Why do I have a feeling the upcoming baby boomer retirement wave is about to come crashing down on the big coral reef of life?
More use homes as main asset
Instead of building a nest egg for retirement, a growing number of homeowners are putting themselves in a debt trap.
Economists and investment advisers say that more Americans are relying on their homes as their primary asset for retirement. These retirees-to-be reckon they can always tap the expanding wealth in their residence to cover their leisure years.
The reasoning goes something like this: Need some cash? No problem, just get a home-equity line of credit. And because home values have skyrocketed in recent years in places such as the East Bay, homeowners figure they can replace the equity lost from taking out the loan within a year or two. Plus, down the road, they assume they can always just sell the house or get another loan to raise some quick cash for retirement.
"People are making the mistake of thinking they live inside a big piggy bank," said Libby Mihalka, president of Altamont Capital. "They don't realize it can all snowball out of control very quickly. Their house is not an ATM."
"This is a form of financial insanity," said Frank Fernandez, chief economist with the Securities Industry Association. "You are digging yourselves deeper into debt using an asset that could decline in value."
"Among my East Bay clients, I often see a person's retirement plan and equity in their home comprise well over 90 percent of their net worth," Valentine said. "Among Peninsula clients, it's only about 50 percent."
August 15, 2006
Savings, stocks, bonds, pensions - faggetaboutit! We own a HOME!
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13 comments:
Since when did your home count as money? I always thought a fully paid off house was something that assured you had a rent-free future. Heck, I remember when after you paid your house off, you went to the church and participated in a Mortgage Burning ritual.
Heard about reverse mortgages? They will use this instead of SS in the future even if the house is worth less than the mortgage. They'll just print fiat dollars to pay the pension and worry about the price fifty years in the future.
"Can you get a reverse mortgage if you are upside down?"
Good question. Can you?
"People are making the mistake of thinking they live inside a big piggy bank," said Libby Mihalka, president of Altamont Capital. "They don't realize it can all snowball out of control very quickly. Their house is not an ATM."
Yeah, about 18 months ago, I seem to recall some financial nitwit referring to those sitting on equity in their homes as "Financially unsophisticated"
Fucktard!
Yeah Fish, it was in the LA Times. My co-workers were making jokes about it.
Is that picture the Yaris piggy bank?
I just bought one. 40mpg
Hey Fish and Jip,
It was from about one year ago. I remember it very well because it demonstrated the stupidity of the American people with their thinking that their homes could be used for endless supplies of cash. Then they quote this so-called economist who perpetuates this thinking with this quote:
"If you paid your mortgage off, it means you probably did not manage
your funds efficiently over the years," said David Lereah, chief
economist of the National Association of Realtors and author of "Are You
Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills
stuffed in your mattress."
He called it "very unsophisticated."
suse orman says pay off your mortgage before retirement and you'll need less money to live on - makes sense!
But if you pay off your mortgage you will lose a big tax advantage! ;)
suse orman says pay off your mortgage before retirement and you'll need less money to live on - makes sense!
Suze is right on.
There is NOTHING like a paid-off house! And I have owned 3 of them.
Screw the tax advantage. You will be pocketing not only the house payment but the accumulating interest from those payments. This will far exceed any tax breaks.
I heard that even President Bush's biggest asset is his home. (The ranch, not the White House!)
Yes, and like so many of the "rich" in Texas pays less in taxes on his property because of all the loop holes for large estates and agriculture exemptions. Many of his "kind" pay less on their multi-million dollar spreads than do middle class folk with a $500,000 loan. A lot of these people pay up to $15,000 in property tax (depending on appraisals and homestead exemption) and I've seen lots of million dollar property taxed at $6,000.
The paper had an article that said, "It is hard to assess these custom properties because we don't have access to the comps as we do in cookie-cutter divisions where we know what everything is selling for." What a crock!
The rich never pay for anything. The rich use inflation to get richer and pay off their massive debts with paper money that looses value. Do you think these cronies really want to see inflation tamed?
The 'rich' never pay for anything?
Some of the wealthies people I have ever worked for, knew the value of a dollar, worked hard for their money.....but, paid on time everytime! Every rich wannabe bitched about how much something was, complained about bid price...paid late, if at all!
Walk a mile in their shoes, Ya dimwit!
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