Disposable Retired Pay

Question: Would it be a bad idea to sell our house and rent instead? We have 17 years left on our massive mortgage. Don't want to extend the mortgage term as we will by then be retired. We could sell, and rent a suitble property for about half of what we pay now in mortgage - and have more disposable income to enjoy. It feels odd to think about renting, having owned our own home for many years, but why not? We won't own our house outright until we are both 68 - we could be dead by then!! We have 17 years left on our massive mortgage. Don't want to extend the mortgage term as we will by then be retired. We could sell, and rent a suitble property for about half of what we pay now in mortgage - and have more disposable income to enjoy. It feels odd to think about renting, having owned our own home for many years, but why not? We won't own our house outright until we are both 68 - we could be dead by then!! We have looked at downsizing but would not have enough equity in this house to significantly decrease the mortgage on a smaller house - we really stretched ourselves to get this one cos it was perfect for us with all the kids at home.

Answer: Keep in mind, you will then have rent to pay when you are retired, when your mortgage would be just about paid off...

Question: I can retire, but want to start working for myself. How much self-generated income do I need to break even? I am eligible to retire with a pension that will be roughly one fourth of what my pre-tax income is now. I would like to do consulting work full-time, but only if I can generate enough income--when added to what I'll be receiving from my pension, will approximate what I am making now. When working for myself, I know I'll be able to greatly reduce my tax liability compared with what I'm paying in taxes now. I would like to figure out how much I would need to make at my consulting work, when added to what I will receive from my pension, will give me roughly the same disposable income I have now. I know what is possible with the consulting work. I just need to know if it will be enough when factoring in the pension and changed tax liability. Are there any calculators out there that can do this? If not, what type of professional should I contact to help me with this, and how much would they probably charge for this?

Answer: If you are consulting, you will pay about twice as much for social security and medicare than you did as an employee. Income tax on the same net amount will be the same. So your taxes will be about 7% higher on consulting than they were on a W-2. The flip side is that you will have items you can deduct from your consulting income to get the net amount that's taxed - but remember, you'll have to put out the money for those expenses too. You could spend an hour or so with a CPA who works with taxes, and they could probably give you a better feel for this. It would probably cost around $125-300.

Question: Mortgage payments question, advice? This has been asked before I'm sure but some details particular to my case would be useful. Bought a house last year and am currently paying about 2.2% and over paying the loan by some margin. At first it was being paid over by a small amount to end the mortgage a few years early, after about 18 yrs but with the recent cuts in the euro zone, I have kept the amount the same which means I am overpaying the mortgage by a lot more. At this rate, the house worth 300K at the moment will be paid off in 13 yrs (by which time I will be 45). The obvious question is, am I best to drop the payments by 150 or so a put that into low to medium risk stocks or some other investment vehicle and then retire on a lot more (hopefully) than the company pension. Some background. I have unemployment insurance and the housing market here in Northern Europe is very stable as it is against the law for banks to have anything to do with sub prime mortgages (seems clever doesn't it). I also am happy with my disposable income at the moment and have no other debts on cars or cards or anything. I have googled for some info but I wondered if there was a decent independent site for info regarding this type of thing. Any ideas anyone?

Answer: The way you describe your situation indicates that you are in a position to take some added risk in hopes of improving your return. On the other hand, the fact that you haven't actually done so, but instead have been aggressively paying down your mortgage, suggests that you personally would rather bet on a sure thing. Other than that, it comes down to the same old risk-return equation - stocks historically have offered the best returns over long periods of time but are accompanied by the risk of extremely painful losses along the way. So it's up to you. Based on historical returns a 32 year old investor like you should be putting substantial amounts of money into the stock market. Unfortunately "historical returns" don't tell you what is going to happen in the next decade or two. You pay your money and take your choice. One last thought. Although you probably shouldn't be making investing decisions based on the plunge in global stock markets in 2008, the simple fact is that stocks are cheaper today than they were a year ago. I suspect that means long term stock market returns will look a lot better in the next decade than they have for the past decade. Good luck. Whatever your decision, I hope it works well for you.