On frugality: We were frugal relative to our friends/peer group (though some made a lot more money than we did, the peer group was pretty affluent). We bought a house in the middle/upper middle class neighborhood of a very affluent town, so my income was likely a multiple of the incomes of our neighbors. Nonetheless, I’d say that our kids were less well dressed and our cars older than our neighbors. We made an explicit choice to not buy a country house but to use that money to take exotic trips every year with the kids. So, we took them to Western Europe (France, UK, Italy, Austria, …), Central/Eastern Europe (Croatia, Czech Republic, Poland, Hungary, …), China, Indonesia, Australia, plus Mexico many times, Canada many times and a few countries in Central America. Even there, I travel a ton for work and we would often piggyback on work trips and use FF/hotel miles. The kids remember these trips as some of their favorite times and even as young adults, will gladly travel with us if we can make the dates work.
We might not have paid for all of the lessons that our friends kids took. We were dealing with LDs and medical issues. But, I don’t think we feel like we missed out with our kids.
The Wallethub article underlying the NYT article is pretty interesting. Who would have guessed the low property crime rates in Massachusetts, NY and NJ or the states with the highest life expectancy other than Hawaii. I agree that it is not obvious that I want to live in a state with a high percentage of old people, only enough that health care, housing and other high quality services that an older person would need are available. Indeed, a higher percentage elderly workers in the work force may mean that they can’t afford to live there without working. Not relevant to me as a) my work is portable (as long as there is broadband and a hub airport) and because, by the time I cannot work, I should have no difficulty affording to live. I am living in two of the top five most expensive places to live. I would be happy moving to Colorado and leaving both Massachusetts and California. My wife would drop California for Colorado, but unlikely she’d drop Massachusetts.
My son found out today that he will get a nice sized stipend for his summer internship. His response…
“I can put all that money in my ROTH IRA.” I don’t know if that’s really true, but I liked his thought.
Re: places to retire. I just did a quick “survey” - a bunch of folks from Mr. B’s headquarters retired recently. To Nevada, South Dakota, Florida, Oregon, and South Carolina. For some reason, not too many were too eager to stay in Bay Area.
When we visited Las Vegas last December, we thought about it as a potential retirement destination.
Even though we are very healthy, being close to good healthcare is really important to us, and it doesnt sound like LV does so great in that area.
I think being close (a car drive NOT plane ride) to good health care is key, especially as folk age and may need medical interventions. Something that is pretty steaight-forward in a setting with decent to good medical care may be MAJOR in a place where medical care is sub-optimal.
@1214mom, DS got what he thought would be earned income at YYGS (Yale Young Global Scholars). He asked accounting about it, and they told him that yes, he’d get a W2, earned income, etc. We made a Roth contribution. The 1099 showed up with his earnings as “graduate student stipend.” He’s not a graduate student, and we argued, without success, that it wasn’t a stipend. So, we had to do a recharacterization, get the money back, and technically he was to be taxed on the minimal gain.
I strongly encourage you to wait until you get the W2 or 1099.
Yes, we always wait until we get the forms because I’m not sure what the funds I receive from others will be characterized as. I ask the CPA and she tells me the forms she’s gotten and what I can legally contribute and that’s the amount I contribute. It sure does get confusing–more than it should.
I’ve not posted but have followed this thread with interest. H and I were both born, raised and have lived our entire life in California. I don’t see us going anywhere else. I think if you’ve always lived here you just take the cost of living as a fact of life. We live in a coastal city that provides everything we need. The health care is good and if we need better we can go to Los Angeles a few hours away. We could sell our house and move to a less expensive cost of living state and live well but it won’t happen. Our kids and family are here.
I have never done a retirement calculator as I figure much of our income comes from investment properties and that won’t change. My H last night said he would like a goal of retiring in 6 years. At that point our house should be almost paid off. My H is pretty frugal but I feel like we have lived a good life while not being overly extravagant. We drive nice cars but not 100,000 cars. Our house is in a great area but that is due to at one time buying the smallest house in one of the nicest neighborhoods. We have a good savings account and for he most part our children are launched. We have always traveled with our children and with just the two of us. I see that continuing and we are conscious of doing the trips we want to do that are physical now why we can.
What we are starting to look into is how we structure our assets and if doable how we can help our children afford to stay in California.
I am happy that I see my children having responsibility in handling their finances. 2 out of 3 are excellent savers. They all without us hounding them have taken the stance of not carrying a balance on credit cards.
" I figure much of our income comes from investment properties and that won’t change. " @mom60 ,
you might want to run a retirement calculator and see if your income stream, with SS, and any IRA minimum distributions, minus one of your investment properties - which could be sold and the proceeds controverted into a 1031 exchange and given to your kids to buy homes, would still allow you enough income to retire comfortably.
Most older retirees income needs go down as they get into their 80’s.
We will have income streams from multiple sources when my hubby retires, and I have run different financial scenarios with this calculator.
I’m no 1031 expert, but money from the front half of a 1031 exchange has to be reinvested or it gets taxed. You can’t just give it away and somehow avoid the taxes.
we have a rental property in pasadena that we bought via a 1031 exchange with funds coming from the proceeds of a land sale . We put it in a trust with both our and our kids name on it. He could live in it if he chooses, and it will be his when we are gone.
IF, at some point WE choose to sell it, AS LONG AS THE PROCEEDS ARE REINVESTED IN ANOTHER PIECE OF PROPERTY, via the 1031 exchange mechanism, there are no taxes to be paid.
mom60 stated that she has investment properties.
I was spelling out an option to help her children stay in Calif., by selling one of her properties and buying a home for her kid using the proceeds through a 1031 exchange.
as long as you buy a “like” property- and follow the rules of the 1031 exchange process, which are a pain, you dont have to pay capital gain taxes on the sale of the prior property.
@menloparkmom - interesting thought on the 1031 exchange.
Most of the income comes from properties owned in partnership with others so they aren’t able to be sold. We have begun gifting them percentages of a property we own. They get income and it should be helpful for them to save for a home or use it to better afford to live in Ca.
Thanks for the suggestion @IxnayBob. I will definitely encourage him to wait until early next year to contribute.
Now that he knows he’s getting this money, he’s also thinking about how he can spend SOME of it. My advice was contribute some to IRA, don’t spend it before you make it, and don’t spend more than you make.
himom,
it doesnt have to be just rental properties exchanged for other rental properties. But that is the most common use of 1031 exchanges.
Ours was land [ property] that was generating no income, exchanged for another piece of property[ a townhouse] which we use as rental property. .
mom60, if the owners of the other properties bought you out, those proceeds to could be used to buy another property that you and your kids own- all without having to pay taxes on the CG.
A 1031 exchange is for business and investment property. My understanding is that you cannot buy a personal residence with the proceeds from the front end of the 1031.
You could buy a rental, and then after some amount of time (generally considered at least a year but there is no specific time in the code) you could convert it into a personal residence.
Here’s a case of someone who moved in after only two months, and didn’t do enough to show they ever truly intended to rent it out, and the Tax Court disallowed the conversion: