patrick.net

Your numbers are very good. My wife and I used similar reasoning (and she has a finance degree).

This is what we came up with. That it's best to go with 50% of one persons income (provided both incomes are close to equal). Essentially to make sure that one income can save and one can survive if necessary without other being present (because shit happens). This allows us to basically keep saving for retirement and not be indentured in some ballooned payment.

We figured it would be a terrible financial decision to not save for retirement (the age where one makes the least and needs the most help).

>I do not want to assume the house is anything but a depreciating asset

this is kinda wrong since land doesn't depreciate at all and with minimal maintenance any house can have a 50-plus year service life.

I can be on both sides of this issue, depending on things, but looking at where you want to be in 2040 is always the best strategy.

Rents are up around 30% from 20 years ago and I think they'll be up another 30% in 2030. I don't think buying now is a horrendous decision given future inflation we're going to have to see.

If things really tank in this decade then if you live in a no-recourse state you can just let the bank have its collateral and walk away. There's absolutely nothing wrong in doing this.

Troy says

>I do not want to assume the house is anything but a depreciating asset

this is kinda wrong since land doesn’t depreciate at all and with minimal maintenance any house can have a 50-plus year service life.

i worded it wrong, the house has value but doesn't have any incoming producing value.

i'm relying completely on savings and investment for a retirement nest egg and for retirement income.

i won't rely on the house for any income in retirement (no reverse mortgages or HELOCs). it's only value to me in retirement is a cheap place to live (assuming property taxes don't go crazy).

If you are still saving money after buying a house, you're doing well. My wife and I wanted to make sure we were still saving at least as much as our mortgage costs every month. That was going well through one kid, but the second one may knock us down a notch.

sfbubblebuyer says

If you are still saving money after buying a house, you’re doing well.

i have a hard time agreeing with this. everyone should save - home owners or renters and i think it really should be the norm.

how do you fund retirement if you're not saving?

social security from the government? that's a risky proposition.
even if you get social security, and that's a big "if", retirement at those low levels of income won't be much fun.

do you expect your kids to help you? americans aren't like asians that take care of their parents in old age. you might want them to take care of you, but whether they will do depends on how you bring them up. it's not something i rely on.

Anon, I was agreeing with you that people need to be saving for retirement, even after buying a house. And I mean REALLY saving, not having 50 bucks left at the end of the month. Retirement saving should be the FIRST thing people do (aside from getting an income source) to provide for themselves financially. Buying a house should be approached from a worst-case-but-still-plausible scenario, in that the house never gains value, or even loses value. The benefit is in the fixed cost of living quarters and the drastically lower cost once you pay off the mortgage. Having a free-and-clear house is part of our retirement plan.

Having watched older relatives near retirement age and their friends buy trophy houses near the peak, then jettison their entire IRA/401(k) savings to try and 'save' the house during the crash makes me shake my head in wonder. Who, at age sixty, wants to take on another giant mortgage? I watched someone sell their paid for house to make a downpayment on a monstrous house 3 times as expensive in 2006. They're squatting in their foreclosure with the ruins of their life savings rotting around them.

sfbb, thanks for clarifying.

Mine is a lot easier.

I live and work in California and when I retire I want to move out of state.

We have saved a large down payment that could be used to purchase a home in California. But this money can probably buy 2~3 houses outright in other states. Since we are 30~35 years away from retirement, as long as we diversify and invest wisely, and have 50% saving rate as long as we are working, when we retire we should be fine.

Basically we want to live well within our means and live a true Christian life. We have faith that God will provide.

Uncle Nomo's definition of a full, adventurous life:

Nomograph says

Go to Vegas, blow 10 grand, and spend some quality time doing body shots and snorting coke off a stripper’s tit. You’ll be a better person for it.

****disclaimer: your definition may differ

Future Cash Buyer says

I live and work in California and when I retire I want to move out of state.
We have saved a large down payment that could be used to purchase a home in California. But this money can probably buy 2~3 houses outright in other states. Since we are 30~35 years away from retirement, as long as we diversify and invest wisely, and have 50% saving rate as long as we are working, when we retire we should be fine.

I too am thinking about leaving California when I stop working.

Where do you keep your cash? I can only put so much in ING. I worry about inflation.