Home › Forums › Financial Markets/Economics › New Paradigm: The job market is the biggest economic problem
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January 11, 2009 at 8:51 AM #327475January 11, 2009 at 9:31 AM #326967NotCrankyParticipant
If dipping into retirement savings allows a young person to buy a house and start building equity and lessening the burden of future costs of shelter, while continuing to save at the same rate as before the extraction from retirement savings was made, why would that not be a boon in the long run?
For many young people, even reasonable shelter costs preclude much savings potential anyway. It could be looked at in a different way than you are patientrenter. Getting started when one has no or little retirement savings is a boon as compared to having enough retirement savings to actually buy a house, as you seem to be suggesting, before doing so by credit.
The rational purpose for buying a house seems to me two fold , first getting started towards reduction in future shelter costs and second forced savings. With rent/buy parity this is extra savings above what could be accomplished with renting alone. While rents could drop temporarily I would still gamble that rent inflation and other measures or inflation would continue to benefit the buyer. Dipping into retirement savings to bring these benefits to one’s life, if necessary makes complete financial sense to me. This is especially true if basic housing makes saving difficult, as it does for most young people.
Also, I don’t see how one buys a house without dipping into retirement funds, even by paying cash? To me its all just individual wealth , strategically apportioned according to individual parameters. A mortgage can be an important part of diversification or initially instead of diversification, for some, if that what it takes to get started.
This is a different answer of course as to whether or not banks should lend to non-savers. I favor that they do for the reasons above.
Where are the holes in this?
Russell
Formerly posting as rusticoJanuary 11, 2009 at 9:31 AM #327305NotCrankyParticipantIf dipping into retirement savings allows a young person to buy a house and start building equity and lessening the burden of future costs of shelter, while continuing to save at the same rate as before the extraction from retirement savings was made, why would that not be a boon in the long run?
For many young people, even reasonable shelter costs preclude much savings potential anyway. It could be looked at in a different way than you are patientrenter. Getting started when one has no or little retirement savings is a boon as compared to having enough retirement savings to actually buy a house, as you seem to be suggesting, before doing so by credit.
The rational purpose for buying a house seems to me two fold , first getting started towards reduction in future shelter costs and second forced savings. With rent/buy parity this is extra savings above what could be accomplished with renting alone. While rents could drop temporarily I would still gamble that rent inflation and other measures or inflation would continue to benefit the buyer. Dipping into retirement savings to bring these benefits to one’s life, if necessary makes complete financial sense to me. This is especially true if basic housing makes saving difficult, as it does for most young people.
Also, I don’t see how one buys a house without dipping into retirement funds, even by paying cash? To me its all just individual wealth , strategically apportioned according to individual parameters. A mortgage can be an important part of diversification or initially instead of diversification, for some, if that what it takes to get started.
This is a different answer of course as to whether or not banks should lend to non-savers. I favor that they do for the reasons above.
Where are the holes in this?
Russell
Formerly posting as rusticoJanuary 11, 2009 at 9:31 AM #327376NotCrankyParticipantIf dipping into retirement savings allows a young person to buy a house and start building equity and lessening the burden of future costs of shelter, while continuing to save at the same rate as before the extraction from retirement savings was made, why would that not be a boon in the long run?
For many young people, even reasonable shelter costs preclude much savings potential anyway. It could be looked at in a different way than you are patientrenter. Getting started when one has no or little retirement savings is a boon as compared to having enough retirement savings to actually buy a house, as you seem to be suggesting, before doing so by credit.
The rational purpose for buying a house seems to me two fold , first getting started towards reduction in future shelter costs and second forced savings. With rent/buy parity this is extra savings above what could be accomplished with renting alone. While rents could drop temporarily I would still gamble that rent inflation and other measures or inflation would continue to benefit the buyer. Dipping into retirement savings to bring these benefits to one’s life, if necessary makes complete financial sense to me. This is especially true if basic housing makes saving difficult, as it does for most young people.
Also, I don’t see how one buys a house without dipping into retirement funds, even by paying cash? To me its all just individual wealth , strategically apportioned according to individual parameters. A mortgage can be an important part of diversification or initially instead of diversification, for some, if that what it takes to get started.
This is a different answer of course as to whether or not banks should lend to non-savers. I favor that they do for the reasons above.
Where are the holes in this?
Russell
Formerly posting as rusticoJanuary 11, 2009 at 9:31 AM #327397NotCrankyParticipantIf dipping into retirement savings allows a young person to buy a house and start building equity and lessening the burden of future costs of shelter, while continuing to save at the same rate as before the extraction from retirement savings was made, why would that not be a boon in the long run?
For many young people, even reasonable shelter costs preclude much savings potential anyway. It could be looked at in a different way than you are patientrenter. Getting started when one has no or little retirement savings is a boon as compared to having enough retirement savings to actually buy a house, as you seem to be suggesting, before doing so by credit.
The rational purpose for buying a house seems to me two fold , first getting started towards reduction in future shelter costs and second forced savings. With rent/buy parity this is extra savings above what could be accomplished with renting alone. While rents could drop temporarily I would still gamble that rent inflation and other measures or inflation would continue to benefit the buyer. Dipping into retirement savings to bring these benefits to one’s life, if necessary makes complete financial sense to me. This is especially true if basic housing makes saving difficult, as it does for most young people.
Also, I don’t see how one buys a house without dipping into retirement funds, even by paying cash? To me its all just individual wealth , strategically apportioned according to individual parameters. A mortgage can be an important part of diversification or initially instead of diversification, for some, if that what it takes to get started.
This is a different answer of course as to whether or not banks should lend to non-savers. I favor that they do for the reasons above.
Where are the holes in this?
Russell
Formerly posting as rusticoJanuary 11, 2009 at 9:31 AM #327480NotCrankyParticipantIf dipping into retirement savings allows a young person to buy a house and start building equity and lessening the burden of future costs of shelter, while continuing to save at the same rate as before the extraction from retirement savings was made, why would that not be a boon in the long run?
For many young people, even reasonable shelter costs preclude much savings potential anyway. It could be looked at in a different way than you are patientrenter. Getting started when one has no or little retirement savings is a boon as compared to having enough retirement savings to actually buy a house, as you seem to be suggesting, before doing so by credit.
The rational purpose for buying a house seems to me two fold , first getting started towards reduction in future shelter costs and second forced savings. With rent/buy parity this is extra savings above what could be accomplished with renting alone. While rents could drop temporarily I would still gamble that rent inflation and other measures or inflation would continue to benefit the buyer. Dipping into retirement savings to bring these benefits to one’s life, if necessary makes complete financial sense to me. This is especially true if basic housing makes saving difficult, as it does for most young people.
Also, I don’t see how one buys a house without dipping into retirement funds, even by paying cash? To me its all just individual wealth , strategically apportioned according to individual parameters. A mortgage can be an important part of diversification or initially instead of diversification, for some, if that what it takes to get started.
This is a different answer of course as to whether or not banks should lend to non-savers. I favor that they do for the reasons above.
Where are the holes in this?
Russell
Formerly posting as rusticoJanuary 11, 2009 at 9:49 AM #326978bsrsharmaParticipantTake this job – or shove it
It is a bit shocking how little many people saved to tide over rainy days. For many, it is a move from affluence to misery.
http://money.cnn.com/galleries/2009/pf/0901/gallery.layoffs_and_salary_cuts/2.html
January 11, 2009 at 9:49 AM #327315bsrsharmaParticipantTake this job – or shove it
It is a bit shocking how little many people saved to tide over rainy days. For many, it is a move from affluence to misery.
http://money.cnn.com/galleries/2009/pf/0901/gallery.layoffs_and_salary_cuts/2.html
January 11, 2009 at 9:49 AM #327386bsrsharmaParticipantTake this job – or shove it
It is a bit shocking how little many people saved to tide over rainy days. For many, it is a move from affluence to misery.
http://money.cnn.com/galleries/2009/pf/0901/gallery.layoffs_and_salary_cuts/2.html
January 11, 2009 at 9:49 AM #327407bsrsharmaParticipantTake this job – or shove it
It is a bit shocking how little many people saved to tide over rainy days. For many, it is a move from affluence to misery.
http://money.cnn.com/galleries/2009/pf/0901/gallery.layoffs_and_salary_cuts/2.html
January 11, 2009 at 9:49 AM #327490bsrsharmaParticipantTake this job – or shove it
It is a bit shocking how little many people saved to tide over rainy days. For many, it is a move from affluence to misery.
http://money.cnn.com/galleries/2009/pf/0901/gallery.layoffs_and_salary_cuts/2.html
January 11, 2009 at 10:06 AM #326983peterbParticipantWhen the tide goes out, you find out who’s been swimming without a bathing suit. Tide’s going out in a big way now.
Retirement accounts are still your money. You can take it out, you just have to pay a penalty to do this. Theoretically, the lender may think that you would take out the money to keep paying your debts in order to avoid foreclosure and trashing your credit.January 11, 2009 at 10:06 AM #327320peterbParticipantWhen the tide goes out, you find out who’s been swimming without a bathing suit. Tide’s going out in a big way now.
Retirement accounts are still your money. You can take it out, you just have to pay a penalty to do this. Theoretically, the lender may think that you would take out the money to keep paying your debts in order to avoid foreclosure and trashing your credit.January 11, 2009 at 10:06 AM #327391peterbParticipantWhen the tide goes out, you find out who’s been swimming without a bathing suit. Tide’s going out in a big way now.
Retirement accounts are still your money. You can take it out, you just have to pay a penalty to do this. Theoretically, the lender may think that you would take out the money to keep paying your debts in order to avoid foreclosure and trashing your credit.January 11, 2009 at 10:06 AM #327412peterbParticipantWhen the tide goes out, you find out who’s been swimming without a bathing suit. Tide’s going out in a big way now.
Retirement accounts are still your money. You can take it out, you just have to pay a penalty to do this. Theoretically, the lender may think that you would take out the money to keep paying your debts in order to avoid foreclosure and trashing your credit. -
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