FAMILY UPDATE!
I've received several requests for updates on our "fur babies," so thought I'd update you on our cats:
Cat #1, Patches:
Patches is like a ghost – we barely ever see her. She's a rescue, around six years old, and absolutely despises the dogs.
Cat #2, Hemingway (Hemi):
Hemi is a Ragdoll and incredibly affectionate. He loves getting right up in your face for headbutts and cuddles. Not the sharpest, but immensely lovable. He's the closest thing to a dog among our cats. However, his long hair is a shedding machine, making him a walking allergy attack.
Cat #3, Coconut (Coco):
Coco, Hemi's sister, has the attitude of, "You're lucky to have me." It's a "serve me, and maybe I'll let you pet me" kind of deal. She reigns as the queen over all the pets. Frankly, I find her a bit annoying and entitled.
Here are some recent questions from my readers.
I've heard that condo owners will greatly increase their HOA fees. Is this true?
It very well could be. Hurricanes and other factors have made insuring condo buildings much more expensive. Naturally, any price increase gets passed down to the owners through higher HOA fees. Unfortunately, some people might see their monthly fees double or even more.
There's another, potentially bigger, problem looming for condos. Starting this year, condos must undergo an annual inspection by an independent third party. Why is this problematic? In the past, condo boards could decide whether to do maintenance on the buildings. Most often chose to "kick the can down the road," thinking, "I might have moved by the time we have to pay for this."
This has led to a significant issue. With the new law, many condo buildings will need expensive improvements or replacements - roofs, windows, balconies, common areas, and more. To fund these, condo owners will face an "assessment." These costs are so steep that owners could look at anywhere from $10,000 to $100,000 or more.
As you can imagine, this creates a huge problem. Many condos were bought in the 80s and 90s by people who are now in their 70s and 80s, living on a fixed income. If the HOA was $200 when they moved in, an $800 HOA fee is nearly impossible to manage. They could face an assessment equal to what they originally paid for the condo!
How do I know I can retire?
Figuring out your retirement date is much easier than the financial industry makes it sound. Let's say you plan to retire at 67, the full retirement age for Social Security. You'd take your Social Security, add your spouse's (if applicable), plus 5% of your investment assets annually, minus what you'll pay in taxes. That's it!
If that amount is more than what you're spending, you can start thinking about retirement. Of course, it's wise to have a couple of thousand dollars extra each month above your budget. For this plan to work, you need to invest your money in a diversified portfolio of stocks and bonds, with at least 50% in stocks.
What is the most common problem you're seeing right now?
Many people I talk to in their 50s have this fantasy of retiring at 62. They think, "I can start Social Security at 62, and I'm tired of my job. How do I make this happen?"
Unfortunately, I have to be the bearer of bad news. Very few people currently in their 50s will be able to retire that early. Why? Well, you could live until 92. It doesn't make sense to be retired for as many years as you worked. I also see this generation having saved less and expecting a more lavish lifestyle in retirement.
Many of these people need to consider retiring between 67 and 70. It's a tough pill to swallow, but it's the reality.
If you're making $100,000 a year and have $400,000 in your 401k, retiring would drastically reduce what you're used to bringing in each month. The formula above should make that clear.
It is fascinating that clients now 67 or older saved much more money, have much less debt, and have lower budgets. Different generations, I guess.
Do you have any recommendations for travel destinations?
From talking with my clients, a few places keep coming up. Italy is the first. Then Greece, Israel, Portugal, Spain, Iceland, and New Zealand. But many tell me their best trips involved traveling around the U.S. It's a big country with lots of diverse beauty.
What would it be worth if I invested $100,000 in the S&P 500 in 2000?
$653,329
What advice do you hear from some of your older clients?
-Travel soon after you retire, especially overseas.
-In your kids' 30s and 40s, help them financially if possible. With new careers, kids, and mortgages, keeping your kids out of debt then can set them up for a better situation in their own retirement.
-On the flip side, be very careful when giving money to kids. If you give to one child and not the other, it often causes discord. This is a very tricky situation. On that note, ensure your wills and trusts are current. Everyone in the family gets along great until you die, and a lot of money suddenly becomes involved. I've seen many families torn apart over $50,000. It's really sad.
-When being a snowbird, rent one place and own the other. Owning two homes like that is a massive financial burden and a pain.
-And, stop worrying so much. Life has a way of working itself out.
Be Blessed,
Dave