The Great Pensions Crisis - Channel 5

[Deleted User]

All depends on the circumstances. If cash flow is an issue, someone in their 70s or 80s should rent.

There is a simple rule of thumb. Take 90. Deduct your age. The remainder represents the percentage of your household net worth you should ideally have allocated to residential real estate.

The point of this rule is simple. It’s a guideline to not putting too much of your net worth into a single, immoveable, costly, potentially-deflating asset the financing on which will only grow more costly in years to come. At the same time, it’s a reminder you need to be building wealth in the form of liquid, diversified, balanced assets that will inevitably provide you with security and an income stream. Remember the Rule of 90, for example, and you won’t be shoving every pound you have against the mortgage.

Linton

Deleted_User wrote: »

All depends on the circumstances. If cash flow is an issue, someone in their 70s or 80s should rent.

There is a simple rule of thumb. Take 90. Deduct your age. The remainder represents the percentage of your household net worth you should ideally have allocated to residential real estate.

The point of this rule is simple. It’s a guideline to not putting too much of your net worth into a single, immoveable, costly, potentially-deflating asset the financing on which will only grow more costly in years to come. At the same time, it’s a reminder you need to be building wealth in the form of liquid, diversified, balanced assets that will inevitably provide you with security and an income stream. Remember the Rule of 90, for example, and you won’t be shoving every pound you have against the mortgage.

That may work up to the age of retirement, I haven't thought it through. After retirement when you are steadily reducing your liquid assets it's crazy. If you are having cash flow problems, the last thing you should do is sell your house and rent - that is just one step from living in a homeless shelter. A better solution could be to trade down or equity release. Fortunately the social security in this country should make it unnecessary.



And a tweak to your somewhat arguable rule of thumb, any debts that are payable after death no not count as negatives against your net worth. After all, you will be dead so cash flow is totally irrelevent.

[Deleted User]

Yes, your kids will totally love you for that.

Linton

Deleted_User wrote: »

Yes, your kids will totally love for that.

Perhaps I dont have any, and if I did they would be in their 50's and presumably would have sorted thenselves out by then. If kids need help, they need help in their 20's.

nigelbb

Nobody on this thread promoting the advantages of renting over buying is actually doing it are they? Perhaps because they know that this is all just a spurious theoretical calculation depending on dubious assumptions eg the FT article claiming renting is cheaper than buying assumes that house owners spend 25% of the rental value of the property on insurance & repairs each month. This is a ludicrous assumption just like those claiming the need to replace the roof of a house every 15 years. What about the value of security of tenure of a house you own rather than renting? Why not add some more negatives to cost of renting eg cost & hassle of moving every few years?

Fundamentally a house is somewhere to live not an investment vehicle & once settled in your house especially when it's paid for whether the value rises or falls is irrelevant. You won't realise the increase or suffer a loss but you will always have a roof over your head.

Finally the sums don't add up. Locally an entry level property costs about £100K. The cost of renting such a property is actually higher than a £90K mortgage. Someone at the beginning of their housing career will put a significant proportion of their income into housing. If you have to £500-600 per month going on rent or mortgage where does the extra money to gamble on stocks & shares come from? If you could risk that £500-600 per month on margin trading where do you live?

[Deleted User]

gamble on stocks & shares come from

Ok, we are not going to agree with someone who just keeps repeating this kind of nonsense.

nigelbb

Deleted_User wrote: »

Ok, we are not going to agree with someone who just keeps repeating this kind of nonsense.

Dressing up playing the stock market as "investment" when it's just posh gambling is what is nonsense.

I see that you own a house so clearly don't believe your own claim that it's cheaper to rent than buy nor can you contradict the simple calculations I provided to show the claim is nonsense.

[Deleted User]

To be clear. I have nothing against people owning houses as long as they treat it as expense rather than investment.

The reason I own a house is because I can afford it. My equity and fixed income portfolio is well into 7 figures.

bluenose1

I wouldn't rent because of the insecurity aspect. Why put myself at risk of the landlord selling and having to move.
I would imagine the majority of people in this country who rent do do because they can't get a mortgage. Not through choice.

badmemory

bluenose1 wrote: »

I wouldn't rent because of the insecurity aspect. Why put myself at risk of the landlord selling and having to move.
I would imagine the majority of people in this country who rent do do because they can't get a mortgage. Not through choice.

The only reason to rent if you can afford to buy is if you are fairly sure you are going to change job in the near future to a place that you would find it difficult to commute to. Who in their 70s would choose to be in a position where a landlord could say "OK you need to find somewhere else to live because I am selling up"? And when you are in your 80s or 90s? It is nightmare territory. And with our small state pensions what would happen if they decided to stop housing benefit?