“My parents have a paid off home and approx. $300,000 in retirement savings. It’s gonna be a tight budget to make that money last 20 years or so.”

“My parents paid off their home 15+ years ago. As far as they were concerned then, they thought they would be ok: $100,000+ in RRSP’s, a paid off home. My mother quit her job cause they no longer need the income etc…. Who wouldn’t – in fine shape with a paid off home???? Well my dad didn’t put away more in RRSP’s (I guess he thought what was the point with a paid off home?) and at 65 was told he didn’t have enough to retire. So he worked two 2 years more of physically draining work 8-10 hours a day, cause he wanted to travel some, go back to visit relatives etc… Then he had a stroke so he’s essentially retired.
They now have a paid off home and approx. $300,000 in retirement savings. Even with $300,000+ it’s gonna be a tight budget to make that money last 20 years or so. They’re hoping for $1000 a month from their RRSP’s on top of approx $1800 a month in OAS and CPP. I’ve run the numbers and its not pretty.
That will probably mean no travel to see relatives, maybe no car in the future, cable may have to go.
I’ve never seen that many seniors out there say, “I own my home so I’m the happiest person there is”, what I do see is alot of cranky seniors who COMPLAIN about the cost of EVERYTHING. If you knew how much it cost to run a home, shouldn’t you have saved money for those costs in retirement?
Its easy to think that owning a home is FANTASTIC when your retired, but its a bitch when just maintaining a roof over your head eats a big chunk of your lowly income.”

Arshes at VREAA 12 Sep 2012 at 3:57pm and 4:10pm

20 responses to ““My parents have a paid off home and approx. $300,000 in retirement savings. It’s gonna be a tight budget to make that money last 20 years or so.”

  1. Operating costs for a paid-off single family house in Metro Vancouver, in the years ahead, will probably be around $1000/month. That’s property tax, house insurance, utilities, and repairs and maintenance. The municipal tax rate, the assessed value of the property, the condition of the house, and how handy someone is, would all factor in to that number, but $1000/month isn’t an unreasonable benchmark for what it will cost Lower Mainland homeowners to continue living in houses they own outright. Many will offset that number with income from a rental suite. Although I’m not sure I’ll want to be a landlord with tenants beneath me when I’m 70.

    • Thanks for the comment, Froogle.
      Those of you who don’t yet know Froogle Scott, see the sidebar for an account of his epic journey through Vancouver homeownerdom.
      Also, readers will be thrilled to know that Episode 10 is on the way, an unprecedentedly comprehensive look at the true costs of homeownership.

    • There’s never a great time to be living atop your tenants, but at least in your 70s, your senses of hearing and smell are likely less acute.

    • I think $1000/mo NOT including maintenance will be a stretch in the coming years (and this doesn’t even take into account that this is after tax). By saying this, I am assuming your definition of a “single family house” is indeed a conventional detached home. Having said this, I know folks living in one bdrm shoe boxes that already pay way more than this (with their strata fees alone eating up half that). So, basically they’ve got to earn $2000 gross just to keep that “fully paid off” roof over their heads heated and properly maintained while keeping food in their stomachs, their tv’s , computers and vehicles up and running not to mention their brains somewhat stimulated with whatever loose change may be left over.

      (NOTE: Luxury SUV’s, 5-star vacations, cruises, wine and golf tours, fine dining, new clothing, prescription drugs not included in promotional price and are available upon request. Please contact your account executive for more details.)

  2. “I’ve never seen that many seniors out there say, “I own my home so I’m the happiest person there is””

    I’ve never heard that from anyone, senior or not.

    Hate to say it Arshes, but it seems like your parents are not particularly good at financial planning – unfortunately, a common trait amongst Canadians young and old. No matter what your living situation is, you need something to actually generate income in your retirement.

    Unless of course, your parents were assuming they would sell the home when they retired?

    • “you need something to actually generate income in your retirement”

      The issue these days is that future income has been brought forward by way of rising income-generating asset prices (low yields). An unfortunate situation — now they must eat through capital to fund current outlays or risk-up.

      Welcome to the 2010s.

    • No i’ve never heard my parents mention selling the home, except once, when my dad said what was the point with the high cost of condos today.

      And i know no one says, “I own my home so I’m the happiest person there is” but the assumptions is that with a paid off home, you’ll go far in retirement, but I know that isnt the case.

      • “the assumptions is that with a paid off home, you’ll go far in retirement”

        The assumption is good, except it’s missing a key part – the saving of the money that you would have otherwise spent on your mortgage. A paid off house that you’re going to live in is of little use in retirement when income is required.

        I think you know that, its a shame your parents did not. They’ll have some tough years ahead. The good news is that 300K should be able to provide 12K a year in gross income, with a 4% return (leaving the capital intact). It will require some moderate risk to get that return, but its doable.

  3. Speaking of ‘tight budgets’… One Saudi Sheik dabbling in London RealEstate was so ‘strapped’… he couldn’t insure his Ferrari.

    Or perhaps he just forgot. Either way – the OldBill found it in their hearts to forive him, though. [NoteToEd: it may well have had something to do with his condo conversion plan for the last of the ‘ol Nicks in UltraPrime boroughs.]… And now for your Quote ‘O The Day!…

    “My Ferrari got seized in London, then they found out who I was and gave it back. Arab money talks!” – Sheikh Rashid, Heir to the Emir of Ajman

    [UK Independent] – ‘Arab money talks’: Son of billionaire Saudi sheikh claims police confiscated his uninsured £200,000 Ferrari then handed back it back when they found out who he was

    …”Sheikh Rashid is the youngest son of the Emir of Ajman Sheikh Humaid bin Rashid Al Nuaimi. His father is known locally as RRR, short for Rich in Real estate Resources. He owns a fleet of supercars in the orange and black company colours of R Holding, his property and leisure conglomerate. He has cars flown to London by private jet for him to drive here when he visits.”…

    http://tinyurl.com/8b9vop9

  4. So what’s the house worth? Unless you’re very handy and always around, your parents are going to reach the stage where they’re either falling off ladders or falling down stairs, every third knock at the door is going to be a salesman or a tradesman who was in the neighbourhood and noticed a problem with their house that needs addressing right away (my favourite was a guy who wanted to repoint the chimney, didn’t have a business card, said the mortar was already mixed for another job they were working on “nearby” and it would be a shame to let it go to waste ($6 a bag, don’t you know!)). The furnace inspector, the carpet and duct cleaning man, the gardener who’ll still raise his rates a bit every year, but will start slacking off on the parts he knows you can’t see out the windows…

    They’ll get older and sorer, and well meaning friends will recommend herbal teas, pills, powders, metal bracelets, beds and shoes with magnets in them or even psychics. Once they’re on one or two of those lists, their mailing details will get passed around and pretty soon there will be a torrent of miracle-cure junk mail every day, along with many other mail order catalogues. If they give to charity at all, those too will pass around their lists, and the phone will ring a few times a day along with more junk mail. Ordering one or two things from a catalogue or TV might be nice. They’ll get sold a bit of accident insurance, a credit card identity theft monitoring service, credit card balance protection, a membership here and another one there, a couple of newspapers and a few magazines, all automatically renewed on the credit card of course. The nice lady from the bank will convince them that another dollar a month for charity can be withdrawn from their accounts.

    This, too, is part of the cost of staying in your house until you’re old and infirm. Ask me how I know. A seniors’ apartment might be a lot cheaper than a simple comparison would suggest.

    • Sounds like my parents. 😦

    • This is exactly what happened to my grandmother. At least she was smart enough to call us and ask “Ist das Quatsch?” about most things.

    • Truer words were never spoken, Ralph.

      I was ineluctably obliged to return to these shores for that very reason… Ok. I was also growing weary of people trying to kill me and, frankly, getting rather too old for that sort of sillly s***e.*

      [NoteToEd: *at times it was impossible to tell who was trying harder… ‘TheOpposition’ or TheManagement. Regardless, when the institutional invitation to PO with a Bag ‘O Swag and residuals came… I ran. Screaming for joy!]

    • As opposed to what Ralph? A condo where the strata will do exactly the same thing on your behalf? The strata council isn’t going to be out there hanging off the 30th floor to wash the windows. Come to think of it, I’d say about half of my condo owning aquaintances have put more money into their “units” than I have into my prewar house over the last 14 years.

      • Ralph Cramdown

        I agree. You’ll probably do just fine as long as you have your wits, judgement and mobility about you, assuming you know enough about home maintenance in the first place. But every slip in judgement is going to cost you big, either in one time costs or automatically renewed ongoing ones. And there’s a whole segment of society dedicated to basically defrauding independent seniors, via the TV, phone, mail or door to door.

  5. Not a problem. Their will be plenty of empty condos for them to move into when they decide to downsize ( at the bottom of the market ).

  6. Scary thoughts…..all I know is while I have a paid off family house (sharing with my family), if I were to be responsible for all the maintenance costs for it right now (assume I now have sole possession and use), it would be fairly tight for my budget, even though I make a good, by Vancouver, above average wage. When I’m retired?? Don’t even want to think about it…..

    Oh yeah, I’m not counting on OAS, GIS, etc be there for us when I retire in 30+ years in its current form and purchasing power.

  7. $300,000 over 20 years? Pssht… some hardship. My parents manage to live on less than $15,000 per year, and they have a lot of fun doing so (season’s skiing passes, monthly RV trips to carving and art conventions, etc.). The key thing is to do yourself everything that you can. That means no eating out, growing most of your own fruit & vegetables, packing your own lunches, fixing whatever breaks down, etc..

    Plus, invest that $300k in blue-chip dividend producing stock, and you can live purely off of the dividends… and if the average return is more than 5% above inflation (5% of $300k = $15k/yr), you can always maintain your after-inflation balance by re-investing the % of the returns that mirror the inflation rate.

    The trick is to be frugal. And no, my parents are already in their 70s, and will probably be spry and ambulatory well into their 90s.

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