Two Retirement Experts Discuss How They’ll Decide When to Retire
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What factors should you consider when deciding to retire?
How to decide when to retire and updates from the housing market. You're listening to the Saturday Personal Finance edition of Motley Fool Money.
I'm Robert Brokamp, and this week I speak with Motley Fool contributor Dan Kaplinger about how we're each determining when we can retire. But first, here are some news items from last week, and they all have to do with housing. First up, Redfin announced that more than 40,000 home purchase agreements were canceled in December. That represents 16.3% of all homes that went under contract, the highest percentage of monthly cancellations since Redfin began tracking the metric in 2017. One reason could be that home buyers are becoming more cautious amidst economic anxiety. After all, the Michigan Consumer Sentiment Index is near its lowest level in 50 years, though it has ticked up a bit in recent months.
How has the housing market impacted retirement decisions?
But another reason is that inventory has risen, giving potential homebuyers more choices. According to Chen Zhao, head of economic research at Redfin, quote, End of quote. This rise in inventory has weighed on prices, which brings us to our second item. Last week, it was announced that the S&P Case-Shiller Home Price Index declined 0.1% in November and grew just 1.4% year over year. That's a slowdown from what we've seen in recent years. Home prices are up more than 50% since the pandemic, including double-digit gains in 2020 and 2021. Such strong price growth over the past several years may have you wondering how real estate compares to the stock market. Well, a recent article from the Bespoke Investment Group took a look and found that the 20-year return of the S&P Case-Shiller Index is actually just 3.1% per year on average.
That's about what long-term treasuries have returned over the same period and much less than the 10.8% annual return from the S&P 500. Of course, with a house, you can benefit from leverage and not having to put all that money down at once. On the other hand, a house has ongoing expenses like taxes, maintenance, and insurance. Factor all those in, and studies show that home price appreciation tends to be just a bit above inflation. Despite the recent slowdown in home prices, many Americans still can't afford a house, which brings us to our number of the week, and it is 75%. That's a percentage of homes on the market that are unaffordable to the average American household. According to a bank rate analysis, a family would need an annual income of $113,000 to afford a $430,000 median-priced home.
Unfortunately, median household income is closer to $80,000.
What are the emotional aspects of planning for retirement?
Middle-income households can afford at least 30% of the listings in only 11 of the nation's 34 largest metro areas. This level of unaffordability is due to high home prices, wage growth that is not kept up with those prices, higher mortgage rates, and not enough homes. According to Bankrate, the U.S. faces a housing deficit of about 4.7 million houses. Up next, two fools getting close to retirement. Talk about when they'll actually retire when Motley Fool Money continues.
The Civil War and Reconstruction was a pivotal era in American history. When a war was fought to save the Union and to free the slaves.
How do retirement calculators assist in planning?
And when the work to rebuild the nation after that war was over turned into a struggle to guarantee liberty and justice for all Americans. I'm Tracy. And I'm Rich. And we want to invite you to join us as we take an in-depth look at this pivotal era in American history. Look for The Civil War and Reconstruction wherever you find your podcasts.
After saving for retirement for decades, you'll actually get to a point when you realize, hey, I could retire soon. I'm in that situation, as is my next guest, pool contributor Dan Kaplinger. So for this episode, Dan and I are going to have a conversation about how we're approaching the decision about when to retire. Dan, welcome back to Motley Fool Money. Hey, thanks for having me, bro.
Great to be with you.
We have a lot in common. We're both former financial planners, both have been associated with The Fool for more than 25 years.
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Chapters
8 chapters
1
What factors should you consider when deciding to retire?
0:05–0:57
2
How has the housing market impacted retirement decisions?
0:57–2:47
3
What are the emotional aspects of planning for retirement?
2:47–3:27
4
How do retirement calculators assist in planning?
3:27–4:34
5
What financial uncertainties affect retirement planning?
4:34–5:19
6
How do personal circumstances influence retirement timing?
5:19–9:43
7
What are the health care considerations for early retirement?
9:43–11:02
8
What predictions do the experts have about their retirement dates?
11:02–22:38