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Thinking of Downsizing? How Much Will Large Home Cost in Retirement?

Posted on November 23, 2014 | Leave a comment

Once you’ve paid for your house, how much will it cost you?

This is a crucial issue for anyone looking ahead to retirement. The more expensive your home, the more of a drain it’ll likely be in terms of property taxes, maintenance, homeowners insurance and more.

Suppose you own a home that, in addition to any mortgage payment, costs $1,000 a month. You then get a fat pay raise, prompting you to trade up to a larger house, which has double the monthly expenses.

Result: If you stay in the larger home during retirement, you’ll need to come up with $2,000 a month, equal to $24,000 a year. Based on a 4% annual portfolio withdrawal rate, that would mean $600,000 in retirement savings just to pay your housing costs, versus $300,000 for the smaller home.

“I’ve always been an advocate of modest homes,” says Charles Farrell, chief executive of Denver’s Northstar Investment Advisors and author of “Your Money Ratios.” A large house “means higher costs in retirement and it makes it more difficult to save while you’re working.”

Hitting home

Whatever price you pay for a house, it’ll often end up costing you at least 2½ times as much over the long term, Farrell reckons. Say you buy a $500,000 home, put down $100,000 and borrow the other $400,000.

You’ll pay back the $400,000 with that portion of every mortgage payment that goes toward principal. In addition, you might cough up another $250,000 or so in interest, even after figuring in the tax deduction. This assumes a 4.5% 30-year fixed-rate mortgage and a 25% federal income-tax bracket. Add that to the purchase price and you’re up to $750,000.

On top of that, Farrell figures the house might cost $20,000 to $25,000 a year, between property taxes, insurance, maintenance and occasional improvements. To generate that income in retirement, you might need $500,000 in savings, and probably more once you figure in the taxes on any investment gains. That brings the total tab to $1.25 million, or 2½ times the purchase price.

Farrell’s estimate for housing costs might strike some readers as high. It’s easy enough to get a handle on property taxes and insurance. Annual property taxes typically run 1% to 2% of a home’s value, while insurance might equal 0.5%.

Disclaimer: for information and entertainment purposes only

SDG&E Latest Price Scheme

Posted on November 21, 2014 | Leave a comment

Today, pricing is divided into four tiers, with rates rising steeply as a household uses more power over the course of a month.

The utility’s proposal would create two tiers with less severe price jumps.

If your power bill is really high, the proposal would cut it substantially, with rates falling 30 percent in the top tiers. If you’re an energy miser like me, you’re in for a modest shock, with rates rising 8 percent in lower tiers.

Environmentalists should hate this idea, because it waters down incentives to conserve. And it cuts into a big advantage for people who install solar panels on their homes to escape the high-priced, upper tiers.

But fair is fair. When you’re regulating a monopoly, the closer a rate system gets to allocating costs equally among customers, the better it is.

There is one caveat. SDG&E’s plan would introduce a fixed fee applying to everybody. This unduly discourages thrift for no good economic reason.

Utility executives argue that fixed fees would help fairly spread the fixed costs of their vast network of wires, transformers and other essential equipment.

Yet Chevron somehow manages to recover much larger fixed costs from consumers each time we stop at the gas station. It’s hard to see how there’s anything fairer than paying your way, one gallon or kilowatt-hour at a time.

This utility proposal for a fixed charge is more correctly viewed as politically deft attempt to improve fairness for people without rooftop solar systems. Under current regulations, solar owners get to sell their power into the grid at the full retail price, offsetting their costs at night when they pull electricity into their homes.

Disclaimer: for information and entertainment purposes only

San Diego: Home Default Notices In County Hit 9 Month High

Posted on November 20, 2014 | Leave a comment

Default notices filed in San Diego County rose to a nine-month high in October, but remain historically low.

Last month, lenders filed 474 notices of default, which trigger the foreclosure processes after 90 days of missed payments, real estate tracker CoreLogic DataQuick reported Wednesday. The notices are the first indication of trouble in a mortgage. Still, the number of filings was down 12.4 percent from October, and well below the 10-year monthly average of 1,387 notices.

Default notices were last this high in January, when 490 were filed in the county. In September, lenders filed 398 notices.

Mark Goldman, a loan officer and real-estate lecturer at San Diego State University, said he was not concerned about the uptick. He said it’s more of a reflection of a bank’s desire to foreclose by the end of the year. Once the notice is filed, a property can be repossessed in as little as 90 days, Goldman said.

Disclaimer: for information and entertainment purposes only

Thinking of Downsizing? How Much Will Large Home Cost in Retirement?

SDG&E Latest Price Scheme

San Diego: Home Default Notices In County Hit 9 Month High

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