Owning a house & saving for retirement or not?

reck_uk

Had a bit of a discussion with some guys at work today. One of them rents and only has a small amount of savings as he spends most of it each month on doing fun stuff he and his family enjoy or just spends it on the kids or going out. 

This is a deliberate thought out decision by him on how he spends his money as he believes if he doesn’t spend it on himself/family it could be taken away from him in later life during retirement. 

His view on wanting to rent is that when he comes to retire he’ll have his full state pension and he’ll be able to live somewhere where his rent will be paid for, or at least have some part of it paid due to his low income and lack of savings. 

On not saving money for retirement his view is why bother? If the time comes to when he may need to move into nursing home this will be paid for. If he’d bought a house and saved all his life this would have been drained away paying for this care and he wouldn’t have had the chance to spend that money on himself/family during his prime years. 

Im the complete opposite to him as I have a mortgage along with savings put away for ‘the future’ / retirement and it did make me think that if his view of things was accurate was I doing the right thing?

For instance if we both ended up in a nursing home I believe his viewpoint is correct. With no owned property and little to no savings his care would be taken care of while in my case all the money I’ve saved over the years and the value of my property will be spent on the things he’s getting for free when I could have used that cash on other things and still benefited from nursing care (for free). 

I don’t know about the rent side though. Do councils pay rent for people who just have the state pension with no other income?

What are people’s thoughts about saving for retirement and then possibly have your life savings and house taken away while others may have this paid for after previously spending their cash having fun earlier in life?

p00hsticks

reck_uk said:

I don’t know about the rent side though. Do councils pay rent for people who just have the state pension with no other income?

People over State Pension Age with limited savings can currently apply for Housing benefit (for working age it's now being replaced by an element of Universal Credit).
 https://www.gov.uk/housing-benefit
 but there is an upper limit to the allowance, so wouldn't necessarily pay for the full rental if e.g. a single person rents a two bedroom house.

 And given the ever increasing rising costs of the benefits system (SPA, social care, etc), who is to say what the situation will be 20-30 years down the line for those unable to pay their own way. Would he be OK living on the Bibby Stockholm barge, for example ?

 I don't have children (but I do have an elderly parents who I would hate to see living in impoverished circumstances). My personal opinion is that there is a balance between spending your money to give your children a fun time when they are young and then potentially becoming a financial burden on them in turn when you are old.

MX5huggy

You’re both right. 

Yes there is housing benefit for those on pension credit. 

Certainly in my area if you can get a Council house in a nice area which is yours for as long as you want you are on to a winner.

You’re not actually that likely to go in a home. If you have assets you will have a choice of nursing home. 

daveyjp

The downside with this approach is there is never an option of retiring before SPA.

State pension is about £200 a week.  That goes nowhere if you are used to spending everything on the things you want, including going out!

RemotecUK

You are also guaranteeing your future somewhat.

You may have the choice to retire before state pension age.

You will have a better choice as to where you live which is more likely to be where you want to live, as opposed to where the local authority want to live.

Moonwolf

This feels to me like a recipe for a rather austere old age which might come as a shock. Taking state pension at 68 could mean another 20 years having worked for 50, that is a big percentage of a life to suddenly be going without unless people really expect state pension to cover meals out and holidays.

I also know some FIRE people who are living an austere lifestyle now in the hope of a wealthy early retirement. Clearly not all, some are wealth enough to enjoy life and still save.

Both feel a little extreme to me and I much prefer trying to plan an evenish lifestyle throughout, a bit less now and a bit more in future. 

Emmia

And of course if a nursing home is required, it's a get what you're given scenario if the LA is being asked to pay, rather than a home of your choice.

I'd prefer to avoid the risk of  a bottom of the rung place myself.

Linton

You have two extremes:
1) Spend everything now and lead a miserable life in retirement struggling to exist on about half of the minimum wage for the final  quarter of your life, every day regretting the foolish amounts of money you wasted when younger.

2) Have no fun now saving all your money in the knowledge that you will be able to really enjoy yourself in the future, retiring early and/or treating yourself to everything you missed out of when young.... assuming you live a long and healthy life.

ISTM the best solution is to set your savings so that you will not have to make a great change in your lifestyle when you retire.  You can simply carry on at the standard to which you have been accustomed during the previous 40-50 years.

Sarahspangles

Your colleague may feel differently once he sees older relatives experiencing the realities of retirement and care.  

hugheskevi

For me, the care aspects would be relatively unimportant compared to other considerations.

One thing I found striking was once seeing a boiler replacement under a free council scheme. The recipient has no choice over make or model, they will be provided with whatever is cheapest. The installers will do the bare minimum to rip out and put in the replacement, with no making good of the affected area. All is done to minimise cost with zero choice. And of course you have minimal control over when replacement will be done, it will depend on when schemes are running and if you meet the eligibility criteria.

It is that sort of lack of control about just about everything in my life that I would hate about a life dependent on benefits.

FIREmenow

That kind of planning could put his children in a very difficult position when they potentially have their own children to provide for but also have to see their parents on a waiting list for social housing or living very basically on state benefits on a budget to which they are very unaccustomed.  I personally would not be happy with that lack of certainty/control over my future, and would not want my child to feel like they need to plug a gap we have chosen to create, which is why I put money aside now.

This reminds me of someone I'm acquainted with, worked in the NHS for nearly 20 years, now has two small kids, didn't pay into the pension because he wanted the money now.