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patientrenter
ParticipantThe method I use for myself is very simple. To calculate my target retirement asset amount, I multiply the total annual amount I need to spend in order to preserve my standard of living by the number of years I plan to be retired for.
In equations, my target amount is S x (DA-RA), where S = annual spending requirement, RA = my retirement age, and DA = the age at which I want my savings to run out. Choosing DA is tricky. If you decide to have enough until you are 85, you are taking on real risk that you’ll be digging for food in a dumpster at age 86, should you live that long. If you decide to have enough until you are 100, you are taking on a lot less risk of outliving your assets, but you are going to have to retire later.
Which assets do I include? I need to be able to liquidate them over time without affecting my standard of living. So I don’t include any home I live in.
I don’t count future investment returns. Any investment return needs to be reduced for expenses, taxes, and inflation. Staying ahead of all those by a healthy margin would require taking on a healthy dose of risk, with a much higher probability of premature dumpster-diving should the risks not pan out.
ParticipantThe method I use for myself is very simple. To calculate my target retirement asset amount, I multiply the total annual amount I need to spend in order to preserve my standard of living by the number of years I plan to be retired for.
In equations, my target amount is S x (DA-RA), where S = annual spending requirement, RA = my retirement age, and DA = the age at which I want my savings to run out. Choosing DA is tricky. If you decide to have enough until you are 85, you are taking on real risk that you’ll be digging for food in a dumpster at age 86, should you live that long. If you decide to have enough until you are 100, you are taking on a lot less risk of outliving your assets, but you are going to have to retire later.
Which assets do I include? I need to be able to liquidate them over time without affecting my standard of living. So I don’t include any home I live in.
I don’t count future investment returns. Any investment return needs to be reduced for expenses, taxes, and inflation. Staying ahead of all those by a healthy margin would require taking on a healthy dose of risk, with a much higher probability of premature dumpster-diving should the risks not pan out.
ParticipantThe method I use for myself is very simple. To calculate my target retirement asset amount, I multiply the total annual amount I need to spend in order to preserve my standard of living by the number of years I plan to be retired for.
In equations, my target amount is S x (DA-RA), where S = annual spending requirement, RA = my retirement age, and DA = the age at which I want my savings to run out. Choosing DA is tricky. If you decide to have enough until you are 85, you are taking on real risk that you’ll be digging for food in a dumpster at age 86, should you live that long. If you decide to have enough until you are 100, you are taking on a lot less risk of outliving your assets, but you are going to have to retire later.
Which assets do I include? I need to be able to liquidate them over time without affecting my standard of living. So I don’t include any home I live in.
I don’t count future investment returns. Any investment return needs to be reduced for expenses, taxes, and inflation. Staying ahead of all those by a healthy margin would require taking on a healthy dose of risk, with a much higher probability of premature dumpster-diving should the risks not pan out.
Participant[quote=pemeliza]The other thing I remember from the mid 90’s is that a lot of my friends hated real estate because they bought condos in UTC and were down big on them. Some of them sold at a loss and bought bigger houses in areas like the Ranch in Carlsbad. Pretty smart moves in hindsight.[/quote]
LoL! Yep, with 20/20 hindsight buying low and selling high is a smart ‘strategy’. I should start that tomorrow! In truth, 1996 was clearly below trend, so even then it was clearly not a bad time to buy, just as 2006 was clearly not a a bad time to sell. Of course, no one at that time knew the exact top or bottom of the market, just that prices were above or below trend by a certain amount.
As for your comment about dramatic physical changes in areas since 1996, yes, that’s right. [I think I am even older than you, ancient pemeliza.] And that could make it hard to judge overall price levels. However, the best way to measure overall price changes is by comparing prices of those homes that haven’t changed much (except normal levels of homeowner improvement and maintenance) in areas that haven’t changed much. I don’t know San Diego all that well, but I imagine La Jolla, Rancho Santa Fe, along with quite a few less expensive areas would qualify. My knowledge is based more on LA and OC, although I think my comments about prices in 1996 versus peak versus today apply reasonably well to SD also.
In any case, I didn’t mean to be argumentative. Some people will want to see real estate as a one-way escalator, a money machine, that needs only sufficient patience to throw off profits. Prices that never return to prior inflation-adjusted lows are part of that view of the world. None of us knows yet if that view is correct. I think it is pretty obvious that without extraordinary artificial govt price supports, prices would already have dropped through inflation-adjusted 1996 levels. It’s hard to know where the wind will blow us eventually when all the powers of govt are blowing in one direction. Mr Bernanke and Mr Geithner, with a few close friends in Congress, and not Mr Market, determine next year’s house prices.
Participant[quote=pemeliza]The other thing I remember from the mid 90’s is that a lot of my friends hated real estate because they bought condos in UTC and were down big on them. Some of them sold at a loss and bought bigger houses in areas like the Ranch in Carlsbad. Pretty smart moves in hindsight.[/quote]
LoL! Yep, with 20/20 hindsight buying low and selling high is a smart ‘strategy’. I should start that tomorrow! In truth, 1996 was clearly below trend, so even then it was clearly not a bad time to buy, just as 2006 was clearly not a a bad time to sell. Of course, no one at that time knew the exact top or bottom of the market, just that prices were above or below trend by a certain amount.
As for your comment about dramatic physical changes in areas since 1996, yes, that’s right. [I think I am even older than you, ancient pemeliza.] And that could make it hard to judge overall price levels. However, the best way to measure overall price changes is by comparing prices of those homes that haven’t changed much (except normal levels of homeowner improvement and maintenance) in areas that haven’t changed much. I don’t know San Diego all that well, but I imagine La Jolla, Rancho Santa Fe, along with quite a few less expensive areas would qualify. My knowledge is based more on LA and OC, although I think my comments about prices in 1996 versus peak versus today apply reasonably well to SD also.
In any case, I didn’t mean to be argumentative. Some people will want to see real estate as a one-way escalator, a money machine, that needs only sufficient patience to throw off profits. Prices that never return to prior inflation-adjusted lows are part of that view of the world. None of us knows yet if that view is correct. I think it is pretty obvious that without extraordinary artificial govt price supports, prices would already have dropped through inflation-adjusted 1996 levels. It’s hard to know where the wind will blow us eventually when all the powers of govt are blowing in one direction. Mr Bernanke and Mr Geithner, with a few close friends in Congress, and not Mr Market, determine next year’s house prices.
Participant[quote=pemeliza]The other thing I remember from the mid 90’s is that a lot of my friends hated real estate because they bought condos in UTC and were down big on them. Some of them sold at a loss and bought bigger houses in areas like the Ranch in Carlsbad. Pretty smart moves in hindsight.[/quote]
LoL! Yep, with 20/20 hindsight buying low and selling high is a smart ‘strategy’. I should start that tomorrow! In truth, 1996 was clearly below trend, so even then it was clearly not a bad time to buy, just as 2006 was clearly not a a bad time to sell. Of course, no one at that time knew the exact top or bottom of the market, just that prices were above or below trend by a certain amount.
As for your comment about dramatic physical changes in areas since 1996, yes, that’s right. [I think I am even older than you, ancient pemeliza.] And that could make it hard to judge overall price levels. However, the best way to measure overall price changes is by comparing prices of those homes that haven’t changed much (except normal levels of homeowner improvement and maintenance) in areas that haven’t changed much. I don’t know San Diego all that well, but I imagine La Jolla, Rancho Santa Fe, along with quite a few less expensive areas would qualify. My knowledge is based more on LA and OC, although I think my comments about prices in 1996 versus peak versus today apply reasonably well to SD also.
In any case, I didn’t mean to be argumentative. Some people will want to see real estate as a one-way escalator, a money machine, that needs only sufficient patience to throw off profits. Prices that never return to prior inflation-adjusted lows are part of that view of the world. None of us knows yet if that view is correct. I think it is pretty obvious that without extraordinary artificial govt price supports, prices would already have dropped through inflation-adjusted 1996 levels. It’s hard to know where the wind will blow us eventually when all the powers of govt are blowing in one direction. Mr Bernanke and Mr Geithner, with a few close friends in Congress, and not Mr Market, determine next year’s house prices.
Participant[quote=pemeliza]The other thing I remember from the mid 90’s is that a lot of my friends hated real estate because they bought condos in UTC and were down big on them. Some of them sold at a loss and bought bigger houses in areas like the Ranch in Carlsbad. Pretty smart moves in hindsight.[/quote]
LoL! Yep, with 20/20 hindsight buying low and selling high is a smart ‘strategy’. I should start that tomorrow! In truth, 1996 was clearly below trend, so even then it was clearly not a bad time to buy, just as 2006 was clearly not a a bad time to sell. Of course, no one at that time knew the exact top or bottom of the market, just that prices were above or below trend by a certain amount.
As for your comment about dramatic physical changes in areas since 1996, yes, that’s right. [I think I am even older than you, ancient pemeliza.] And that could make it hard to judge overall price levels. However, the best way to measure overall price changes is by comparing prices of those homes that haven’t changed much (except normal levels of homeowner improvement and maintenance) in areas that haven’t changed much. I don’t know San Diego all that well, but I imagine La Jolla, Rancho Santa Fe, along with quite a few less expensive areas would qualify. My knowledge is based more on LA and OC, although I think my comments about prices in 1996 versus peak versus today apply reasonably well to SD also.
In any case, I didn’t mean to be argumentative. Some people will want to see real estate as a one-way escalator, a money machine, that needs only sufficient patience to throw off profits. Prices that never return to prior inflation-adjusted lows are part of that view of the world. None of us knows yet if that view is correct. I think it is pretty obvious that without extraordinary artificial govt price supports, prices would already have dropped through inflation-adjusted 1996 levels. It’s hard to know where the wind will blow us eventually when all the powers of govt are blowing in one direction. Mr Bernanke and Mr Geithner, with a few close friends in Congress, and not Mr Market, determine next year’s house prices.
Participant[quote=pemeliza]The other thing I remember from the mid 90’s is that a lot of my friends hated real estate because they bought condos in UTC and were down big on them. Some of them sold at a loss and bought bigger houses in areas like the Ranch in Carlsbad. Pretty smart moves in hindsight.[/quote]
LoL! Yep, with 20/20 hindsight buying low and selling high is a smart ‘strategy’. I should start that tomorrow! In truth, 1996 was clearly below trend, so even then it was clearly not a bad time to buy, just as 2006 was clearly not a a bad time to sell. Of course, no one at that time knew the exact top or bottom of the market, just that prices were above or below trend by a certain amount.
As for your comment about dramatic physical changes in areas since 1996, yes, that’s right. [I think I am even older than you, ancient pemeliza.] And that could make it hard to judge overall price levels. However, the best way to measure overall price changes is by comparing prices of those homes that haven’t changed much (except normal levels of homeowner improvement and maintenance) in areas that haven’t changed much. I don’t know San Diego all that well, but I imagine La Jolla, Rancho Santa Fe, along with quite a few less expensive areas would qualify. My knowledge is based more on LA and OC, although I think my comments about prices in 1996 versus peak versus today apply reasonably well to SD also.
In any case, I didn’t mean to be argumentative. Some people will want to see real estate as a one-way escalator, a money machine, that needs only sufficient patience to throw off profits. Prices that never return to prior inflation-adjusted lows are part of that view of the world. None of us knows yet if that view is correct. I think it is pretty obvious that without extraordinary artificial govt price supports, prices would already have dropped through inflation-adjusted 1996 levels. It’s hard to know where the wind will blow us eventually when all the powers of govt are blowing in one direction. Mr Bernanke and Mr Geithner, with a few close friends in Congress, and not Mr Market, determine next year’s house prices.
ParticipantHouse prices in Southern California are still around 50-100% higher, adjusted for inflation, than they were at the bottom of the last real estate cycle, in 1996. Individual areas will have their own peculiar variances, of course, but that’s the big picture I see.
Just because they are 40% off their peak doesn’t mean anything if the peak was 200% above the cyclical low points. (I am adjusting everything for inflation to get rid of that noise.) There is still plenty of downside room for this cycle.
Only a few trillions of taxpayer-backed dollars provided thanks to Mr Bernanke, Mr Geithner, and certain well-connected members of Congress are preventing house prices falling to their natural cyclical lows.
Oh, and I can’t help but agree with the prior poster who pointed out that “recovering” really isn’t the right word for re-entering the world of bubble prices. Even now, prices are still above their long-term trends, per Robert Shiller’s analysis. Why prices that start above their long term trend and then rise further represents a normal or recovering market, I’ll never know. Does someone still hope that houses are magic money machines, if you just wait long enough? LoL!
ParticipantHouse prices in Southern California are still around 50-100% higher, adjusted for inflation, than they were at the bottom of the last real estate cycle, in 1996. Individual areas will have their own peculiar variances, of course, but that’s the big picture I see.
Just because they are 40% off their peak doesn’t mean anything if the peak was 200% above the cyclical low points. (I am adjusting everything for inflation to get rid of that noise.) There is still plenty of downside room for this cycle.
Only a few trillions of taxpayer-backed dollars provided thanks to Mr Bernanke, Mr Geithner, and certain well-connected members of Congress are preventing house prices falling to their natural cyclical lows.
Oh, and I can’t help but agree with the prior poster who pointed out that “recovering” really isn’t the right word for re-entering the world of bubble prices. Even now, prices are still above their long-term trends, per Robert Shiller’s analysis. Why prices that start above their long term trend and then rise further represents a normal or recovering market, I’ll never know. Does someone still hope that houses are magic money machines, if you just wait long enough? LoL!
ParticipantHouse prices in Southern California are still around 50-100% higher, adjusted for inflation, than they were at the bottom of the last real estate cycle, in 1996. Individual areas will have their own peculiar variances, of course, but that’s the big picture I see.
Just because they are 40% off their peak doesn’t mean anything if the peak was 200% above the cyclical low points. (I am adjusting everything for inflation to get rid of that noise.) There is still plenty of downside room for this cycle.
Only a few trillions of taxpayer-backed dollars provided thanks to Mr Bernanke, Mr Geithner, and certain well-connected members of Congress are preventing house prices falling to their natural cyclical lows.
Oh, and I can’t help but agree with the prior poster who pointed out that “recovering” really isn’t the right word for re-entering the world of bubble prices. Even now, prices are still above their long-term trends, per Robert Shiller’s analysis. Why prices that start above their long term trend and then rise further represents a normal or recovering market, I’ll never know. Does someone still hope that houses are magic money machines, if you just wait long enough? LoL!
ParticipantHouse prices in Southern California are still around 50-100% higher, adjusted for inflation, than they were at the bottom of the last real estate cycle, in 1996. Individual areas will have their own peculiar variances, of course, but that’s the big picture I see.
Just because they are 40% off their peak doesn’t mean anything if the peak was 200% above the cyclical low points. (I am adjusting everything for inflation to get rid of that noise.) There is still plenty of downside room for this cycle.
Only a few trillions of taxpayer-backed dollars provided thanks to Mr Bernanke, Mr Geithner, and certain well-connected members of Congress are preventing house prices falling to their natural cyclical lows.
Oh, and I can’t help but agree with the prior poster who pointed out that “recovering” really isn’t the right word for re-entering the world of bubble prices. Even now, prices are still above their long-term trends, per Robert Shiller’s analysis. Why prices that start above their long term trend and then rise further represents a normal or recovering market, I’ll never know. Does someone still hope that houses are magic money machines, if you just wait long enough? LoL!
ParticipantHouse prices in Southern California are still around 50-100% higher, adjusted for inflation, than they were at the bottom of the last real estate cycle, in 1996. Individual areas will have their own peculiar variances, of course, but that’s the big picture I see.
Just because they are 40% off their peak doesn’t mean anything if the peak was 200% above the cyclical low points. (I am adjusting everything for inflation to get rid of that noise.) There is still plenty of downside room for this cycle.
Only a few trillions of taxpayer-backed dollars provided thanks to Mr Bernanke, Mr Geithner, and certain well-connected members of Congress are preventing house prices falling to their natural cyclical lows.
Oh, and I can’t help but agree with the prior poster who pointed out that “recovering” really isn’t the right word for re-entering the world of bubble prices. Even now, prices are still above their long-term trends, per Robert Shiller’s analysis. Why prices that start above their long term trend and then rise further represents a normal or recovering market, I’ll never know. Does someone still hope that houses are magic money machines, if you just wait long enough? LoL!
ParticipantHey, earlyretirement, thanks for all the good info.
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