Friday, May 11, 2007

Early retirement

I've posted before how some of my coworkers are retiring early; they're cashing out on their California real estate and moving to parts less crowded. That trend seems to be continuing; however take that with a grain of salt. My work is seeing a pension change, so perhaps its just people jumping ship while they can (there is a year or two "penalty" for not jumping ship now).

But what is new and shocked the heck out of me... a co-worker in his 40's has announced his retirement. How? Why? Simple, he bought a home at the right location in 1995. Now... he's selling (hasn't sold, yet) and will use the $1M profit to assist his retirement. OK, there are mitigating circumstances (his child survived a serious illness that scared him silly). So they will become a "stay at home couple" in an uncrowded suburb in another state. Any one else seen this? Is this a one off? He'll be able to get some consulting work later I'm sure...

All I can think of is "unintended consequences." The equity (or perception of equity) is driving people to make rash choices. Not that I disapprove taking four to five years off to spend most of the day with a child during the years the child will still idolize the parents... But I do wonder at the situation that makes this possible.

Got popcorn?
Neil

4 comments:

tj & the bear said...

I know I sound like a broken record, but... I expect a lot of this behavior to surface and drive SoCal housing prices into the cellar.

Regardless of what they may say, every homeowner out there is basing their net worth on their perceived home value. Once that sense of entitlement is threatened, they'll all head for the exits attempting to salvage what they can.

It'll be a race to the bottom.

Westside Bubble said...

When you talk about cashing out, a frequent question is, 'where would you go?' If you have friends and family in LA, especially recently grown kids, that's a big reason not to go very far.

On the other hand, we hear about kids leaving California after finishing school.

West coast prices have gone up so much that if you've owned for even a decade or two you may get hit with big federal and state capital gains taxes beyond the tax-free $500K per couple. Sales commission plus taxes are a big transaction cost of leaving.

wannabuy said...

I know I sound like a broken record, but... I expect a lot of this behavior to surface and drive SoCal housing prices into the cellar.

You did predict... I just was surprised.

When you talk about cashing out, a frequent question is, 'where would you go?' If you have friends and family in LA, especially recently grown kids, that's a big reason not to go very far.

I agree with you. But I also blogged earlier on a trend of multi-family moves where the whole "support base" moves at once. ;)

It will be a race to the bottom... I think the fed's will make a killing in taxes... Cest la vie.

Got popcorn?
Neil

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