New home expenses versus a high (overly-high?) savings & investment rate

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Jeff7
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New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Sat Apr 01, 2017 7:00 pm

Hello all, it's been awhile since I've been around these parts.

I've got myself a house now, and it of course comes with numerous expenses.
I did have a home inspection, and nothing critically-wrong was discovered. However, there are numerous things that are problems that I'd like to resolve. (Doors that don't close properly, poor drainage in a swampy back yard [home inspection was during winter, so the ground was snowy and frozen], and some repair items, like a leaky roof.)

The question I have is, should I reduce my 401k contributions to knock out some home expen6ses that could cost money later, or improve the home's value?
Somewhat related: Is there such a thing as saving "too much," and not having enough to reasonably enjoy the present, in addition to not shooting yourself in your future foot?

Some of this will follow the "Asking Portfolio Questions" post from the investments forum, since there's some overlap.
- Age: 35
- 25% tax bracket
- I'm maxing out 401k and Roth IRA contributions each year, which ends up being a bit over 35% of gross pay.
401k has a 0.55% wrap fee, but offers low-cost index funds. (Before, I had no wrap fee, but only ≥1% ER American Funds options.) I'm in Vanguard index funds in both investment locations.
- 3.25% base mortgage rate, 30yr.
- $0.50/dollar 401k match on up to 8% of gross pay, which has been increasing steadily from 4% several years ago. I would still ensure that I get the full match though.
- Profit-sharing into 401k usually been about 5% of gross pay.
- No taxable investment fund.
- ~6 month emergency fund.
- Job seems stable, been seeing growth every year since the 2009 recession, both in terms of new markets and improving internal efficiencies.
- Monthly healthcare insurance cost is about $12.



Some projects:
- Improve drainage of back yard to keep water away from the house, and stop it from seeping through the basement walls. The ground is mostly flat, but the water in the back has nowhere to go, and tries to push its way into and then around the house. The front yard slopes downward toward the street.
I'm thinking of a curtain drain to divert water around the house, and keep it from saturating the ground around the basement.
I've done some work with a small backhoe before; they're pretty easy to use I think, and have been considering renting a Bobcat and trying my hand at that project myself, after checking with gas/electric/water to ensure that there are no surprise pipes.
- And the back yard is generally just soft and squishy, which, as stated earlier, wasn't easy to foresee when the ground was frozen when I bought the place. If I tried to sell the house in the summer, a prospective buyer in the ~250lb range would very likely sink in an inch or two in the back yard if it had rained recently.
- Roof evidently has some leaks and needs repair work, no idea what that will cost. I hope to find that out very soon. That could be due to some recent windstorms that saw >60mph gusts.
- The entry doors aren't in great shape: Single-pane windows aren't good for insulation against cold winters, poor alignment and degraded seals mean drafts, and the deadbolt locations are so weak that a determined kitten could probably kick them in.
- Have a backflow-preventer installed in the sewer line. Not long after moving in, there was a sewer backup. Luckily it wasn't a horrendous or even grotesque mess, but it did ruin some cheap laminate flooring, and fortunately not much else. It still astounds me that 1) backflow-preventers aren't standard, and 2) that sewers backing up is even a thing that can happen. I never even had a concept of that kind of thing; I grew up in a house with a septic tank+field that never had any serious problems. The city only covered the plumber's cost, nothing else. Homeowners insurance wouldn't cover it, as I didn't have a rider that would cover backflow.
- Need to get it tested, but there are some ceiling tiles in the basement that could be quite benign, or they could be asbestos. A lot of reading online led me to a firm "maybe" without having a sample tested by a lab. What I at least gather is that if I leave it alone, it'll leave me alone.
- A fun thought crossed my mind: If, IF I ceased 401k+IRA contributions and shunted it all into the mortgage, I could pay off the house in under 5 years. That doesn't strike me as a good idea, but it's fun to know that I could do that.

I've agonized over reducing the 401k contribution for at least 2 months now, and it's time to finally make a decision. I do not like the idea of doing it due to the potential investment growth and tax deferment. (I guess I could reduce Roth IRA contributions instead?) So that's why it's taken so long to even reach the stage of making a (lengthy) post here to help kick me along a path.

drawpoker
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Location: Delmarva

Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by drawpoker » Sat Apr 01, 2017 7:32 pm

Being a fellow homeowner - :) am just going to address the issues you raised on the house itself. Not the financial decisions on how to spend your money.

First off - if there was a sewer backup shortly after you moved in - well, if it was cleared out properly by a proff. service like RotoRooter or a competent local plumber, that is one worry (expense) you can put off for a while. Like years, maybe. Once that line has gotten a thorough reaming out from the house to the street it will take a while for another blockage to occur.
Unless - it was due to tree roots ? Whoever did the cleanout should be able to tell you the cause. When this happened to me nearly 4 years ago, the RotoRooter guy said it was a t.p. clog in one of the turns. He said they know this because if it was tree roots, the block comes back to the machine, not out in the other direction.

The roof: that is more worrisome. As you say, it could be something as minor as a few shingles becoming loosened due to high winds. $10 of roofing cement, end of problem. Or, since you live in a snowy winter clime, if you are seeing the ceiling stains around the corners of either front or back rooms, it could be due to ice damming. If so, with summer coming, that is something you won't have to worry about for another 6-7 months.

So, its important to identify just what is cause of the leaks. If you are physically able to do so, climb up into the attic and inspect the rafters, joists, etc. to find dampness. Remember, water runs downward so where you are seeing the stains on the ceilings is not necessarily where the water is entering. (Unless it is ice damming) That is why you (or someone) has to go up into the attic and inspect.

The doors/older poorly insulted windows problem can probably wait until the start of another winter - but - one caveat to that - Anderson and the other big quality window and door people will be having sales going on in the off-season. If you wait until cold weather you will probably have to pay top price to replace these items. So, my advice would be to do some pricing starting around Memorial Day, and not wait if you can snag a good price.

As for the poor drainage in backyard, is there any sign that water is actually entering the basement after a heavy rain?
If not, then that is one project that could be put off without chancing some damage to the dwelling.

I think, if you plan/prioritize these home projects very carefully you can fund them without having to reduce any of your retirement contributions.

Congratulations on becoming a Happy HomeOwner :wink:

tipee
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by tipee » Sat Apr 01, 2017 7:51 pm

What was your down payment? E.g. how much equity do you have in the home? I ask because an option would be to take out a HELOC to pay for the projects, which should allow you to keep maxing out your 401k, rIRA, etc.
Jeff7 wrote: Somewhat related: Is there such a thing as saving "too much," and not having enough to reasonably enjoy the present, in addition to not shooting yourself in your future foot?
Specifically to the question about about saving too much... it's a question I've pondered myself. Not that I am in that position yet, but where's the balance between enjoying life in the present and saving for retirement/college? Wife and I have discussed adding on to the house so we can get a bigger master bath and walk-in closet for our own enjoyment instead of worrying about resale value of the house 15 years from now. Still haven't decided yet, as it will cost a hefty sum, but it does come up every few weeks.

drawpoker
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Location: Delmarva

Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by drawpoker » Sat Apr 01, 2017 8:19 pm

tipee wrote:
Jeff7 wrote: Somewhat related: Is there such a thing as saving "too much," and not having enough to reasonably enjoy the present, in addition to not shooting yourself in your future foot?
Specifically to the question about about saving too much... it's a question I've pondered myself.
Yes, it is possible. But I think the danger is primarily with very elderly people.

At risk of going OT, can tell you this - a very elderly but also very high net-worth relative of mine asked me what to do about the bad odor coming from garbage disposal.
Told her to buy a few lemons, keep them on hand, cut up one into small sections, put down the disposal, turn it on, and let it run for 20-30 seconds. End of smelly problem.

Know what? She was aghast at this suggestion, proclaimed "I am not buying lemons and then throw them away!
What's wrong with you, are you nuts!"

Safe to say, isn't it, this was someone who was not "reasonably enjoying the present" and also shooting herself in present foot. :P

Leemiller
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Leemiller » Sat Apr 01, 2017 8:47 pm

I'd fix the house since anything with potential water damage makes me squeamish.

I hate to give up tax advantaged space but it seems to me that you can save to much especially in retirement accounts since at some point what you have saved will throw off more income than you will need/ expect to spend. If you want to retire early then the money needs to be saved in taxable accounts and it may be harder to over-save. I guess it depends on your goals.

I've never heard of a backflow preventer. What was the cost on that? Will be googling that since our neighbor had a backflow recently. It did not sound like an experience I'd like to have ...

Jeff7
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Sat Apr 01, 2017 9:29 pm

drawpoker wrote:Being a fellow homeowner - :) am just going to address the issues you raised on the house itself. Not the financial decisions on how to spend your money.

First off - if there was a sewer backup shortly after you moved in - well, if it was cleared out properly by a proff. service like RotoRooter or a competent local plumber, that is one worry (expense) you can put off for a while. Like years, maybe. Once that line has gotten a thorough reaming out from the house to the street it will take a while for another blockage to occur.
Unless - it was due to tree roots ? Whoever did the cleanout should be able to tell you the cause. When this happened to me nearly 4 years ago, the RotoRooter guy said it was a t.p. clog in one of the turns. He said they know this because if it was tree roots, the block comes back to the machine, not out in the other direction.
Unfortunately, the people who did the cleanout didn't find any clogs or blockages.
Shortly after I called, the water level stopped rising and started dropping. By the time they got there, almost all of it had drained back out of the basement's floor drain.
The city had a truck out the next day, but it was next door, and it was a problem with the storm drains, which I understand isn't connected to the sewage system. But they did eventually send out a truck for the sewage to check out the lines in the area. Unfortunately, I was out of town at the time and couldn't be there. They said there were tree roots further down the line that they cleared out. And I'm sure they're underfunded in general, so this could happen again. (They offered to show me the video they took of the lines. It's on a VHS tape in their office. VHS.) The simple fact that it can happen at all leaves me unwilling to put anything of value in the basement until the backflow preventer's installed.

The roof: that is more worrisome. As you say, it could be something as minor as a few shingles becoming loosened due to high winds. $10 of roofing cement, end of problem. Or, since you live in a snowy winter clime, if you are seeing the ceiling stains around the corners of either front or back rooms, it could be due to ice damming. If so, with summer coming, that is something you won't have to worry about for another 6-7 months.
The home inspector said that it looked like it'd be good for another 10 years or so. There are no ceiling stains either. There was a slow drip coming from above one iterior doorway. Otherwise, the only way I knew there were leaks was poking my head into the attic and having a listen when it was raining.
I'll also add that I know squat about home repair. My dad would usually hire someone to take care of things because he also didn't know how to do any of that. At least I've got the Internet now, but there's always the possibility of getting poor or incomplete information there. ("$10 of roofing cement" - At least as of this minute, I wouldn't even know what to do with it if I had any.)

So, its important to identify just what is cause of the leaks. If you are physically able to do so, climb up into the attic and inspect the rafters, joists, etc. to find dampness. Remember, water runs downward so where you are seeing the stains on the ceilings is not necessarily where the water is entering. (Unless it is ice damming) That is why you (or someone) has to go up into the attic and inspect.
Climbing all the way up there is the next step for me. I didn't have a ladder until now that was able to reach high enough. The good news is that I know exactly where I have to go once I'm up there.

The doors/older poorly insulted windows problem can probably wait until the start of another winter - but - one caveat to that - Anderson and the other big quality window and door people will be having sales going on in the off-season. If you wait until cold weather you will probably have to pay top price to replace these items. So, my advice would be to do some pricing starting around Memorial Day, and not wait if you can snag a good price.

As for the poor drainage in backyard, is there any sign that water is actually entering the basement after a heavy rain?
If not, then that is one project that could be put off without chancing some damage to the dwelling.
Every time it's rained heavily since I got the house, there's been water seeping through the bottom of the basement walls, so yes, definite signs. :wink: The bottom of the basement wall is at least 6ft below ground level.
Doors: Thank you for the tip. I've never needed to buy a door before.

I think, if you plan/prioritize these home projects very carefully you can fund them without having to reduce any of your retirement contributions.

Congratulations on becoming a Happy HomeOwner :wink:
I put off buying a home for years because of this sort of thing, and plenty of bad stuff is happening and it's not even a full year yet.
My priority for upgrades and modifications is for longevity and reduction of maintenance. I don't like going cheap and having something that'll break or otherwise fail in short order.

We'll see what the roofing situation looks like. Hopefully it's not horrendous.
The back yard: I don't know what that'll entail. I might see about a landscaping consultant, or maybe just get a price estimate for professional installation. But the idea of getting to use a backhoe again is kind of fun.

Oh yeah, the yard has a fence that was poorly installed, apparently. The windstorms helped expose the poor post bases (cement on only the first inch or two, nothing below that), and some of the panels might actually be rotting, which I also didn't notice when buying. That's more of a home-value thing though. I like the idea of having a privacy fence, but it's not essential.


tipee wrote:What was your down payment? E.g. how much equity do you have in the home? I ask because an option would be to take out a HELOC to pay for the projects, which should allow you to keep maxing out your 401k, rIRA, etc.
Down payment wasn't 20%, so I've got monthly PMI of about $50, and I'm still not up to 20%.
Closing costs are pathetically absurd, almost $7k in total. If that was less, I would've been able to make 20%. I honestly wasn't expecting that kind of outlandish expense for paperwork.
I'm also in a region that reportedly has some of the highest property taxes in the state. (I did submit a form for some kind of "homestead exemption," which is supposed to be good for up to $1k savings if I understand it correctly.) Maybe some of it helps pay for the constant snow plowing and salting that goes on for what feels like half of the year.

Specifically to the question about about saving too much... it's a question I've pondered myself. Not that I am in that position yet, but where's the balance between enjoying life in the present and saving for retirement/college? Wife and I have discussed adding on to the house so we can get a bigger master bath and walk-in closet for our own enjoyment instead of worrying about resale value of the house 15 years from now. Still haven't decided yet, as it will cost a hefty sum, but it does come up every few weeks.
It's not an easy question to quantify either. "I saved enough to retire at age 50, but died of cancer/heart disease at age 49. So glad I jammed so much income into retirement savings." It's not a probable outcome, but it's certainly a possible one.
The things I want done first feel more like infrastructure upgrades, other than the fence. Doors: That's energy savings, summer or winter. Back yard drainage and roof: Protecting the basic integrity of the home itself. The roof is mandatory. The drainage I think should come next, then the entry doors.
Then also the nagging and persistent urge to push leftover money into extra principal payments on the mortgage. I don't like debt.
I guess that's the other good news: The mortgage is the only debt I have.


Leemiller wrote:I'd fix the house since anything with potential water damage makes me squeamish.
Same here. I'm not a fan of water much these days. Frozen driving nightmare in the winter, home-invader in the spring and summer.
I hate to give up tax advantaged space but it seems to me that you can save to much especially in retirement accounts since at some point what you have saved will throw off more income than you will need/ expect to spend. If you want to retire early then the money needs to be saved in taxable accounts and it may be harder to over-save. I guess it depends on your goals.
I've never been good at setting goals, personal or financial. I don't know how to determine what a reasonable goal is, and I'm not good at separating what I want from what friends and family think I should want.
So how did I decide how much to contribute to retirement funding? The legal maximum set the amount for me. Is it enough? Is it too much? I don't know, because I don't know what goal to have. So I'm saving it with the intention of using it sometime for something.
I also don't like giving up tax-advantaged space. Once it's gone, it's gone. And I didn't start investing until sometime around age 25. Until I learned about index funds, I regarded stocks and investing as little more than gambling, and the only kinds of bonds I knew of were savings bonds and molecular bonds :?. Index stock funds still of course carry risk, but not quite like picking individual company stocks. My introduction to mutual fund investing was a gift of a tech-stock-heavy mutual fund, just about a month the tech bubble's implosion around 15 years ago. In the year after getting that fund, it shed an enormous amount of value. I was low on money during college about 10 years afterward and cashed it in for about 60% of its original value. That kind of soured me on investing and mutual funds right from the start. So anyway, I already lost out on years of 401k and IRA investing space because I didn't trust or understand investing; this isn't a decision I'm taking lightly.

I've never heard of a backflow preventer. What was the cost on that? Will be googling that since our neighbor had a backflow recently. It did not sound like an experience I'd like to have ...
I don't know the cost yet. I want to say a thousand dollars for installation? I'm remembering stuff from 2+ months ago now, so it's going to be a bit fuzzy. It would probably also depend on how much digging needs to happen to get at the pipes. I haven't gotten a formal quote yet.
Reading about it, sewer backups look like they can get really nasty. In my case, I thought it was water coming in from 50F rainfall on top of over a foot of snow. (Yeah, outright white-out blizzard conditions followed by heavy spring-like rainfall. I was worried the roof would collapse rather than leak. At that time, it did neither.)
It was just slightly cloudy water, like what happened at my parents' house when their basement would get water in it, which seeped in through cracks in the foundation. I didn't know it was sewer water until the plumbers told me what it was.
Last edited by Jeff7 on Sat Apr 01, 2017 10:08 pm, edited 1 time in total.

drawpoker
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by drawpoker » Sat Apr 01, 2017 10:05 pm

Jeff7 wrote:
....I'm also in a region that reportedly has some of the highest property taxes in the state. (I did submit a form for some kind of "homestead exemption," which is supposed to be good for up to $1k savings if I understand it correctly.)
Usually, the homestead exemption only defers future property tax increases, not really is "savings"

Check into it closely. Unless you live in some really weird place, a homestead exemption generally means that as long as the dwelling is your primary residence, any increase in the property tax rate has to be phased in gradually, like in 2, 3, 4, or 5 year terms. Not all at once.
So, if your jurisdiction has a big tax hike (usually due to some very rising valuations) people with the exemption are not hit with the entire new property tax bill; it is phased in under whatever terms are written into the homestead exemption.

bloom2708
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by bloom2708 » Sun Apr 02, 2017 8:35 am

"I did have a home inspection, and nothing critically-wrong was discovered."

Sewer backup issues, leaking roof, single pane windows, water drainage issues, doors that don't close properly.

Who did your home inspection? The purchase is done, but it sounds like you fell in the "I love this house" trap. This is home ownership. All of these issues can/will/do pop up for home owners. You get the joy of having them pop up as a new owner.

I do not recommend sacrificing your retirement savings, but it may come to that. If maxing out your 401k and Roth leaves you with little margin for near term spending/saving, then you will have to lower your 401k amount.

Make a list, address the critical ones first (roof). See what you can do yourself and what has to be hired out. The "American Dream" of home ownership is tapping you on the shoulder. :annoyed
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend very little time here! | 3. You have no control <--spend no time here

Jeff7
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Sun Apr 02, 2017 10:52 am

bloom2708 wrote:"I did have a home inspection, and nothing critically-wrong was discovered."

Sewer backup issues, leaking roof, single pane windows, water drainage issues, doors that don't close properly.

Who did your home inspection? The purchase is done, but it sounds like you fell in the "I love this house" trap. This is home ownership. All of these issues can/will/do pop up for home owners. You get the joy of having them pop up as a new owner.
Before buying the house: Didn't know about the sewer backup issue (or even much about the concept of a sewer backup - country mouse in the city), didn't know about the leaking roof (it might still have been recent damage from storms), didn't know about the water drainage issue since the ground was frozen. I've since dug into the soil, and it looks more like good-quality topsoil with clay beneath it, rather than the rocky fill I'd seen before.
It was a local home inspection company, been in business since 1990.
There was probably some shading of my own mind in this: A lot of the things I'm seeing that are wrong are things I would never put up with myself, so I guess I assumed that other people would have reasonably similar standards, which was admittedly a stupid thing to even begin to consider thinking about believing. My tendency toward "good enough is not good enough" causes tension at work sometimes; it's also one reason that they like to keep me around.
I do not recommend sacrificing your retirement savings, but it may come to that. If maxing out your 401k and Roth leaves you with little margin for near term spending/saving, then you will have to lower your 401k amount.

Make a list, address the critical ones first (roof). See what you can do yourself and what has to be hired out. The "American Dream" of home ownership is tapping you on the shoulder. :annoyed
Roof is of course a mandatory fix-it, and soon.
Drainage is next, since that can also cause long-term damage from freeze/thaw of water in the concrete wall. There's a rudimentary curtain drain outside, but it's too shallow to do much good. I don't know what the total cost of that would be. My parents had a similar drain put in, but they don't know where the paperwork is from that; it was probably done 10 years ago. The logistics might be a challenge too, like having enough time off from work to either be available when contractors are doing work, or else for machine rental and doing it myself.

This was partly a matter of "I want to get out of my lousy apartment, I don't like packing and moving a lot, and this house is in an adequate location at an acceptable price. Fine, it'll do." Not "in love," but "It's available, it's right here. Fine, whatever." Along the lines of not being able to set goals, I also don't know what my ideal house would look like.
The apartment I was in was my first apartment, moved into during college. It was a building shared with a convenience store, so I had truck noise, traffic noise, high utility bills, and the smell of a deli's dumpster first thing in the morning. But hey, the rent never increased in all the years I was there, so that was nice.

I'd had buying a house on my mind for years, but kept hearing differing thoughts ranging from "It's a great investment, you can build home equity then! Owning real estate is the gateway to paradise!" to "Owning a house is horrible. Everything breaks constantly, and it's nothing but a borderline scam and a black hole for money."
But if you rent, those expenses still exist. It's just that the landlord handles the logistics for them, plus a markup to make a profit.
In my mind, a house is a very fancy box that people live in, and as a financial tool, its value can be volatile, and it is an illiquid asset that cannot be transported. I suppose the autonomy a house offers is the main draw, if you ignore the fact that you're also working for the house now.


I was thinking about this thread a bit, and it probably is really more of a lightly-veiled "Am I so focused on saving that I'm not using enough to enjoy the present?" question. I can check around the forums and wiki for input on how to go about setting financial goals.

PaulF
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by PaulF » Tue Apr 04, 2017 9:18 am

Congrats on the home. I have done many of the things you are contemplating (and more) over a 20-year period, rather than all up front.
Jeff7 wrote: I was thinking about this thread a bit, and it probably is really more of a lightly-veiled "Am I so focused on saving that I'm not using enough to enjoy the present?" question. I can check around the forums and wiki for input on how to go about setting financial goals.
I think you are correct. I struggle with this, too. I saved a similar fraction of my earnings, but without putting any real thought into it. It just seemed like what you were supposed to do!

The only thing I would like to add, to help you put some thought into it, is to point out the math of your savings rate. By my calculations, a 35% savings rate (and assuming a typical SS rate of replacement), should allow you to retire with the same standard of living after about 22 years of working. (Without SS, turns into ~25 years.) A similar exercise can be found on Mr. Money Mustache here: http://www.mrmoneymustache.com/2012/01/ ... etirement/. Although it is a little less conservative than Bogleheads, you could also read this excellent JFPA article: http://strike.coloradolinux.com/~sjg/FP ... Ratios.pdf

My point is that you should probably ask yourself: When do I want to retire? Then choose a savings rate that will get you there. (Again, I did NOT do this. I blundered into my potential early retirement. I still ask myself if I oversaved....)

fittan
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by fittan » Tue Apr 04, 2017 10:07 am

Jeff,
Few random thoughts/suggestions:

1) Do you have a sump pump in your house? If not I would suggest installing one since you're having water/drainage issue.

2) Regarding your 401K match...Will the company pay up to 8% (you contributing 16%) or 4% (you contributing 8%)? 50% match is very generous, just wanted to make sure you're not leaving any money on the table.

ysette9
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by ysette9 » Tue Apr 04, 2017 1:48 pm

Somewhat related: Is there such a thing as saving "too much," and not having enough to reasonably enjoy the present, in addition to not shooting yourself in your future foot?
Ultimately this is a question that only you can answer. I found it really helpful to have a "money date" with my husband where we set aside the actual money and talked instead about our big goals and dreams. What really makes us happy? How do we want to spend our time? If money were not an issue, what would we be doing with our lives? Ultimately money is just a tool to help you get what you want, and hopefully you spend that wisely on things/experiences that bring you joy. The key is to be mindful.

The other side of that is that each day you work is a day of your life you don't get back. I think we on these types of forums are all skilled at delayed gratification. The thing is, there is no prize at the end for dying with the biggest account balance or having the nicest house. I'm sure you've seen those articles about how old people in hospice are interviewed about their biggest regrets in life. They all share the theme of wishing they had more fun/spent more time with friends and family whereas very few wished they had worked harder/more or bought more toys.
Let us go then, you and I, when the evening is spread out against the sky, like a patient etherized upon a table.

iamlucky13
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by iamlucky13 » Tue Apr 04, 2017 3:36 pm

Fix the roof sooner rather than later. I'd probably even say take a 401k loan if you have to (although I'd prefer to keep enough in a taxable account for this kind of "emergency" expense). It will rain again, and water will damage underlying materials over time. Your 6 month savings should be able to cover this, perhaps even if it requires re-roofing. It sounds like your can very safely reduce your 401K contributions temporarily to rebuild your savings more quickly.

I would also do the sewer backflow preventer sooner rather than later. The risk of another backflow is presumably not high, but I'm sure you really just don't want to deal with that again.

The rest of the items on your list sounds like they can safely wait for your non-retirement savings to comfortably accommodate them.

Your retirement savings rate sounds great. Just to be sure, I'd advocate making a spreadsheet that projects your savings and returns out to your desired retirement age and then withdrawals through your hoped for life expectancy. If that indicates you can still easily meet your retirement goals with a lower contribution, and there are other things you'd like to spend the money on in the near term, a reduction in your contributions seems safe.

If you do reduce contributions, I'd reduce the 401k as long as it doesn't affect your company match. Tax-deferral vs tax-free growth is a bit of a guess as to what you think your tax rate will be in retirement compared to now. Being mid-career and in the 25% bracket myself, my default guess is I could easily go either way, but when I look at the magnitude of revenue change that would be required to resolve our federal deficit, it seems to me my tax rate is more likely to be higher in the future than lower.

Also, that 0.55% fee on your 401k is a non-trivial drag it sounds like you can avoid in your IRA.

Easy Rhino
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Easy Rhino » Tue Apr 04, 2017 4:10 pm

haven't had a chance to read all responses, but we bought an old house a few years ago and I sympathize.

The "too much" question also depends on how much you already have saved up, not just your savings rate. your savings rate is high. If it's been high for a long time, you might have quite a formidable nest egg. you could try running some projections (firecalc maybe?) to see what kind of shape your end.

I would recommend fixing any active leaks first.

The seepage in the basement sounds bad. but I live in an incredibly dry area, and don't have a basement, so I don't know what "normal" is in your area.

Jeff7
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Sat Apr 15, 2017 8:29 pm

PaulF wrote:Congrats on the home. I have done many of the things you are contemplating (and more) over a 20-year period, rather than all up front.
Jeff7 wrote: I was thinking about this thread a bit, and it probably is really more of a lightly-veiled "Am I so focused on saving that I'm not using enough to enjoy the present?" question. I can check around the forums and wiki for input on how to go about setting financial goals.
I think you are correct. I struggle with this, too. I saved a similar fraction of my earnings, but without putting any real thought into it. It just seemed like what you were supposed to do!

The only thing I would like to add, to help you put some thought into it, is to point out the math of your savings rate. By my calculations, a 35% savings rate (and assuming a typical SS rate of replacement), should allow you to retire with the same standard of living after about 22 years of working. (Without SS, turns into ~25 years.) A similar exercise can be found on Mr. Money Mustache here: http://www.mrmoneymustache.com/2012/01/ ... etirement/. Although it is a little less conservative than Bogleheads, you could also read this excellent JFPA article: http://strike.coloradolinux.com/~sjg/FP ... Ratios.pdf

My point is that you should probably ask yourself: When do I want to retire? Then choose a savings rate that will get you there. (Again, I did NOT do this. I blundered into my potential early retirement. I still ask myself if I oversaved....)
I tried out the networthify.com calculator, but I'm getting some weird behavior from it. 4% withdrawal rate: I can retire in 14.5 years. 2% withdrawal rate: I can retire in 24.3 years? So if I take out less, I have to work longer? If I make the withdrawal rate 23%, it says I can retire right now.
Another calculator says that if I want to retire in 25 years at 4% withdrawal rate, I'd have to save 64% of gross pay. ....ok? The estimated/expected inflation rate can really skew things too.
When to retire? Don't know, that's into the "I don't know how to set goals" thing, and honestly a bit scary to think about being that much older. If ever do end up married, that could change things drastically too. Changes to health can also easily throw a wrench into everything.


fittan wrote:Jeff,
Few random thoughts/suggestions:

1) Do you have a sump pump in your house? If not I would suggest installing one since you're having water/drainage issue.

2) Regarding your 401K match...Will the company pay up to 8% (you contributing 16%) or 4% (you contributing 8%)? 50% match is very generous, just wanted to make sure you're not leaving any money on the table.
1) No sump pump. The basement floor is graded and has a floor drain, which is conveniently located near the back wall, which is where the water is seeping in, so the trickles always just go right down the drain.
2) The latter: Company would pay 4% with me contributing 8%, and there's rumor that those numbers will increase again. I'm maxing out the 401k, so I'm not missing any of the match. Instant 50% returns are indeed tough to find anywhere else.


ysette9 wrote:
Somewhat related: Is there such a thing as saving "too much," and not having enough to reasonably enjoy the present, in addition to not shooting yourself in your future foot?
Ultimately this is a question that only you can answer. I found it really helpful to have a "money date" with my husband where we set aside the actual money and talked instead about our big goals and dreams. What really makes us happy? How do we want to spend our time? If money were not an issue, what would we be doing with our lives? Ultimately money is just a tool to help you get what you want, and hopefully you spend that wisely on things/experiences that bring you joy. The key is to be mindful.

The other side of that is that each day you work is a day of your life you don't get back. I think we on these types of forums are all skilled at delayed gratification. The thing is, there is no prize at the end for dying with the biggest account balance or having the nicest house.
That calculator link above was nifty.
I just need a calculator on how to determine rational and reasonable goal-setting. :happy :?
"If money were not an issue, what would I be doing with my life?" I....actually don't think I have an answer for that. But that issue goes a bit beyond a financial forum.

I'm sure you've seen those articles about how old people in hospice are interviewed about their biggest regrets in life. They all share the theme of wishing they had more fun/spent more time with friends and family whereas very few wished they had worked harder/more or bought more toys.
Possible bias though: Aren't the people who are in hospice care going to be the ones who had enough money to afford it? One's financial situation can easily color both worldview and memories.


iamlucky13 wrote:Fix the roof sooner rather than later. I'd probably even say take a 401k loan if you have to (although I'd prefer to keep enough in a taxable account for this kind of "emergency" expense). It will rain again, and water will damage underlying materials over time. Your 6 month savings should be able to cover this, perhaps even if it requires re-roofing. It sounds like your can very safely reduce your 401K contributions temporarily to rebuild your savings more quickly.
The roof work is done already. That was (only?) several hundred dollars, and yes, that was a no-compromise "has to be done, and soon" thing. It's just more money from the pile, that's all. The overall health of the roof was reported as good. The ridge vents were reseated and reshingled, the chimney base was redone, and they redid the boots and flashing on anything else poking through up there.


I would also do the sewer backflow preventer sooner rather than later. The risk of another backflow is presumably not high, but I'm sure you really just don't want to deal with that again.
I do need to get an estimate. I don't even know if I've got cast-iron pipes (sounds like a pain to work on) or PVC.
There's also the option to add an insurance rider, for some cost, to deal with some of the aftermath. I don't consider that to be a proper solution either though. (I'm still, still astounded that "sewer backup" like this is even a thing that is allowed to happen by any building standards, and that it seems to be such a regular and even "accepted" occurrence in cities. "Yup, sometimes the sewers flow backwards. But hey, what're ya gonna do? It just happens." :shock: )
What worried me about that is that there's no other way out for a severe backup except for it to fill the basement to the brim, and start flowing out the windows near the basement ceiling, assuming it even can get that bad.


The rest of the items on your list sounds like they can safely wait for your non-retirement savings to comfortably accommodate them.

Your retirement savings rate sounds great. Just to be sure, I'd advocate making a spreadsheet that projects your savings and returns out to your desired retirement age and then withdrawals through your hoped for life expectancy. If that indicates you can still easily meet your retirement goals with a lower contribution, and there are other things you'd like to spend the money on in the near term, a reduction in your contributions seems safe.

If you do reduce contributions, I'd reduce the 401k as long as it doesn't affect your company match. Tax-deferral vs tax-free growth is a bit of a guess as to what you think your tax rate will be in retirement compared to now. Being mid-career and in the 25% bracket myself, my default guess is I could easily go either way, but when I look at the magnitude of revenue change that would be required to resolve our federal deficit, it seems to me my tax rate is more likely to be higher in the future than lower.
No argument there on the company match. I don't like the idea of giving up tax-advantaged space at all.


Also, that 0.55% fee on your 401k is a non-trivial drag it sounds like you can avoid in your IRA.
I'd honestly never even considered the possibility of retiring early. (And who knows what the "retirement age" might be in 20+ years.) I just assumed 65 years, and assumed to start putting what I could into retirement plans once my student loans were repaid; that took <3 years to do, but I also didn't have the cost of a house then either. I started out with the 401k with enough to get the company match, then figured I'd just up it to the full yearly max, just because I could, rather than because of a specific goal.

0.55% wrap fee: Yes, it's not much, especially when compared to the 1%+ ERs on the previous plan's funds. But it's still 0.55% that I'd rather keep myself :wink:, especially since it seems to help pay for people in suits to come out every year to buy everyone lunch, give a sales pitch, and hand out "free" stationery that we're effectively paying for. But at least we've got very inexpensive index fund options now, which is a nice improvement.


Easy Rhino wrote:haven't had a chance to read all responses, but we bought an old house a few years ago and I sympathize.

The "too much" question also depends on how much you already have saved up, not just your savings rate. your savings rate is high. If it's been high for a long time, you might have quite a formidable nest egg. you could try running some projections (firecalc maybe?) to see what kind of shape your end.
That rate's not been that way for long. I only really started properly investing at roughly age 30. Until then, I regarded the stock market as little more than a place for gamblers, and fully expected I'd be working the rest of my life, maybe until health problems forced me onto Social Security; after "deciding" that, I hadn't given it much more thought. My first foray into investing was a gift of a tech-stock-heavy mutual fund from a relative, bought near the NASDAQ's peak in early 2000. Over the next 2 years, I watched the fund shed more than half of its original value. My next venture into investing was starting my 401k, but that was right around the 2009 recession, so for the first 1-2 years of that I stared down constant negative return rates and wondered 1) What was I doing wrong? 2) Maybe I'm reading it wrong. Is a negative return good, like a low number in a golf score? 3) If this just keeps losing money and there's no safe option for investing, what's the point of a 401k anyway?
So initially, I only put in the bare minimum to get the match, but still watched a good bit of its value vanish into the ether. The fund expense ratios at the time were >1.5%, too. The highest was 1.89%.
In late 2012, I joined this forum and started learning about investing the Bogleheads way. On the plus side, in that time I've managed to accumulate about $130k in retirement accounts (at age 35 though).


I would recommend fixing any active leaks first. [Done.]

The seepage in the basement sounds bad. but I live in an incredibly dry area, and don't have a basement, so I don't know what "normal" is in your area.
Parents' house: Every time it rained for a several days straight, maybe every 5 years or so, there was about 1-2" of water in the entire basement, up until it was deep enough to flow out the back door. That was with a sump pump, which would be running almost continuously when that happened. But water came in through every crack in the floor and the walls. After probably 17 years in that house, a good drainage trench was finally installed.
What I have now seems like a cakewalk compared to that. It's a trickle, and it goes right down the drain.
Last edited by Jeff7 on Sat Apr 15, 2017 8:58 pm, edited 1 time in total.

ThreeBears
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by ThreeBears » Sat Apr 15, 2017 8:52 pm

-The hydrostatic pressure from the water can cause the basement wall to crack, which can cause structural problems. Don't ask how I know. Are you sure it's flat in the back yard and not a mild slope towards the house?

I tried a retainment wall and it has helped. In my scenario, the house is on a hill, the water runs towards it.

Jeff7
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Sat Apr 15, 2017 9:05 pm

ThreeBears wrote:-The hydrostatic pressure from the water can cause the basement wall to crack, which can cause structural problems. Don't ask how I know. Are you sure it's flat in the back yard and not a mild slope towards the house?

I tried a retainment wall and it has helped. In my scenario, the house is on a hill, the water runs towards it.
Mild downward slope, yes. I'd guess a foot of elevation change over maybe 40-50ft from the back fence down to the house. The front yard is higher than the street, so that water has somewhere to go.
I guess "flat" was a relative assessment: Again, versus my parents' yard, with not a square foot of flat terrain to be found there. I could walk from one end of my own yard to the other without feeling like I was hiking the face of a steep hill, so I called it flat.

I knew about the problem of water seeping in and freezing and causing damage, so that's why I placed some priority on mitigating that issue. I didn't think about the pressure issue. (Yet another astounding thing to me: House and yard construction that doesn't seem to adequately account for the presence of water outside.)

ThreeBears
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by ThreeBears » Sat Apr 15, 2017 10:12 pm

Jeff7 wrote: I knew about the problem of water seeping in and freezing and causing damage, so that's why I placed some priority on mitigating that issue. I didn't think about the pressure issue. (Yet another astounding thing to me: House and yard construction that doesn't seem to adequately account for the presence of water outside.)
I would considering hiring a landscaping guy. I did. But, find one who focuses on water (and not just on making the yard pretty). The drain idea you have may not be the best idea. Maybe you need to re-grade the yard or get a retaining wall.

Also, can you see the basement wall where the water pushes against or is it behind white wall?

Minty
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Minty » Sat Apr 15, 2017 11:00 pm

I would be concerned if the soil next to the foundation was continuously wet. That is a problem I would solve before saving for retirement.
Core Four with nominal bonds and TIPS.

Jeff7
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by Jeff7 » Mon Apr 24, 2017 11:48 am

ThreeBears wrote:I would considering hiring a landscaping guy. I did. But, find one who focuses on water (and not just on making the yard pretty). The drain idea you have may not be the best idea. Maybe you need to re-grade the yard or get a retaining wall.
This company does multiple types of work, and includes landscaping, drainage systems, and basement waterproofing on their list of specialties.
Also, can you see the basement wall where the water pushes against or is it behind white wall?
You mean inside the basement?
If so, it's all been painted by the previous owner with Drylok or something similar. All I can see is the spots where the water gets through tiny holes in the paint.
Outside that wall is a cement patio which is well-caulked at the house/patio seam, so the water is getting to the wall underground and beneath the patio.

ThreeBears
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Re: New home expenses versus a high (overly-high?) savings & investment rate

Post by ThreeBears » Tue May 02, 2017 7:21 pm

I had a [hill] that encouraged water against my back wall. It caused the cement between the cement blocks to crumble.

I hired a landscaper to put a retaining wall in front of the deck that was against that side of the house.

it seems to have worked well.

I don't know your situation. But, hydro-static pressure can cause structural issues. Good luck!

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