MAKING LEMONADE OUT OF LEMONS

Neal A. Deutsch, CFP^®

Published in Rivertown Journal, June 2009

The last year has been tough for all of us- not that I’m telling you anything you don’t know. As a financial advisor and retirement planner, I spend every day speaking with folks just like you, helping them review their aims, goals and objectives, looking at their retirement plan, budgeting and the like. As the market and the economic cycle changes, so do the points of conversation.

This past week while meeting with a new client, I was delighted to see a broad, smiling face at the opening of the meeting. Shamus McBurke (not his real name- I just liked the way it sounded!) was looking at life from a different prospective- the way he saw it, this recession, drop in his 401(k), and diminished return on his investments sparked a completely new way to look at life for the first time in his 64 years…it was time for a change! And so, I asked this joyful person to explain to me the epiphany he was experiencing.

“We’ve got to be out of our minds to live in this area” he started with. “High property taxes, congestion, cost of living, gas and just about everything makes it so hard to live in this part of the country. “ Both his brother and sister lives in Georgia, and he had done a comparison of the cost of living and difference in lifestyle that he would be faced with. Let’s look at this case together…

The property taxes on his primary residence were approximately $11,000. While his primary mortgage was relatively small, he had taken equity out of the home via a home equity line to do improvements and help fund college costs for his grandson with a current monthly payment for mortgages and taxes at approximately $3600 per month. While rather high, his current income is sufficient to cover this amount- but due to the adjustment in the balance in his 401(k) and upcoming retirement, this monthly payment would be a stretch. Additionally, he estimated an additional $500 had to be added for amortized monthly upkeep- grass cutting, snow plowing, etc for a total of $4100 per month. He estimated that even in today’s lower real estate market, the equity in his home was about $300,000.

After a visit down South and some due diligence on residential developments, he determined that he could buy a brand new home relative to the size of his home here in New York for about $225,000 (yes Toto, we’re not in Kansas anymore). The taxes on the home were based on appraised value at 1.1%, so the tax bill would be about $2500 per year, and there were common charges of $90 per month which covered lawn maintenance, snow plowing (last snowfall was 10 years ago)   a pool, tennis courts, walking track, and a host of other amenities which by now have you laughing and shaking your head. The point? He will be reducing his monthly overhead from $4100 per month to roughly $300 per month by selling the NY home and utilizing the equity to buy the Georgia home for cash. He will be no longer responsible for the upkeep on the outside of the home, and will have reduced his overall “nut” expenses by 70% or so. Who’s laughing now?

I once read a statistic somewhere that over 90% of people leave this wonderful world within 50 miles of where they were born. Whether true or not, look at those close to you and draw your own conclusions. For myself, I find this concept both personally frightening and incredibly exciting. For a person approaching retirement, this concept can be the answer to trading our golden years from living month to month to living on the golf course every day. There are some amazing communities around the country (The Villages in Florida, Sun City in Arizona to name just a few) that allow the retiree to live the life of riley, with daily activities, evening parties (no, you’re not too old) and a lifestyle far beyond what you imagined. Don’t kid yourself- these communities are not for old people, just for those in the higher digits.

Relocating is not for everyone. It’s tough to leave a place that you have been used to for decades, as well as friends and family if they are in the area- but while you may not want to admit it, starting again in a brand new house (less the “stuff”), a new lifestyle, and a radically reduced overhead has you at the very least curious. So give it some thought, check out the net…and maybe you can convince your best friend to do it with you. Happy dreaming!

Want to see and read more of me? I am pleased to announce that I can be found on www.babyboomers.tv as their financial planning expert. It’s a great site- check it out!

Neal A. Deutsch is a Certified Financial Planner^™  & Registered Securities Principal, offering securities through First Allied Securities, Inc., member FINRA/SIPC.  Neal is President of Chestnut Investment Group in Suffern, NY, helping people with financial planning since 1984. Please feel free to call Neal at 845.369.0016 or email him with your questions at neald@chestnutinvestment.com. Visit his website at www.chestnutinvestment.com