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Hi All,

This is my first post, I have had a few trials and have used the "Fool" for about 2 years but this is the first time I've actually signed on as a full member.

I would like to ask about retirement for my Mom, she's 47 years old and she has no pension and no retirement fund other that SS. However she owns a home worth $73K in Grand Rapids Mi, she bought it for $52K. She's put about $10K into it since she's been there. She's decided to sell the hows and live with her aunt rent free (6 Months) to allow her to build capital. She told me she could walk away with $21K in her pocket after closing. She wants to relocate to Portland, OR to preprare for retirement.

She wants to know what are some good short-term investments she can use until she's ready to buy another home and also so long term investments that will reward her even though she is in her late forties. I have my own ideas however I would like to hear what some of you would suggest. If you need any additional infor please ask. Thanks in advance for all your help.
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Welcome Oracle10q!

You might want to check out a cost of living calculator. Here's one:

http://houseandhome.msn.com/pickaplace/comparecities.aspx

I'm sure there's one on the Fool somewhere. We might need a little more information to make a recommendation.

Just a quick comparison showed a 30% increase in cost of living. Something to take in consideration since that's quite a bit more expensive than Grand Rapids.

Also, is she sure she can walk away with $21k? What about capital gain tax? Is that already taken into account?

There a good site on the fool with information about where to put your money...

http://www.fool.com/News/mft/2004/mft04052116.htm

47 is very young in my humble opinion...so I think she's got some time. What are her plans for retirement? When does she plan to retire? Is she moving in with friends in Portland? Does she want to own her own home there?

My biggest recommendation is convince your mom to start saving and start saving NOW. The longer she waits the tougher it will be. The link above should provide you with some suggestions. BOL

Jesse




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She wants to relocate to Portland, OR to preprare for retirement.

I'm not familiar with Portland RE costs, but I doubt that she could buy anything for $73K there. Perhaps you could check out RE prices in Portland and discuss them with her to determine if she can afford to relocate. Does she still intend to work if she relocates, and pay a mortgage?

She wants to know what are some good short-term investments she can use until she's ready to buy another home and also so long term investments that will reward her even though she is in her late forties.

Safe short-term investments are paying notoriously low interest right now, and you haven't told us her time-frame for buying another home. RE is usually a good long-term investment (i.e. 20+ years), but prices on the West Coast have gotten extremely high, and as interest rates go up, it will be harder to afford mortgage payments.

If she wants to prepare for retirement, I agree with the other poster who said:

My biggest recommendation is convince your mom to start saving and start saving NOW. The longer she waits the tougher it will be. The link above should provide you with some suggestions. BOL

Unfortunately 21K is not a very large nest egg. If I were your mom I would work for as long as I could, reduce my expenses as low as I could, and start saving as much as I could toward retirement. I doubt whether she would be able to do this AND relocate to Portland, unless she intends to live with a friend/relative practically rent free. IMHO retirement saving should be her priority right now, not relocation.

I'd like to hear what your ideas are...

2old


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"She told me she could walk away with $21K in her pocket after closing. She wants to relocate to Portland, OR to preprare for retirement."

You might like to go to www.realtor.com and check on the price of housing in the Portland area.

Sorry to say but $21K on the west coast doesn't go very far. In fact if she is moving furniture etc that would cost a good chunk of the money, if not then she has to budget for furnishing the house.

Without a doubt your mom needs to save all she can NOW! I own my home in Silicon Valley and have no debt... Social Security is not enough to live on and it will probably be even less by the time she needs it.. right in the middle of the baby boomers drawing on the system. Benefits may shrink...

ING http://www.ingdirect.com/osa_work/ offers 2% on savings, you might check that out for a short term place for her money, some posters on another board recommended them. I haven't done business with ING.. so can't say from personal experience.

Read all you can on the MF sites. Fool School is one you can start with http://www.fool.com/school.htm?ref=G02A06

God bless, Ken
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I agree that a sense of urgency needs to be created. My brother (just graduated from U of Oregon Law School) and I have were discussing this last night. His suggestion is that my mother should invest about $4000 into the house (carpeting & siding) and increase the value of the her home prior to the sale, with an estimated time of approximately 6 months to the date of sale.

She also has an offer from a family member to live with them rent free for 6 - 9 months while she saves money.

My suggestion is to do small improvements to the house some that will make a significant increase in market value. Than sell and move in with her aunt for nine months while saving, and preparing to relocate (she has a lot of family in portland). I am considering ING and a sharebuilder brokerage account. In addition, for her long term investment a traditional IRA. That's all I have so far. If the group has any other suggestions please let me know. I thank you all for your time and support.

Sincerely H.Z.S
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I am considering ING and a sharebuilder brokerage account. In addition, for her long term investment a traditional IRA. That's all I have so far. If the group has any other suggestions please let me know

If she qualifies for a Roth, and doesn't have high current income then a Roth MIGHT be better than a TIRA over the long-term. In either one the profits will grow tax-free, but in the Roth, she won't pay any taxes when she starts drawing from it in retirement, while in a TIRA she would pay ordinary income tax. It really depends on what her tax rate is now vs: what it might be after she retires. IOW, does she really need that deduction now, or would it be better to get all the money tax free during retirement? Just a thought...

...my mother should invest about $4000 into the house (carpeting & siding) and increase the value of the her home prior to the sale, with an estimated time of approximately 6 months to the date of sale.

If the carpeting is shot, new carpeting (buy CHEAP) can make the house look much better. The siding I'm not so sure about--she might never get the cost of that improvement out of the sales price--unless the current siding is ABSOLUTELY AWFUL. If it really needs new siding, the buyers might want to pick it themselves, rather than buying someone else's taste.

One of the best things to do to a house that makes a big difference in price/time to sell is to clean up the clutter (if there is any). Try to clear the house of almost all the the 'personal' clutter items that are hanging around (i.e. framed photos, 'collections', knick-knacks, etc.). They can all be put in boxes in the attic or garage until the move. If the interior needs paint, paint it (that's cheap enough). Try to make the rooms look as light and spacious as possible via paint, higher wattage light bulbs and rearranging furniture, if necessary. If the furniture is torn or in bad shape, inexpensive 'throw' slip covers in a light color might do wonders. I think that these ideas are cheaper and might yield a faster sale and possibly higher price than new siding. The idea is for buyers to be able in their minds eye to see enough SPACE that they can imagine their furniture and personal items in the home. If there's a lot of the seller's personal stuff, it usually looks too cluttered, or buyers will get distracted by it and start talking about personal stuff (i.e. Do you have any grandkids? Oh, I collect such-and-such also, etc.), instead of focusing on the house itself.

If the garage is messy, that needs to be cleaned up also--have a yard sale! If your mom's going to relocate, it costs to move all that stuff across country.

And the front entry should look inviting, including the yard. If it needs weeding, weed it and keep the grass mown. Get rid of any empty pots/containers that might be around. Paint the front door if it's dirty.

2old

(Can you guess my favorite show is BBCAmerica's "House Doctor"? ;-)

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My mom wrote:

Thanks Hak.............let me give you a little more information. I do have a 401K (about 2 years old) and the house has new kitchen, carpet, bathroom, vinyl, paint, electrical, plumbin - but it really does need siding to meet the comps in the area. Most of the area homes (in good to excellent shape) are selling for $ 90-95,000. But currently my house is in need of siding and possibly a new roof. I already have the siding and a new garage door (I didn't pay more than $300.00 for all of it). So far my monitary investment has been only $7,000.00 but the man hours I have invested is of course, much more than that - as most of the work I have done myself.

I do intend to reinvest a portion of the profit into another real estate venture. My mortgage broker has suggested a different approach to real estate investment...........one that would be more cost effective and would allow my money to work for me - rather than investing so many man hours and energy. I plan to meet with him after I receive the appraisal information.

The appraisal is scheduled for Friday and that will be used to determine the exact value of my property. I will let you know the outcome as soon as I find out.

That forum you used seems to be a very useful tool in working out new ideas prior to acting on them. Thank you for sharing with me and thanks for all of the input. It was very helpful - and I will bring more info to you to get your groups perspective, as well. Thanks Mom
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Your mom's awesome...can she come over and help with my siding? ;-)

The 401k is great but your original post indicated she wanted to move to Portland and essentially retire there. The mortgage broker probably has a better idea of her net worth than any Fools here but here are some final thoughts for your mom.

I agree with the other poster with respect to the siding. I'd be curious as to what the appraisal came back as. I'd invest as LITTLE as possible.

I do intend to reinvest a portion of the profit into another real estate venture. My mortgage broker has suggested a different approach to real estate investment

Hmm, little suspicious of this different approach. She might be investing in real estate with the purpose of renting it out to gain additional income? This really depends in large part on her goals. Let's say she scores $90k for her home so her profit is $38k. (I did not notice if this included capital gain tax but this would be moot I believe if she is investing in another home short term)

Now as far as her 401k, if she's been in it for 2 years the maximum she could have contributed is $23k (11k for 2002 and 12k for 2003) unless she's rolled some over from some place else. Last year she probably did pretty well. Let's say a conservative 15% gain (should be more...S&P was up I believe just over 30% but 2002 didn't get hot until October). This would put her at around $25k or so.

This would leave about $60k for retirement. I will venture to say this will not be sufficient. I would ask her just to be cautious here. She should really sit down and determine what her retirement goals are and figure out if she's heading in the right direction.

When one reaches retirement the recommended withdrawal rate is around 4-5% if one wants to maintain some principal (usually used for inheritance to one's children or to a charity), more if they want to dip into the principal and not have much remaining.

This is not much for retirement especially since she is planning to move to the west coast. If one saves $1,000,000 by the time they retire this would give them a $40-$50,000 per year income. More if she wants to dip into principal but remember average life expectancy for women I think is in the 80's so she will need income for a while. Maybe that's enough. Also, health insurance premiums keep on moving up and I'm pretty sure quite a few people are supplementing Medicare with something else if they can.

From reading your mom's message it seems she's moving forward so all you can really do is make a couple of suggestions here. I don't mean to say the above to scare her but only to perhaps for her to think a bit more about her retirement so when she gets there she'll really be able to retire and not worry so much about money.

HTH

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"This really depends in large part on her goals. Let's say she scores $90k for her home so her profit is $38k. (I did not notice if this included capital gain tax but this would be moot I believe if she is investing in another home short term)"

I believe that as a single person she is entitled to a $250K profit free from income tax whether or not she buys another home provided she has owned the house for 5(?) years and lived in the home the required amount of time, 2(?)years. My time numbers may be wrong but that's easy to check out. So I suspect none of her profit would be subject to tax.

Ken
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