WatchFrom Patrick.net reader Michael:
http://finance.yahoo.com/retirement/article/112417/homeowner-no-savings-some-options
Are we supposed to feel sorry for this person because she never saved any money? She lives in Grass valley in a nice house and has $150K in equity? Can she take a reverse mortgage and get a monthly check from the bank? She also owns timberland in N Calif that she won'r sale becasue it has dropped in Value? She never invested any of her earnings over the years...Her choice.Give me a break! This woman is better off than 90% of the people on this planet. For real. Cry me a river. Am I missing something here?
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Michael says
Yes. You're missing that the point of the article was not to be a sob story and make you feel sorry for her. It's in the Personal Finance section. I'm sure there are lots of people in a similar situation, and the article discusses some options, so it's probably of value to many people.
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This is a person who made all the wrong decisions, when the country was in fact rich and powerful. Back then, UC/Berkeley costed at most, $2-3K per year, everything included for CA residents. People were paying for college back then with their summer landscaping jobs. Then, she wasted her time there when she could have been studying either accounting or engineering. Upon dropping out, she took a bunch of odd jobs, earning little, with the hopes of making it as an artist. Huh? Then, she had children w/o planning for the costs of raising one.
Today, kids who're doing the *right* things are graduating with huge debts and with fewer prospects, given the enormity of white collar offshoring there is. Many kids today will boomerang back to their parent's homes and may never get a job or pay down their debts, if they didn't win a scholarship to a top ten law or pharmacy program.
Now, add to the above litany, this person's lack of lifelong financial planning and you have a type of spoiled `Summer of Love` brat who never grew up.
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Not everyone graduates with debt. It isn't that bad when payment plans are made out (say weekly at a few hundread). Outright loans for tens of thousands or even more don't help. Student loans are toxic. I have no problem concenting to a credit report.
The report in question showed how sometimes art doesn't really help. If you want it as a side job that's fine but the saying of "Don't quit your day job" is real. I have plenty of ideas for stories to write but I don't quit to do so. With actual paintings it can be ok but if you don't have a market it's a hard medium. At least with music you can perform it live and some prefer live music. If you write you can distribute it via ebooks overnight. People don't buy artwork in the same volume as books and music.
the other issue I have with the article is it assumes that retirement exists. No civilization within the history of the planet has this. Normans, Romans, Incans, Mayans, Gauls, Hans, Nubians, Persians etc. No civilization has allowed a man made vehicle to allow one generation to retire on the backs of another. People had large families because having one meant the division of labor to help the parents would be easier. Family was replaced by the state.
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Baltimore, MD
shrekgrinch says
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Baltimore, MD
Whever happened to working your way through college?
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I find this article typical of the way so many people apparently manage their money through life.
First, this woman made $65,000 at one point over 25 years ago and could not save a penny? This is typical of these "human interest' stories where a person made series of personal life choices - and apparently here from a financial standpoint, most of them not wise - and then ends up with little money and inadequate income.
Except that in this instance, her net worth is above the median household for the United States. So despite her low income, she is not poor. She needs to either get a roommate, sell her properties or extract her equity through a reverse mortgage. And if where she lives is too expensive, she should consider moving somewhere cheaper.
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I'm 65. My wife and I have been married 42 years. We have 2 grown children. We have lived in the Southern California desert for 40 years.We had no money or friends or skills when we came here. I sold firewood and my wife was a waitress. We scratched out a living for years, driving old cars that we fixed ourselves when they broke. I started a sign business knowing nothing about the craft and it turned into a life long vocation. My wife put herself thru collage and got a masters degree in design.
Nobody gave us anything. All the while we were working our fannys off, many of our friends and relatives who lived in the city were living well. New cars every couple of years, nice vacations, lots of presents under the old Christmas tree. Now they don't have squat! I should feel sorry for them? NOT! They had more money go thru their hands in a few years than I will see in my lifetime. I remember a guy telling me when I was young, "It's not what you make, it's what you save".
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"They had more money go thru their hands in a few years than I will see in my lifetime"
Exactly, this is what happens to those 'sudden' money types. On the other hand, if one persists in this behavior, after the age of 28, then they can't blame the follies of youth either. This particular individual never grew up.
"Not everyone graduates with debt"
Sure, however, if one wants to attend a professional school, like law, medicine, or even pharmacy, if one doesn't get into their top state program, ala Univ of Texas/Austin, there's a good chance that loans will be involved.
"The report in question showed how sometimes art doesn’t really help. If you want it as a side job that’s fine but the saying of “Don’t quit your day job” is real. "
But everyone knows this; it's commonsense. Van Gogh died poor. Same for Nikola Tesla, since Westinghouse held many of his patents. The artist, unless they do let's say accounting/bookkeeping or computer programming part-time, is nearly guaranteed a low income lifestyle.
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Egg Harbor City, NJ
I don't know if we are suppose to feel sorry for her, I took it more as a warning to those who not have started saving for or have not saved enough for retirement what can happen to you. Personally I don't think I saved enough either. I'm 42 and my retirement account only has about 100k in it, my wife has less then 5K in her account. At our current saving rate we will have some where in the area of 1.2 million by the time were 67, and I still don't think that's enough.
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afrost says
It's unclear to me if that really was the case. By that I mean from the value of her house, I was assuming that it was in rural California, which I understand (feel free to correct me here) is really not particularly expensive. Sure she could move to someplace cheaper, but by how much? I wold think that finding a roomate might be better for her.
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Boise, ID
afrost says
I choked on that statistic too. The reporter never asked the hard questions, such as did she spend it all on parties and vacations?
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TechGromit says
If current trends continue, figure on beign a WalMart greeter in "retirement". Even if you do get to 1.2 Million, that won't by much in another 25 years.
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Pacifica, CA
"One thing kind of led to another,” Ms. Wilson said. “I’ve always put all my money into my businesses. And I always thought the business I was in was going to be a great success.” She also raised a daughter, Corie, 36, who lives in Los Angeles with her two children and is not in a position to help her mother financially."
I have some sympathy for this lady, having been through two business failures. You can lose a lot of money learning the hard lessons of small business. Luck also plays a part, no matter how smart some of one's decision-making might be. I wish her luck.
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"At our current saving rate we will have some where in the area of 1.2 million by the time were 67, and I still don’t think that’s enough"
Well, the issue here is whether or not you can generate enough of a dividend income to cover your costs and I do think it's possible, however, you'll most likely need to move out of high markup states like CA to do it comfortably.
Look at this house in Bangor Maine (http://tinyurl.com/4je7jaj), it's about ~$138K but has pretty much all you'll ever need. This is what housing is like in non-bubble regions. Fine, Stephen King and the Bushes can have the most posh palaces in Maine but an ordinary folk can also afford a place there.
So while I agree with the general don't get into RE motto, esp in these bubble cities but it's better to have a low cost home, paid off in full, for retirement where your retirement income can cover taxes & maintenance.
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"They had more money go thru their hands in a few years than I will see in my lifetime"
Exactly, this is what happens to those 'sudden' money types. On the other hand, if one persists in this behavior, after the age of 28, then they can't blame the follies of youth either. This particular individual never grew up.
"Not everyone graduates with debt"
Sure, however, if one wants to attend a professional school, like law, medicine, or even pharmacy, if one doesn't get into their top state program, ala Univ of Texas/Austin, there's a good chance that loans will be involved.
"The report in question showed how sometimes art doesn’t really help. If you want it as a side job that’s fine but the saying of “Don’t quit your day job” is real. "
But everyone knows this; it's commonsense. Van Gogh died poor. Same for Nikola Tesla, since Westinghouse held many of his patents. The artist, unless they do let's say accounting/bookkeeping or computer programming part-time, is nearly guaranteed a low income lifestyle.
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Really? I am surprised at some of the comments. If the same person had bought a mortgage far beyond her means, and was now underwater and was unable to make a payment (right from the beginning), I am sure the same lot would be feeling sorry for her and having a big discussion about how the Wall street was screwing "innocent" homeowners.
Here is a story which is meant to educate people about the need for savings, and no where is the person asking for a handout, but people are making comments like she is the worst person ever (both here and on Yahoo comments). I do feel sorry that she was not financially educated, and could have made a better choices for herself.
I also feel sorry that the so called liberals are going to stand behind deadbeat/greedy homeowners who borrowed in full knowledge that they can not afford to do so, but are ready to lynch a person who is just down on hard times. I am sorry also because I like so many things that democrats are good at (environment for eg.) but their lack of personal responsibility makes me not want to associate myself as a democrat (not that I am a fan of republicans either).
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TechGromit says
rule of thumb if you're poor(uaw=under-accumulator-of-wealth): age divided by 20 times gross income
if you make $100k/year at 40 years old.
you're poor if you have a net worth below $200k.
http://www.pfstock.com/2010/04/millionaires-rule-of-thumb.html
http://en.wikipedia.org/wiki/The_Millionaire_Next_Door
http://www.punny.org/money/your-total-measure-of-wealth-age-and-net-worth/
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"If the same person had bought a mortgage far beyond her means, and was now underwater and was unable to make a payment (right from the beginning), I am sure the same lot would be feeling sorry for her and having a big discussion about how the Wall street was screwing “innocent” homeowners. "
That's why it's a housing bubble blog and not a mainstream site. I've been down on everyone who'd bought a home, since 2004, from Boston to Virginia. Here's why... huge IT/telecom bust but strangely enough, people were going crazy over housing, as if it were an industry (like semiconductors, biotech, or plastics) into itself. Now, none of these persons are talking to me because one, they can't move (all metro areas from Boston to DC), and the jobs are growing in Houston, Denver, and other cheaper towns and two, they constantly worry about losing their jobs and have found that with the prop taxes/maint, that they're paying 2.2x equivalent rent and don't have a rainy day fund anymore.
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I was able to discern the root of all her mistakes:
"... in the late 1950s, though she left before graduating to move to New York and marry her college sweetheart, the Minimalist sculptor and sometime rock musician Walter De Maria."
Translation:
Didn't finish college, to run off and marry a bum who was a lazy sculptor (fooled a lot of ppl with his 'minimalist' mumbo-jumbo). When not playing around with bits-o-junk in the backyard... Walter, spent all of his disposable income and time on 'trying to get the band back together.'
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---Didn’t finish college, to run off and marry a bum who was a lazy sculptor (fooled a lot of ppl with his ‘minimalist’ mumbo-jumbo). When not playing around with bits-o-junk in the backyard… Walter, spent all of his disposable income and time on ‘trying to get the band back together.’---
And those are the two failed businesses, an art shop and a musical stint.
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I think what Michael is missing is grammar, spelling and appropriate capitalization. Calling someone else dumb when you don't know how to write at the level of a moderately intelligent ten year old is a little weird.
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Hello, long time lurker, first time poster here. Many people out there made mistakes similar to Susana Wilson. Note the article states she plowed her earnings back into her businesses. Hell, I've done that in the past too. We all make mistakes and none of use live long enough make everything right.
I don't think, however, that the article is a sob story. The point of the article is to reinforce social shame of bankruptcy and instead convince readers that reverse mortgage is the better option. Because one's supreme obligation is to that holy institution, the Bank. No other consideration should be taken into account, right? Note, Wilson only owes 9,000 in credit, plus 5 and change on her mortgage.
I'm here to learn, so my question is, wouldn't Wilson actually be better off declaring bankruptcy? thanks all
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I may have misunderstood, I think this article just highlights a few facts.
1) Most people do not save for retirement. This lady certainly didn't save much.
2) Older folks are going to be downsizing probably in near future in order to make old age a more joyful experience. After all this lady is selling some land she bought long ago to solve her immediate cash problems. (I just hope she doesn't do reverse mortgage, that is an effing death trap for seniors)
And last but not least this lady has a lot of options, most of which do not include being in debt.
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Snapdragon says
It depends. Bankruptcy doesn't mean she doesn't pay. She has to prove to the court that she is making below median income and she can't afford payments. That's not the difficult part. Hard part is next:
In bankruptcy her assets which are non exempt (exempt would be primary residence and tools of the trade) would be auctioned off to pay off whatever debt, and the rest of the debt would be cleared. This means the land that she owns elsewhere would be auctioned off anyway. (I don't think it is exempt since it's not primary residence)
Not sure if it is worth it for her at this point. For one thing, she got into the CC debt due to her lifestyle. Bankruptcy will simply mean she can no longer borrow and make her life much harder (which I guess is the idea behind it).
Best bet is for her to simply sell some assets (which the court would do anyway) and settle with credit cards. And after that find a way to live within the means. She can rent out part of her house to some college kids. A lot of older folks out here do that. Almost every house out here has a renter or two.
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Syphilis says
I guess I'm poor then. Also it's net worth, not 401k worth, it's entirely possible to have home equity, savings and other investments not directly related to your 401k/IRA value. But admittedly I still don't make the cutoff. :(
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Pasadena, CA
junkmail says
The root of all mistakes happened sometime before this, when her parents raised her in such a manner that she grew up to think that it was OK to run off with lazy minimalist sculpters without a care in the world.
Walter De Maria looks so darn happy after creating a "piece of art" that doesn't compare to what my 2 year old daughter can create with her Mega Blocks:
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No sob story here; Susanna has had better financial opportunities than millions of other Americans. Earning $65,000/year 25 years ago is equivalent to earning over $130,000/year in today's dollars...plenty of income to have socked a bunch away for the future...but she didn't. Really bad decision.
OK, one can't change past bad decisions. Time for her to act NOW: 1) sell the timber, put proceeds in gold or something else that will keep its value with inflation; 2) live frugally (track her expenses in detail and cut out what she can); 3) take in friendly rent-paying roommates --for rental income, to share food/utility expenses, and for companionship. As many as roommate-renters as possible so that there's one person for each bedroom in the house -- she could potentially get as much in rent as the $900/month she gets in Social Security...and $1,800/month is quite enough for one elderly person with Medicare to live well in Grass Valley.
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Glendale, CA
I am missing something here, this person has about 5k in debt and a 200k house and is 70, that means she was born around 1940 when life expectancy for a woman was 65.8. She need not live all that frugally, rent the house, move someplace cheap.
I disagree that she didn't save. She didn't save cash, she invested in making her mortgage payments and now in effect owns outright a halfway decent rental unit.
Sell the timber land, take that mortgage to zero, while your at it I say, and go to the beauty parlor and ditch the teenage haircut.
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On the recs, I've been wondering...
Are people recommending just the initial post lead, the whole post with comments, or if the post is a question are they just using the rec as their answer to that. In the case of this post, do readers giving a negative rec think that this post is uninteresting? or are they just saying "No, I don't feel sorry for this person"?