An IRA is not the only retirement need avenue?

**Daylily** · 11-09-2008, 05:27 PM

Another avenue is to work for an employer that offers a pension - and then hope that the plan is solvent when you retire and that the employer doesn't change the plan a few years before you retire.

Whether to buy or rent is another story. Don't overlook the home mortgage interest deduction when comparing the costs.

**disneysteve** · 11-09-2008, 05:44 PM

Originally posted by leighangela View Post

The reason I say I doubt I'll ever buy is because after what I've just seen in this housing crisis, it seems so risky and expensive. As a renter, I don't have to pay for any upkeep or improvements or taxes, and I'm already 32 so I'd be paying a mortgage until I retire IF I stayed in the same house for 30 years, which I highly doubt. When I look at the numbers it's much cheaper on a month to month basis to rent. I only have about $100 left over each month for savings after I pay all my bills.

Of course you pay for upkeep and improvements and taxes. That is all factored in to your rent. Your landlord isn't renting to you out of the goodness of his heart. He is doing it as a business and, most likely, is at least breaking even if not making a profit each month.

Recent housing market events are an anomaly. Over time, home values typically rise. We bought our home in 1994. Today, it is worth about twice what we paid. Between our original down payment and appreciation, we have equity equal to about 65% of the home's value and that number rises each month.

That said, if your budget is so tight that you only have $100 in disposable income each month, it doesn't sound like you are in any position to think about buying at this point. You need to work on cutting expenses and boosting income. Then you can build up that savings amount and maybe then think about becoming a homeowner.

As for retirement, you are right, though. I'm in the same situation. My Roth is my only tax-sheltered retirement account. Of course, I also invest money in taxable accounts that will be used for retirement, so you have that option as well.

**jIM_Ohio** · 11-10-2008, 09:26 AM

Rent never goes away. If you have a mortgage, there is a point in time where that payment is removed from your budget.

A way to analyze the situation:
Most retirement spending calculators assume you start retirement with 25X your annual expenses in retirement account, then take out 4% of the balance each year.

Run 2 spending scenarios
1) your current budget (which includes rent, utilities, groceries, health coverage, travel etc...). This number will be $X and probably be higher than your current income for two reasons- health care and rent.
2) a new budget with rent removed (because you own a house) and the other variable same as before. This budget will be less than $X above and might be less than your current income.

I would not disclude SS from calculations. What I would do is add both expense scenarios up. Then calculate a SS benefit (assume 24k per year if your job pays around 60k per year). Subtract the 2k benefit from monthly expenses above. If you wait long enough, medicare might be another $1100 per year to subtract for health coverage (for example). You now have the expenses YOU need to save for to cover.

Things to consider- once you own your house, the only variable which needs to be accounted for is house maintainance and property taxes. Rent will keep increasing over your next 35 years of working- and would also increase in your 30 years of retirement too. This might change some of the needs calculations.

An IRA is not the only retirement need avenue?