool. Yes a small gym. Common room. But not a $1000+ worth per month.

Choices!!

Imagine having an HOA that starts at $200/mo and goes to $1,000/mo via reassessment? That's a huge chunk of change that retirees can't really plan for especially when these reassessments are due to acts of nature and/or changes in the law.

 

[andrew_j]

How common was this?
How many people really were in line to get pensions?
How many people paid into a pension and lost it completely?
How many were offered 401Ks with zero matching?
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

In long term reality 401K's and IRA's are the best things that ever happened for American workers willing to save money for retirement.

Willing to sa

Mmm… like most things, it depends.

A 3.25% mortgage is awfully cheap in light of recent (and potential future) inflation, or even without considering inflation. The interest is deductible, so the real cost of that mortgage is down around 2%, depending on tax bracket.

Paying off that mortgage is a guaranteed very low return on the investment. There are a great variety of investments with far better returns.

I would rather invest the money, than pay off a mortgage at that rate.

That leads to the question would I borrow money at 3.25% to invest?

 

[andrew_j]

Not as many people actually had pensions as you suggest. Fewer than half of workers had pensions in the 1970s and the numbers were dropping every years as big companies went bankrupt and restructured.

Pensions weren’t “ripped out” by any single company or force. Pensions were underfunded for decades in the 190s and 1960s.

In response, in 1974, ERISA required companies to fully fund pensions every year, every year, according to a formula based on assets and liabilities. A plan that was OK one year, might require a billion dollars of contributions the next due to normal market fluctuations in the asset value. It was a time of poor market returns, and high inflation.

Those big pension funding requirements drove a lot of plans into insolvency, accelerating the demise of pensions, ironically, as the point of ERISA was to save pensions.

In 1979, when Congress created the 401(k), fewer than 20% of workers had a pension and the 401(k) was an attempt to help fix the problem of so many company and pension insolvencies.

Look, this is a topic that is personal for me, because my own pension was wiped out, liquidated, in 2002. In 2000, it was funded at 165%. Solid, strong fund. Market forces and ERISA requirement led to it being at 65% funded in 2002 and was a large part of why the airline filed for bankruptcy. I have no pension as a result.

It’s a fantasy to talk about the “good old days” of pensions - because by 1979, they didn’t exist for 80+% of workers. And even those that survived that decade didn’t make it into the future.

The number of private pensions has been holding at about 15% for the past 50 years. Very few folks on this board saw the environment change while they were working. So, no, the world didn’t change, not recently, it’s been this way for a long time.

It has been a while which was my point why retirees now have issues ….

 

[Cujet]

As always the true tax rate is what the government spends. As you will pay, in taxes, inflation, fees, rent, product and energy costs.

The idea that government spending happens in a vacuum is wildly in error.

 

[zzyzzx]

I'm sure all those internet "Experts" that tell everyone to retire early and take your SS early, isn't helping the situation.

 

[zzyzzx]

Much of what's happening in FL right now involves unanticipated substantial increases in insurance rates, property taxes and condo fee assessments.

And lot rent.

 

[Pablo]

Private pensions were de jour until the late 1980's - early 1990s when companies started to offer 401k's with or without matching. Matching was not as ubiquitous as it is today. When I started in banking in the mid-1990's we had a pension and then we were bought out for some lump sum amount once the company fully transitioned to 401k prior to 2000.

There are three big problems with 401k's. #1 You can never contribute enough to match what a company would have to set aside under the pension scheme. #2 As an employee you're at the mercy of the employer with regards to what company is chosen to administer the 401k and how much they charge. #3 Enrollment is not mandatory.

Not many folks had pensions, a LOT more now have 401Ks

1) Not true - especially with the very generous catch up provision. "Never" is a strong word. Pensions were quite under funded and no companies were putting in what you can contribute..........even if you are making $200K/year, $30,500 is a decent savings per year, plus at that salary throw at least $25K after tax savings, invest, bingo.............

"401(k) contribution limits for 2024
The 401(k) contribution limit for 2024 is $23,000 for employee contributions, and $69,000 for the combined employee and employer contributions. If you're age 50 or older, you're eligible for an additional $7,500 in catch-up contributions, raising your employee contribution limit to $30,500. Depending on your plan, you may be able to make post-tax contributions beyond the pretax and Roth contribution limit but less than the combined employee and employer contribution limit to invest even more for retirement. Total contributions cannot exceed your annual compensation at the company that holds your plan."
https://www.fidelity.com/learning-center/smart-money/401k-contribution-limits

2) Yes that is true, and some of what I read even here is painful, the somewhat limited options folks have. BUT most have one or two stock funds that do OK. I was absolutely lucky to have Fidelity since 1988. Even in my 401K I could choose "Brokerage Link" and buy any fund or stock I wanted (except MLP's). That said, stock picking as you know is not the key. Just time and money and sticking with it, plus increasing savings all the time.

3) Mandatory enrollment. The is whole large kettle of fish. How stupid are people!?! That's not a question.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
I've said how we did it. I've not mentioned dollar amounts. If someone asks, I will answer.

 

[zzyzzx]

If you do a U-Tube search, you'll see tons of people with varying degrees of opinions on retirement. Working until your 70 will get you the biggest benefit, if that works for you. ,,,

Not collecting Social Security until you are 70 gets you the biggest benefit. You can be below 70, not working and not collecting Social Security.

 

[Pablo]

Not collecting Social Security until you are 70 gets you the biggest benefit. You can be below 70, not working and not collecting Social Security.

Here we go!!

Tipping point may depend on lifespan and $ amount and discipline. 65 was a good age for us, enough - plus invest the $5500/month. Didn't make sense to wait until 70 and yes could have been $5900 or so.

 

[zzyzzx]

There are three big problems with 401k's. #1 You can never contribute enough to match what a company would have to set aside under the pension scheme. #2 As an employee you're at the mercy of the employer with regards to what company is chosen to administer the 401k and how much they charge. #3 Enrollment is not mandatory.

#4 - You don't always get matching money. Either it's not offered, or it's offered but takes 4 years to vest and you aren't going to stay at a company for 4 years that doesn't give raises, or they cut the matching money. I have had all of these things happen.

 

[zzyzzx]

Inflation is keeping a lot of people from retiring as well.

 

[zzyzzx]

What's the point in retiring unless you can do it in Caligulan splendor?

 

[Pablo]

What's the point in retiring unless you can do it in Caligulan splendor?

I do try!

It's the eating part that is killing me.

 

[SC Maintenance]

So what if you don't have a 401K option or a pension. I have never had a pension option. I have had a 401K match only one job (3%) and one job they didn't even have a 401K - very small company.

There are IRA's, Roth IRA's. You can also just put money away after tax. Since it seems to be the ones on the lower income scales that lack the company sponsored stuff there tax rates are likely not very high anyway.

SS is not going to cut it. If you don't have a stash of cash, you shouldn't be retiring - at whatever age. IMHO.

 

[ZZman]

Florida suffers from high home prices and ridiculous home insurance costs.