# percent of income and assets for housing



## Aurora (Sep 8, 2016)

I have read somewhere that we should spend no more than about 40% of our monthly income and assets on renting or condo, etc per month.

So 60% of your monthly income and assets would be used for other purposes or saved. This depends on how long
you will be living there, of course.

True? Is this what you do?


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## Butterfly (Sep 8, 2016)

I always heard no more than 1/3.


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## rkunsaw (Sep 9, 2016)

By the time we become seniors most people have their houses paid off or at least well on the way. Your question would be more appropriate for young people renting or buying their first house.


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## Shalimar (Sep 9, 2016)

I wish most seniors could own their homes. Sadly, many do not--not out of choice. From what I understand, 30-40% would be about right Aurora. Three of my friends do just that.


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## Aurora (Sep 9, 2016)

Thanks. What would you say to 45% of income and assets. That is probably the only way I can afford to move to a much nicer,
larger apartment in my ideal destination. Assuming that the rent does not rise too much, expenses stay the same.
Also depends on how long I or anyone lives --there--or anywhere. About a third of my money is in quality stocks--a question!
I need to make a decision very soon.


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## bluebreezes (Sep 9, 2016)

Many apartments/landlords now require a minimum of three times the rent as your verifiable income. Of course, that's not true for all landlords everywhere, but when I scoping out apartments in a large region of the US this spring, that's the standard I saw.


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## Lon (Sep 9, 2016)

The cost of my housing is 22% of my monthly income.


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## Butterfly (Sep 9, 2016)

I've always been very cautious financially and have worked very hard at not painting myself into a corner (and have succeeded so far).  I would avoid like the plague getting so much of my income tied up in housing that I had no wiggle room in having money for anything else.  And, when you figure out your housing expenses, be sure to add in realistic estimates for utilities, phone, internet, etc.  Simply put, I wouldn't want to end up eating catfood so I could live in a fancy place.  

When you say income "and assets," are you contemplating depleting your assets (savings or whatever) for housing expenses?  I would try VERY hard not to do that, as you'll likely need those assets for other things as time goes on -- depending on age and circumstances, of course.  I mean, if I were 97 I wouldn't be as worried about it as I would be now, at 70.

Are you contemplating a move you MUST make for some reason?


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## Aurora (Sep 10, 2016)

I am NOT depleting my assets for housing. But I would need 40-45% of it all including most
of my stock portfolio if I stay there over 10 years. For over 7 years I am fine, but then
if I don't work or have more income, I start running out of money by 80 years old.Obviously,
the longer I or anyone lives in the same place, more of the assets are depleted.
 I have no other necessary payments now. My car is paid off.

I don't HAVE to move, but I have been planning this move for decades and I will be disappointed
if I don't...especially after telling everyone my plans. I can live indefinitely where I am in my
small suburb and actually save money, but I am so bored with my state and area in it.


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## Lethe200 (Sep 10, 2016)

Counting everything, including utilities, insurance, water, garbage: 8% of our net income.

If we were renting: approx 38-45% of our net income. Rents are high here and going higher due to demand.


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## rkunsaw (Sep 11, 2016)

The percentage could vary quite a bit depending on what goes with the apartment or condo.

Does the rent include utilities, maintenance, grounds upkeep, etc. ?  If paying 45% leaves you adequate amount to live on then you should be fine.


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## OneEyedDiva (Oct 15, 2016)

The latest I heard was 33 - 36%.  I believe the general rule for public housing is 30 -33T of income unless a person gets help with rent via vouchers or a program. The article I've included uses 30% but that was two years ago. And it says that 30% rule is really useless in the real world today. I bought a co-op apartment when I was 23 years old. Our complex has strived to keep our housing expenses as low as possible. Now that taxes have risen substantially, although our mortgage is paid off, we expect to pay the same or have to pay a little more.  My carrying charge (co-op terminology) is 16% of my net monthly income. Add the average utility bill and it is 19% of my net income.
http://www.bloomberg.com/news/articles/2014-07-17/housings-30-percent-of-income-rule-is-near-useless


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## mathjak107 (Oct 16, 2016)

it really depends where you live . in nyc and the tristate area it requires a bigger percentage of income to buy a place .

but that is not so bad ,in fact it is very good because in a way it is more of a forced savings .

most of those who relocate from high cost of living area's to cheapsville later on are in far better shape than locals are .

a 600k house that appreciates even 3% a year grows a whole lot more money than a 150k house appreciating the same 3% . high cost areas have higher salary's too. that means your social security check can be much bigger too when you relocate .  when we had the second home in the pocono's in pa transplants from high cost of living area's were far wealthier


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## Knight (Oct 17, 2016)

Is there really a magic percent that works? IMO far to many factors to try to come up with a percent that works for everyone. People that are employees not business owners I supose make up the largest portion of retirees. What their income is prior retiremment has a lot to do with what a senior will live on in retirement. Do they make enough to save? Invest? Get a 401k with company match? Forced out and have no health plan coverage after Cobra is exhausted? Live where there is a social safety net? Do they calculate the tax load, insurance needs, utility costs that will climb? Have they checked the acturial tables to best guess how long they will live? Have they done a BMI test to see if they are obese, or over weight? <---- The list of health issues that are attributed to those two is huge. We looked ahead and best guessed those and are right on target for what we expected. 

I don't know what percent we need since we have no mortgage on our new 3 bedroom rancher. No car payment on our 2016 Sonata with all the bells & whistles. We have auto deposits to our banking account from the various sources of income. If I live to be 128 years old I will exhaust one of my sources. The other sources will automatically be transferred to my wife. There is no way she will live long enough to exhaust even 1/3 of what will be available. We married a long time ago, I had a high school education, she got her GED. No money left to us we set goals and met them. Living well in retirement can be done.


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## mathjak107 (Oct 18, 2016)

it is always better to work from the expense side of things , not what you used to make prior .

for one thing we found we spend more being retired . with us time cost money and everything we seem to do ends up costing money. one thing we have plenty of in retirement is time .

not only do we spend more  these early years of retirement but if we tripled our income it still woudn't cover all the things on our wish list .

for many retirement is not just about bill paying , it is about time , the time do do all the things you wished you had the time to do .

there are also the wild cards of health and long term care as well as variables in markets ,rates and inflation .


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## OneEyedDiva (Nov 1, 2016)

Mathjak107: Relocating to a high cost area or staying in one because the salaries are higher may not work for those nearing or who are in retirement already. It's harder for Boomers and Seniors to find new jobs if they relocate (unless their current work is transferring them). This also doesn't work for people who are already collecting social security.


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## mathjak107 (Nov 1, 2016)

the advantage is living and working in high cost areas and then retiring in cheapsville , not the reverse


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## Aurora (Mar 9, 2017)

What do you think of allocating 60% of your assets for rent and utilities,phone..., instead of the customary 35%?

I spoke to a senior tax specialist who recommends l_ess than 35%, _when you figure cost of living. And assume that
the individual is 70 years old and projecting 9-10 years in future. Optimistically, the stock market (assuming you have stocks)
will rise at least 12% a year. I don't want to look at a chart now...am sick of worrying about this problem. I wonder if I should just "throw the
dice" and not worry about the future.


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## Butterfly (Mar 9, 2017)

I am no expert in this area, but speaking just as another senior, I most definitely would NOT allocate this much to rent, etc.  Of course I guess it would depend somewhat on what your income amounts to, but IMHO if you have that much committed to just living, any unexpected health problem or other unexpected event could really be a calamity.  Why do you feel the need to allocate so much to rent, etc.?


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## Knight (Mar 9, 2017)

Aurora said:


> What do you think of allocating 60% of your assets for rent and utilities,phone..., instead of the customary 35%?
> 
> I spoke to a senior tax specialist who recommends l_ess than 35%, _when you figure cost of living. And assume that
> the individual is 70 years old and projecting 9-10 years in future. Optimistically, the stock market (assuming you have stocks)
> ...



Sounds like a plan "Throw the Dice and not worry" 

How does homeless and hungry sound if the dice don't favor you? 

If the dice do favor you and you live past that 80 year time frame when you think you will not be doing well.  Do you hope society will take care of you?  

Big decision to make.  Bet you will remain in relatively good health, use a significant portion of what you have in the way of income and assets to move to a place you WANT so you won't be embarrassed by staying where you are.


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## OneEyedDiva (Mar 10, 2017)

rkunsaw said:


> By the time we become seniors most people have their houses paid off or at least well on the way. Your question would be more appropriate for young people renting or buying their first house.


Rkunsaw, there are lots of seniors who do not own their own homes and never will. You are in a blessed bunch if most you know do! Some of my online friends (and I'm on 4 networking sites) can hardly afford to pay their rents. Within the last 3 months, three of my friends were searching for apartments and saw places they liked but could not afford.

Aurora, to answer your question, like Butterfly I've always heard and read it should be no more than 1/3 of your income. I'm wondering if that 40% is the "new normal" to reflect the reality of rising rents. Public housing for seniors usually charge 1/3 of a person's income. Private senior housing can charge anywhere from a little to a lot more.


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## Shalimar (Mar 10, 2017)

Knight said:


> Sounds like a plan "Throw the Dice and not worry"
> 
> How does homeless and hungry sound if the dice don't favor you?
> 
> ...


Homeless and hungry? What a horrendous thought! Yes, society should take care of it's elderly if they are unable to do it themselves. Btw, why would she be embarrassed by staying where she is at some point?


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## Shalimar (Mar 10, 2017)

rkunsaw said:


> By the time we become seniors most people have their houses paid off or at least well on the way. Your question would be more appropriate for young people renting or buying their first house.


I wish that were true. Here on the island, even outside the city, an inexpensive house/or nice townhouse costs at least $300,000. Condo, $150,000 and up to buy. Rents aren't cheap unless you are in subsidised housing. Thank goodness for our healthcare. Seniors really benefit. Sixty five years old and up are eligible for an addition to their old age pension if they lack an alternate income. Roughly amounts to $1,450 per month. If one is paying rent in the city, that is a godsend.


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## Aunt Bea (Mar 10, 2017)

To me the question is 45-60 percent of what.  If you have substantial income and assets then I don't see it as a problem, if your income is low and your portfolio is small then I would think it is a very bad idea.

I try to live within my income and look at the conventional wisdom as a guide but not get hung up on it.  The percentages for individual budget items are only a guide and will vary greatly from one person to another.  If a person is frugal and doesn't maintain a car they can allocate a higher percentage of income to other things in life like housing, travel, etc... 

I would look at the amount you are currently spending for housing and compare that to  the amount you expect to pay in the new area, see if you have the  ability to comfortably cut other areas of your spending to make up the  difference.  Be brutally honest with yourself and if the answer is no  then I think you need to look at other options. 

Consider house/apartment sharing with one or more people to get a place to live with the amenities that your desire or moving to a cheaper area of the same city or state, etc...

Also as you become older you can look at slowly depleting your investment portfolio by a few percentage points each year to help keep pace with inflation.  I would not worry if I started to gradually spend down my portfolio when I hit my mid 80's or beyond.

No one size fits all answers exist, we all need to come up with our own plan.

Good luck!


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## Butterfly (Mar 10, 2017)

Aunt Bea said:


> To me the question is 45-60 percent of what.  If you have substantial income and assets then I don't see it as a problem, if your income is low and your portfolio is small then I would think it is a very bad idea.
> 
> I try to live within my income and look at the conventional wisdom as a guide but not get hung up on it.  The percentages for individual budget items are only a guide and will vary greatly from one person to another.  If a person is frugal and doesn't maintain a car they can allocate a higher percentage of income to other things in life like housing, travel, etc...
> 
> ...



I agree.  I wouldn't want to get locked in to something that leaves me in a situation where all I can afford to do is sit at home.  AND, how much is that rent going to go up over your projected lifetime?  My sister's rent goes up every year, and it is going to come to a point where she can no longer afford to live where she does.  I just feel it is important to leave ourselves some wiggle room, especially as we get older.


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## dpwspringer (Mar 11, 2017)

Aunt Bea said:


> To me the question is 45-60 percent of what.


I suspect that the lower your means, then the higher that percentage and when you get to 60 percent you are bad financial shape... real bad. Now there could be exceptions to that but I think they would be rare and considered outside the norm. How many grouping do we use for our disposable income and in what order do we list them as far as priority is concerned... housing, food, health, transportation, entertainment, charity, and what else?


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## mathjak107 (Mar 11, 2017)

Aunt Bea said:


> Also as you become older you can look at slowly depleting your investment portfolio by a few percentage points each year to help keep pace with inflation.  I would not worry if I started to gradually spend down my portfolio when I hit my mid 80's or beyond.
> 
> No one size fits all answers exist, we all need to come up with our own plan.
> 
> Good luck!



the problem is drawing down a portfolio late in life or early is really dependent on your draw rate and market sequences . the so called 4% rule assumes under worst case scenario conditions that you end 30 years with at least a buck left . so it isn't a case of just living off gains much of the time .

if the losing years are up front that portfolio is reduced day 1.

there can be a difference as much as 15 years given the same average return in how long the money lasts just based on the sequence the gains and losses come in . so we can't really know whether we wll be burning principal or gains early on .

this is our 3rd year in retirement and so far gains have not kept pace with spending so we are down a bit  principal wise .


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## Lon (Mar 11, 2017)

Percent of Monthly Income is significant but Percent of Assets is not.


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## Knight (Mar 11, 2017)

Shalimar said:


> Homeless and hungry? What a horrendous thought! Yes, society should take care of it's elderly if they are unable to do it themselves. Btw, why would she be embarrassed by staying where she is at some point?


No location of where Aurora lives so I wouldn't know what was possible for supporting a person without money. This web site seems pretty good at identifying the quantity of homeless http://www.pbs.org/now/shows/526/homeless-facts.html It ain't pretty. 


As for why would she be embarrassed. You would have to read her posts to understand that she wrote that she has told all her friends that she was moving and would feel uncomfortable if she didn't.  I took her concern for what others thought as being embarrassed.


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## Aurora (Mar 11, 2017)

Thanks for your replies. I want to move badly either south like to Florida or maybe Nashville. Denver looks too expensive now. 
M y general figure is about $3400 a month to spend for 9-10 years in future. This includes rent for a one bedroom, electric, phone,internet.
 the electric will be much higher in Florida because of the a/c running constantly..* I am very frugal* so there's nothing to cut from my modest lifestyle.I must then add auto insurance, gas, travel, dentistry (big for me), health maintenance.No cable TV. My retirement current income is about 2400. a month only but this rises a bit each year. Right now my rent is quite low so I actually save money. When I move my rent will rise by at least 35%. I will have to research more because I don't know much about where I am moving.


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## Butterfly (Mar 11, 2017)

Knight said:


> No location of where Aurora lives so I wouldn't know what was possible for supporting a person without money. This web site seems pretty good at identifying the quantity of homeless http://www.pbs.org/now/shows/526/homeless-facts.html It ain't pretty.
> 
> 
> As for why would she be embarrassed. You would have to read her posts to understand that she wrote that she has told all her friends that she was moving and would feel uncomfortable if she didn't.  I took her concern for what others thought as being embarrassed.



I'd just tell 'em all I changed my mind.  Nothing wrong with that, people do it all the time.  Friends would probably be glad she's staying.  Anyway, I wouldn't make a big financial commitment based on the fact that I'd told all my friends I was going to do it.


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## Butterfly (Mar 11, 2017)

Aurora said:


> Thanks for your replies. I want to move badly either south like to Florida or maybe Nashville. Denver looks too expensive now.
> M y general figure is about $3400 a month to spend for 9-10 years in future. This includes rent for a one bedroom, electric, phone,internet.
> the electric will be much higher in Florida because of the a/c running constantly..* I am very frugal* so there's nothing to cut from my modest lifestyle.I must then add auto insurance, gas, travel, dentistry (big for me), health maintenance.No cable TV. My retirement current income is about 2400. a month only but this rises a bit each year. Right now my rent is quite low so I actually save money. When I move my rent will rise by at least 35%. I will have to research more because I don't know much about where I am moving.



Aurora, I wouldn't make a commitment to move somewhere I didn't know much about.  Too often our idea of what life is like in a place has little or nothing to do with day to day reality.  Before I actually up and moved, I'd go stay there (like in a little apartment in the area you'd like to move to) for a few months and see how you really feel about the place, or at least make an extended visit there.  You don't want to wind up stuck in a place you hate because you've invested too much in it to leave.


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## Aunt Bea (Mar 11, 2017)

I agree, do as much research as possible on the internet and then go for a vacation to the area to check things out first hand.  Check out the subsidized senior citizen apartments in the area you are interested in and fill out an application to get your name on the waiting list.  I would need to visit an area several times before I made the decision to just pack up and leave.  Take your time and do your research, something will turn up!

Good luck!


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## OneEyedDiva (Mar 12, 2017)

Butterfly said:


> Aurora, I wouldn't make a commitment to move somewhere I didn't know much about.  Too often our idea of what life is like in a place has little or nothing to do with day to day reality.  Before I actually up and moved, I'd go stay there (like in a little apartment in the area you'd like to move to) for a few months and see how you really feel about the place, or at least make an extended visit there.  You don't want to wind up stuck in a place you hate because you've invested too much in it to leave.


That's an excellent idea Butterfly.


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## Victor (Apr 19, 2017)

What would you think of allocating 35% of my total assets, including stocks and other savings for my retirement in a warmer state, after I move
*AND* about 80% of my income which is from pensions, social sec and stock dividends? On my frugal budget, I could afford a $400 increase in
rent a month. I have very low rent now. Retired, No job.
After I reach 70 1/2 I must take money from my IRA (over 5000 a year.) There's nothing in my budget to cut! I'm tight.
 My recreation is almost zero, but I do go on vacations, alone.
I am depressed of staying put for the rest of my life here in my suburban apartment in midwest. It's a very old rut.
 No one wants to encourage me or talk about it.
What say you?


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## Lon (Apr 19, 2017)

Victor said:


> What would you think of allocating 35% of my total assets, including stocks and other savings for my retirement in a warmer state, after I move
> *AND* about 80% of my income which is from pensions, social sec and stock dividends? On my frugal budget, I could afford a $400 increase in
> rent a month. I have very low rent now. Retired, No job.
> After I reach 70 1/2 I must take money from my IRA (over 5000 a year.) There's nothing in my budget to cut! I'm tight.
> ...



I say do whatever will make you happy Victor and only you are the one that can answer that.


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## Butterfly (Apr 20, 2017)

Just be careful not to paint yourself into a corner where you have no wiggle room if something goes haywire -- like if you need help at home because of an illness or accident and can't afford to pay for it because you've got all your $$$ committed to rent.  OR if you got into a new place and got a big fat rent increase you can't afford.

Be sure you are moving for the right reasons.  Maybe there are things you could do where you are to spice up your life?  Too many people move hoping it will fix things, but find that they face the same old problems, but in a different venue with a new set of problems, too.


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## Knight (Apr 20, 2017)

Victor said:


> What would you think of allocating 35% of my total assets, including stocks and other savings for my retirement in a warmer state, after I move
> AND about 80% of my income which is from pensions, social sec and stock dividends? On my frugal budget, I could afford a $400 increase in
> rent a month. I have very low rent now. Retired, No job.
> After I reach 70 1/2 I must take money from my IRA (over 5000 a year.) There's nothing in my budget to cut! I'm tight.
> ...



35% of your total assets doesn't translate to a dollar amount to be spent for a place to live, I'm not interested in you saying what that is, that isn't any of my business. $5000.00 a year is only $416.00 a month. Utilities and general expenditures like trash pick up or in a place that has a HOA can eat that $416.00 in a month. And you have to know that MRD doesn't last forever. You might want to calculate when it will be totally depleted and figure that into your plan. 

Of course where you move to where it's warm should be investigated. A reasonably priced place to live may not be in a neighborhood you would want to live. Taxes on your pension is another potential cost depending on what state you are thinking about. Health and access to doctors and emergency facilities another biggie, are you confident you will find what you need?

Relocating on a tight budget as you point out as having, brings with it a lot of careful planning. I'm pretty sure you wouldn't want to find yourself out on the street in that warm place. 

So I say while you have time to decide and internet access research & research some more. One thing for sure knowing the length of time you will have $5000.00 a year to draw on is important.


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## Knight (Apr 20, 2017)

A follow up to my last post. 

For anyone not understanding MRD payout and how the value is calculated to determine when the MRD is finally finished this calculator should help.

https://web.fidelity.com/mrd/application/MRDCalculator
Maybe not understood is a person has to have cash their account to cover the capital value represented. Only good news is taxes are paid on the amount paid out on the MRD, not the value still in an IRA account. If there isn't enough cash to cover the value represented by holdings then some of the holdings would have to be sold to meet the pay out required.

That last part is where some get into trouble. Selling the asset to cover the payout reduces the long term. A person really does need to do research and fully understand how their finances are affected. 

I am not promoting Fidelity. The use of their calculator may be wrong on my part & this post should be removed if I am wrong in using it.


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## Knight (Apr 23, 2017)

Opps


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