I think the key to having more people achieve a good retirement is to reduce the cost of existing as much as possible. That means zero property tax for individuals or at least non-working people. One should be able to buy some property, put a dwelling on it and grow a garden if they choose without any ongoing costs. That would be an idea retirement for some, and the rest can upgrade from there by having more money. But instead we created a society where there are recurring costs to existence and people struggling the most to achieve independence pay the highest tax rates.
Just some thoughts, I'm not proposing a comprehensive solution. It's just that we keep wondering how people will fund retirement and I keep coming back to - if it didn't cost so much to exist, there wouldn't be the concern about where the money will come from.
> I think the key to having more people achieve a good retirement is to reduce the cost of existing as much as possible. That means zero property tax for individuals or at least non-working people. One should be able to buy some property, put a dwelling on it and grow a garden if they choose without any ongoing costs. That would be an idea retirement for some, and the rest can upgrade from there by having more money. But instead we created a society where there are recurring costs to existence and people struggling the most to achieve independence pay the highest tax rates.
Traditionally this existed as parents moving in with their adult children. Half of the bargain would be babysitting your grand kids. In exchange you got a roof over your head, food, and the joy of seeing your grandkids on a daily basis.
The reason why this doesn't work is that we have to pay for the services that help all of society. Fireman, police, roads, electricity, making sure that the food we eat is basically healthy. You could argue that "you" are a special person who will never rely on society for anything. You'll make your own clothes, fight your own wars or whatever. But we are all related.
> The reason why this doesn't work is that we have to pay for the services that help all of society. Fireman, police, roads, electricity, making sure that the food we eat is basically healthy. You could argue that "you" are a special person who will never rely on society for anything. You'll make your own clothes, fight your own wars or whatever. But we are all related.
It does work. Modern society has agreed upon on taxing earned income to provide shared services. That's where the money to pay for all the things you describe comes from. The roads, firemen, police, you name it. It all comes from income taxes (or that and real estate taxes for some of the local stuff but primarily income tax).
By taking care of your grandchildren and generally being helpful to your kids, they're covering you end of all of those as well. They earn the money that buys you food. They earn the money that puts a roof on your head at night. And all that money would be taxed per usual. Arguably you'd be paying more taxes in this setup that if each of you split out and made a more meager existence due to the progressive nature of taxes (i.e. your son making $50K pays more than if each of you made $25K).
As a tangent, I've always wondered if my understanding that property is no guarantee of survival is incorrect.
When I was younger, I used to think having a fully-owned house is survival forever, since you have no more payments to make (besides utils). As I grew up and looked into the details, I realized property taxes stick with a property forever.
This begs the question. Why buy a house at all? It's not like if you are laid off, disabled or just incapable of finding and keeping a job, you will still have a dwelling to squat and survive in.
This makes a house a liability more than an asset (in survival terms, not monetary terms) in my mind.
People wait to long to pay off their mortgage. Once that thing is out of the picture you can't imagine how fast you can save money. Like another poster said, my prop taxes are 3-4K per year and there's no way I could rent anywhere close to that in my neighborhood. Loans are a financial treadmill that everyone gets on and thinks that's normal. Once you get out from under loans you start to see things like property taxes as another treadmill. My water and sewer bill... Oh right, I'm not allowed to have a septic system or well in my area.
But let me tell you, there are 100,000 cabins in rural Michigan that can be had for under $50K and you could outfit with solar and a well and grow a garden - maybe even some farm animals in certain areas. You'll be 1/2 hour from the nearest hospital though, which retired people seem to want near by. With the number of HN readers who favor telecommuting, it surprises me that so many still concentrate is some of the highest rent areas in the country.
Property taxes for my house are $3000 a year. In the same area, my rent for a much smaller place was about to be $1800 a month. On disability, I could scrape up $250 a month fairly easily.
I don't have to worry about rent increasing every year or a change in management.
It has value. And thus you can sell it or borrow against that value. The alternative of renting does not maintain value. You pay to live there for a month and then at the end of that month your value disappears.
It is true that a house has its downsides and requires more effort. That is true of most anything with value.
>> The alternative of renting does not maintain value
What if renting is cheaper than buying (example SF bay area)?
More importantly, what if the purchase of house is made with the expectation of growth in value of the house and that expectation turns out to be incorrect after 30 years (as in Detroit)?
Beyond a certain cost of a house, wouldn't it be advisable to plunk money in funds rather than a house (and hoping it builds equity)?
Just some thoughts, I'm not proposing a comprehensive solution. It's just that we keep wondering how people will fund retirement and I keep coming back to - if it didn't cost so much to exist, there wouldn't be the concern about where the money will come from.