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Renting during retirement - a no brainer?
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mr_apple said:Pat38493 said:hugheskevi said:What are the assumptions about the net return on the capital from the house sale? In particular, the rate of return net of charges, dividend tax, capital gains tax, income tax, etc, depending on how it is saved/invested.
For the base case where I buy a new house immediately, my pensions, investments, and the net proceeds of the house downsize are invested roughly 70/30 equities / bonds&cash based on the starting point of a calculated cash flow ladder.
You can also use other online tools like cfiresim which are not as comprehensive but do something roughly similar and are free.
I think you could theoretically still use Timeline by signing up for an account with the first month at £1 and then cancelling it, but I haven't tried it.
The ongoing cost is over £100 per month so it's not really feasible for an individual investor.0 -
mr_apple said:Pat38493 said:hugheskevi said:What are the assumptions about the net return on the capital from the house sale? In particular, the rate of return net of charges, dividend tax, capital gains tax, income tax, etc, depending on how it is saved/invested.
For the base case where I buy a new house immediately, my pensions, investments, and the net proceeds of the house downsize are invested roughly 70/30 equities / bonds&cash based on the starting point of a calculated cash flow ladder.
I've used neither, but bookmarked the products for further investigation after seeing some positive reviews a while back in this forum from people who used them.
It's worth noting that cfiresim mentioned by @Pat38493 covers DC & DB style pensions and only uses US market data for back testing but is incredibly easy and quick to use. You would need to assume you have sold your house at the start of retirement, or include any rental income as a DB style pension to model it.0 -
As has been said some of the data is using historic numbers from the US. Another user suggested a FIREsim drawdown calculator using UK data. Offered here if anyone is interested https://www.2020financial.co.uk/pension-drawdown-calculator/#calculator0
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Shimrod said:mr_apple said:Pat38493 said:hugheskevi said:What are the assumptions about the net return on the capital from the house sale? In particular, the rate of return net of charges, dividend tax, capital gains tax, income tax, etc, depending on how it is saved/invested.
For the base case where I buy a new house immediately, my pensions, investments, and the net proceeds of the house downsize are invested roughly 70/30 equities / bonds&cash based on the starting point of a calculated cash flow ladder.
I've used neither, but bookmarked the products for further investigation after seeing some positive reviews a while back in this forum from people who used them.
It's worth noting that cfiresim mentioned by @Pat38493 covers DC & DB style pensions and only uses US market data for back testing but is incredibly easy and quick to use. You would need to assume you have sold your house at the start of retirement, or include any rental income as a DB style pension to model it.
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I’d personally class a no brainer as something the majority of people do. Unless the vast majority are wrong.0
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Here is my take
Sell house pocket £1m
Assume an SWR on £1m invested 70:30 over a 40 year retirement in the UK of 3% then you have 30k a year gross to spend. 30k x 40 years is £1.2m so 200k growth taxed at 20% gives 29k net pa.
So the question is then would the 29k get more or less rental house than I get from my owned house.
Can't just look at rent though as owning incurs extra costs that renting does not.I think....0 -
You can make carefully considered assumptions about returns from investments, and their variance, and house prices, and rental costs.But1) You can be confident that your carefully considered assumptions will be significantly wrong. You just don't know it what direction.2) That doesn't really matter, because it's a lifestyle decision, anyway.If you'd prefer an itinerent lifestyle (whether for a few years, or longer), then yes, investment returns might plausibly be enough to cover your rental costs and being out of the housing market. However, if you are getting out of the housing market and planning to get back into it later on, then you are introducing an extra risk, that prices will move dramatically against you in the intervening period.If you'd prefer a stable housing situation (as I think most rettirees do), then your options are owning your home or a secure tenancy. And in the UK, you're unlikely to get the latter unless you already have it.2
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michaels said:Here is my take
Sell house pocket £1m
Assume an SWR on £1m invested 70:30 over a 40 year retirement in the UK of 3% then you have 30k a year gross to spend. 30k x 40 years is £1.2m so 200k growth taxed at 20% gives 29k net pa.
So the question is then would the 29k get more or less rental house than I get from my owned house.
Can't just look at rent though as owning incurs extra costs that renting does not.0 -
Shimrod said:michaels said:Here is my take
Sell house pocket £1m
Assume an SWR on £1m invested 70:30 over a 40 year retirement in the UK of 3% then you have 30k a year gross to spend. 30k x 40 years is £1.2m so 200k growth taxed at 20% gives 29k net pa.
So the question is then would the 29k get more or less rental house than I get from my owned house.
Can't just look at rent though as owning incurs extra costs that renting does not.
On an annual basis that is 30k of which 25k is spending from capital so not taxed and 5k from interest taxed at 20% gives a total tax bill of 1k and a net of 29k.I think....0 -
Stupid question, but as someone who has never rented before, would you be able to rent somewhere when you are in your sixties without any prior history of renting? Or is it just a case of show me the money?!
The only way I think I would ever end up renting would be if I wanted to move to a completely new area, and wanted to rent in a few different areas over the course of a few years, to see where I wanted to buy.Think first of your goal, then make it happen!0
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